-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WSNIi+j09zBMAhp4Uj4/mPjP2ayXauy66RVYwnMY3U3DwAv3Xiefi2ZhJDU1ICbU kRA9wYlVlGoRBzMtKbbz0Q== 0000950130-95-001928.txt : 19951002 0000950130-95-001928.hdr.sgml : 19951002 ACCESSION NUMBER: 0000950130-95-001928 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950928 SROS: AMEX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLAS CORP CENTRAL INDEX KEY: 0000008302 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 135503312 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-02714 FILM NUMBER: 95576646 BUSINESS ADDRESS: STREET 1: 370 SEVENTEENTH ST STREET 2: STE 3150 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3038251200 MAIL ADDRESS: STREET 1: 370 SEVENTEENTH STREET STREET 2: STE 3150 CITY: DENVER STATE: CO ZIP: 80202 10-K405 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (x) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended June 30, 1995. or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________ to ______________ COMMISSION FILE NO. 1-2714 ATLAS CORPORATION________ ---------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 13-5503312 - -------------------- ---------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 370 Seventeenth Street, Suite 3150, Denver, CO 80202 303-825-1200 - ---------------------------------------------------- ------------------------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number) (including area code) Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock, par value $1 per share New York Stock Exchange Option Warrants to Purchase Common Stock American Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- -------- Aggregate market value of the voting stock held by non-affiliates of the Registrant at September 21, 1995: Approximately $24,500,000. Number of shares outstanding of the Registrant's common stock as of September 21, 1995: Common Stock, par value $1 per share -- 18,777,500 shares. Documents Incorporated By Reference: None PART I Item 1. BUSINESS -------- Atlas Corporation ("Atlas" or the "Company") is a mining company which is principally engaged in the business of exploring for, producing and selling gold. The Company is a Delaware Corporation with headquarters in Denver, Colorado. Incorporated in 1923, the Company first traded on the New York Stock Exchange in 1937. GOLD OPERATIONS All of the Company's gold production has been from its Gold Bar Resource Area. The Gold Bar Resource Area is located in and adjacent to the Roberts Mountains in Eureka County, Nevada, at elevations exceeding 6,000 feet above sea level. The area currently encompasses 110 square miles on the Battle Mountain mineral trend. The Company's right to the Gold Bar Resource Area is derived mainly through unpatented and patented lode mining claims and mill site claims located on public domain lands. The area is reached by traveling 22 miles west of Eureka, Nevada, on U.S. Highway No. 50 and 17 miles northeast along the Eureka County Three Bars Road. Regional exploration brought Atlas to the area in 1983. Detailed geological work led to the development of specific targets which resulted in the claim staking of most of the Gold Bar Resource Area. A drill program in late 1983 and 1984 outlined the original Gold Bar deposit. The orebody was a limestone-hosted predominantly oxidized orebody containing approximately 315,000 mineable ounces of finely disseminated gold. After completion of a positive feasibility study, a 1,500 ton per day carbon-in- leach mill was constructed at a cost of $12 million, and open pit gold production from the Gold Bar deposit began in January 1987. Due to a low stripping ratio, uniform mineralization, and low processing costs, Gold Bar was profitable for the first four years of operations, with project cash costs in the range of $150 per ounce. While producing at the Gold Bar pit, the Company conducted regional exploration which resulted in the discovery of three new gold bearing deposits, Goldstone, Gold Ridge and Gold Pick, clustered together in the Roberts Mountains approximately six miles northeast of the Gold Bar mine and mill. These deposits, located in bedded limestone sediments, contain ore which is largely oxidized, although portions are unoxidized and contain fine-grained pyrite and carbon. With the success of mining the Gold Bar deposit and the discovery of additional reserves in 1987 and 1988, the Company expanded mill capacity from 1,500 to 3,000 tons of ore per day at a cost of $5 million in 1989. Power for the processing facilities is provided by Mt. Wheeler Power Inc. As mining progressed at the Gold Bar pit, a large stockpile of higher grade refractory ore was created. A refractory circuit designed to process the stockpiled ore was added to the mill in the 2 first quarter of fiscal 1991 at a cost of $3.4 million. Although the refractory ore circuit did not perform as expected, stockpiled refractory material was processed over the next six month period while the haul road was completed and the new satellite deposits prestripped. The refractory ore circuit did not perform as expected. As a result of an increase in the stripping ratio, the lower ore grade of the new satellite deposits and additional costs for the longer haul to the mill, direct minesite costs increased approximately $50 per ounce to $207 per ounce. Although the stripping ratios of the satellite deposits were much improved in fiscal 1992, the continued lower grade of the satellite ores resulted in minesite costs rising to $223 per ounce. The operations were still generating positive cash flow but the effect of the high non-cash costs resulted in operating losses for fiscal 1991 and 1992. Two properties were purchased in 1991 and 1992 to consolidate and expand the Company's Gold Bar claim block. In 1991, the Company acquired 751 unpatented lode mining claims for 118,644 shares of Common Stock. Exploration of these claims identified a small mineralized deposit, called Cabin Creek, located one mile east of the haul road. In 1992, an additional 99 unpatented lode mining claims were acquired for $500,000 in cash and 178,949 shares of Common Stock. These claims hosted the Gold Canyon deposit which provided ore for the mill from September 1993 to January 1994. Operational problems and permitting delays experienced in fiscal 1993 resulted in further cost increases which precipitated a liquidity crisis for the Company. A decrease in gold production was experienced during mining of the first phase at Gold Pick East with 30 percent less oxide and 18 percent more refractory ore being produced than was forecast by the reserve model. In addition, mining encountered a zone of structurally controlled mineralization which limited the dissemination of gold and reduced the available ore tonnage. A delay in the permitting of the Gold Canyon satellite deposit also required the acceleration in prestripping of the smaller and higher stripping ratio Goldstone North deposit which was mined from March to August 1993 in order to sustain production. In May 1993, mining of this deposit was suspended for one month due to a partial collapse of the highwall. As a result of these problems, Atlas was unable to maintain payments to its mining contractor and provided the contractor with a secured $3.5 million note. This note was repaid in fiscal 1994 from cashflow from the mining of Gold Canyon, from proceeds of a private placement in September 1993 and from the sale of selected mining equipment. After a change in control of the company in September 1993, management began an extensive program aimed at confirming and evaluating the economics of the remaining reserves at the Gold Pick, Gold Ridge and Gold Canyon deposits. One of the main concerns was the past overestimation of reserves in deposits having strong structural ore controls. A 23 hole confirmatory drill program at the Gold Canyon deposit led to the determination that mining to the originally designed pit bottom would have been uneconomical due to the occurrence of more refractory material than had been previously forecast. As a result, mining at the Gold Canyon deposit was halted in January 1994 instead of April 1994 as had been originally estimated. 3 From January 1994 to the end of the fiscal year, gold production was sustained at reduced rates from the milling of stockpiled materials. This lower grade material resulted in gold production for the second half of 14,100 ounces. After the depletion of stockpiled material, milling operations were suspended on September 19, 1994. Since the commencement of commercial production in January 1987, the Company produced and sold 478,000 ounces of gold. The following table provides the operating statistics for the Gold Bar Project from fiscal years 1987 to 1995. GOLD BAR RESOURCE AREA ANNUAL PRODUCTION DATA (TONS IN THOUSANDS)
YEAR ENDED JUNE 30, --------------------------------------------------------------------------------------- 1987 1988 1989 1990 1991 1992 1993 1994 1995 --------------------------------------------------------------------------------------- GOLD BAR ORE TONS MINED 564 662 1,015 1,711 33 GRADE (OZ/TON) .058 .074 .086 .082 .061 GOLDSTONE ORE TONS MINED 704 5 195 126 10 GRADE (OZ/TON) .077 .080 .069 .088 .045 GOLD RIDGE ORE TONS MINED 44 1,316 331 GRADE (OZ/TON) .043 .060 .051 GOLD PICK ORE TONS MINED 249 544 GRADE (OZ/TON) .071 .075 GOLD CANYON ORE TONS MINED 602 GRADE (OZ/TON) .065 --------------------------------------------------------------------------------------- MINING STATISTICS: TOTAL TONS MINED (INCLUDING PREPRODUCTION STRIPPING) 1,703 2,462 6,198 7,004 13,298 10,240 13,322 4,462 13 TOTAL ORE TONS MINED 564 662 1,015 1,711 748 1,570 1,103 728 10 STRIP RATIO (WASTE:ORE) 2.0:1 2.7:1 5.1:1 3.2:1 16.8:1 5.5:1 11.1:1 5.1:1 .3:1 MILLING STATISTICS: TOTAL TONS MILLED 212 589 825 1,150 1,091 1,226 1,120 1,101 199 GRADE (OZ/TON) .09 .09 .09 .08 .09 .07 .06 .06 .04 RECOVERY 93% 91% 91% 89% 82% 92% 82% 79% 72% OUNCES PRODUCED 13,824 46,292 66,082 81,263 80,727 81,832 55,080 51,696 6,019 AVERAGE SALES PRICE ($ PER OZ) $ 435 $ 457 $ 428 $ 397 $ 379 $ 362 $ 350 $ 377 $ 387 OPERATING COSTS ($ PER OZ) CASH PRODUCTION COST $ 139 $ 166 $ 159 $ 161 $ 207 $ 223 $ 323 $ 319 $ 446 NON-CASH COSTS 95 82 62 73 98 143 162 87 58 ------- ------- ------- ------- ------- ------- ------- ------- ------ TOTAL $ 234 $ 248 $ 221 $ 234 $ 305 $ 366 $ 485 $ 406 $ 504 ------- ------- ------- ------- ------- ------- ------- ------- ------
When mining was suspended at gold canyon, management elected to delay the development of the gold pick and gold ridge deposits until they were more adequately drilled and various cost cutting measures were examined. 4 A total of 303 surface holes were drilled into the Gold Pick and Gold Ridge deposits during fiscal 1994 to confirm and expand the known mineralization. An Additional 55 holes were drilled as part of an underground exploration program at Gold Pick. The drilling of these two permitted deposits confirmed 7.9 million tons of mineralized material at an average grade of 0.041 ounces gold per ton using a cut-off grade of 0.01 ounces per ton. As a result of a geological mapping program and the additional drilling, which has reduced drill spacing to a nominal 50 feet within these two deposits, management believes it has adequately resolved the previous problems relating to structural ore controls. In excess of 9.7 million tons of mineralized material at an average grade of 0.04 ounces per ton has been identified within the Gold Pick, Gold Ridge, Gold Canyon and Cabin Creek Deposits. Further analysis is required to determine an optimum development plan in light of a number of processing and mining alternatives and their associated levels of capital expenditures. During the fourth quarter of fiscal 1995, the Company completed revised mining plans for the Gold Pick and Gold Ridge deposits. Atlas plans to restart mining from these deposits when suitable mining contracts have been negotiated and financing arranged. Based on these mining plans, the Company estimates its proven and probable ore reserves at june 30, 1995, as 3,051,000 tons at an average gold grade of .063 ounces per ton, containing 192,000 ounces. GOLD EXPLORATION The Company continues to actively explore for gold, principally in the Gold Bar Resource Area. During fiscal year 1995, the Company employed 5 full-time professionals and spent a total of $1,571,000 in connection with its exploration activities. During the fourth quarter of fiscal 1995, an 18 hole drill program was concluded on an area adjacent to the original Gold Bar Deposit. Holes were drilled to the northwest and southeast of the original pit. All of the 13 holes to the northwest encountered gold mineralization with 3 holes having grades in excess of 0.1 ounces per ton over a distance of at least 20 feet and 0.055 ounces per ton over 80 feet. Based on the results of this program, the Company is currently permitting a second phase of drilling to further define this target. To accelerate the exploration and development of the Gold Bar Resource Area, the Company entered into three exploration joint ventures on its property. Description and terms of the joint ventures and additional information on the Companys exploration program is provided under the caption, operations and joint ventures under item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. The Company intends to pursue additional joint ventures for its property in addition to conducting its own exploration on a number of identified targets. Subsequent to fiscal 1995, the Company reached an agreement to purchase, subject to the completion of due diligence, the Doby George property in Nevada and entered into letter agreements for a one year option on the Commonwealth property in Arizona and on the Dixie Comstock property in Nevada. Descriptions of the properties and terms are provided under item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. 5 PERLITE OPERATIONS During the past year, the Company has been proceeding with the necessary activities to bring its Tucker Hill perlite deposit into commercial production. This property, located in south central Oregon, approximately 35 miles northwest of Lakeview, was acquired by the Company in 1988. The 900 acre property is held primarily by unpatented mining claims. A drilling program conducted in fiscal 1994 on a small portion of the property (10 acres) confirmed a proven and probable reserve of 8.9 million tons. Overall, the property is estimated to contain a minimum resource of 50 million tons. At current consumption levels, such a resource would be adequate to satisfy the current North American demand for perlite for the next 50 years. Perlite is a light weight volcanic mineral commonly used in the manufacturing of acoustic ceiling tile, insulation products and filter material and is used as an additive for horticultural products. To date a total of thirteen bulk samples, ranging up to 45 tons in size, have been mined from the property and sent to a variety of end users for testing. Ore from Tucker Hill has been demonstrated to be of high quality and capable of satisfying manufacturing requirements in a wide array of uses. The Company completed an engineering study which included a facilities design and an operating plan. Initial capital requirements to construct a nominal 75,000 ton per year capacity plant are estimated at approximately $2.0 million. A draft environmental impact statement has been issued by the Bureau of Land Management. Pending successful completion of permitting, contract negotiations, and financing, perlite production could begin as early as the summer of 1996. ACQUISITION OF GRANGES INC. INVESTMENT In August of 1994 Atlas completed the purchase of 12,694,200 shares of Granges Inc. The shares represented 37.2 percent of the issued and outstanding shares of Granges. The purchase price was Cdn. $4.00 Per share (US $2.80) or an aggregate purchase price of Cdn. $50.8 million (us $35.8 million). As a result of the subsequent amalgamation on may 1, 1995 of Granges and its 50.5 percent owned subsidiary, Hycroft Resources and Development Corporation, Atlas interest in the amalgamated entity was reduced to 27.7 percent. Prior to the amalgamation, the Company and Granges entered into an agreement pursuant to which atlas agreed to vote its shares in favor of the amalgamation of Granges and Hycroft as discussed above. The agreement called for the initial Board of Directors of the "new" Granges Inc. to be composed of eleven members including three members nominated by Atlas. The agreement also provided that effective on October 1, 1995, The Board would be reduced to nine members with Atlas continuing to have the right to nominate Directors to the Board proportionate to its shareholding in Granges. On that date, a representative of Atlas would be elected President and Chief Executive Officer of the Granges Inc., subject to approval of the revised Board. Mr. Michael B. Richings was subsequently named Director, President and Chief Executive Officer of Granges effective June 1, 1995, taking a leave of absence from his position as President and Chief Operating Officer of Atlas. 6 Granges is a Vancouver, Canada, based precious metals mining company whose shares are traded on the Toronto Stock Exchange and American Stock Exchange. Granges principal asset is the Crofoot/Lewis Gold Mine. The mine is located 60 miles west of Winnemucca, Nevada, and is an open pit, heap leach operation which produces gold and silver. In calendar 1994, the mine reported production of 94,900 ounces of gold and 315,000 ounces of silver. Granges reported total ore reserves at January 1, 1995, of 66.5 million tons grading 0.019 ounces of gold per ton. Estimated contained gold was 1,264,000 ounces compared to 1,021,000 ounces at the end of 1993. Additional information on the Granges Inc. investment is provided under Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations and in Note 7. Investment in Unconsolidated Subsidiary to the Companys financial statements. OTHER The Company's profitability has been significantly affected by the price of gold. Gold prices fluctuate widely and are affected by numerous factors beyond the Company's control, including expectations for inflation, the strength of the United States dollar, global and regional demand, political and economic conditions and production costs in major gold producing regions, including Australia, Canada, South Africa and the former Soviet Union. The aggregate effects of these factors are impossible to predict. Gold is a product which can be easily sold on numerous markets throughout the world. It is not difficult to ascertain the market price for gold at any particular time, and gold can be sold to a large number of refiners or precious metals dealers on a competitive basis. The Company normally sells its gold through major precious metals dealers, in some cases using hedging programs, and it is free to sell uncommitted gold to others. Gold is produced at the mine site in the form of gold/silver alloy, which is further refined by a third party into commercially acceptable gold. The Company is required to comply with various federal, state and local regulations and requirements relating to environmental matters at its mining operations. The Company is required to obtain permits from various governmental agencies in order to mine and mill. The company has obtained all of the necessary permits relating to its present operations. The Company cannot anticipate whether increasing costs of environmental compliance for its gold operations will have a material adverse impact on its operations or competitive position. The Company competes with substantially larger companies in the production and sale of gold. The Company does not believe that it or any other competitor is a material factor in these markets, and the price it receives for its production depends almost entirely upon market conditions over which it has no control. The Company believes that it can promptly sell at current market prices all of the gold that it can produce for either present or future delivery. 7 With respect to the acquisition of mineral interests and exploration activities, the Company competes with numerous persons and companies, many of which are substantially larger and have considerably greater resources than the Company. The Company currently employs approximately 25 people in its operations and considers its relations with those employees satisfactory. ITEM 2. PROPERTIES ---------- The Company's materially important properties consist of the gold ore-bearing properties and mill site at its Gold Bar Resource Area and its Tucker Hill perlite property described under "Item 1. Business," and approximately 14,000 square feet of leased headquarters office space in Denver, Colorado. ITEM 3. LEGAL PROCEEDINGS ----------------- The information called for by this item is set forth in Note 11 to the Financial Statements and is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- No matters were submitted to a vote of the security holders during the fourth quarter of fiscal 1995. EXECUTIVE OFFICERS OF THE COMPANY --------------------------------- Set forth below is the age and certain other information regarding each person currently serving as an executive officer of the Corporation. David J. Birkenshaw, age 40, has served as Chairman of the Board and as Chief Executive Officer of the Corporation since September 21, 1993. Mr. Birkenshaw's employment history for the past five years is set forth below under "directors". Gerald E. Davis, age 46, Has served as President of the Corporation since August 11, 1995. Prior to that he had served for the Corporation in the following capacities as: Executive Vice President since may 15, 1995, Vice President-Corporate Development since September 21, 1993, Chief Operating Officer from May 1, 1993, and Vice President - Business Planning and Marketing since November 13, 1989. 8 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS ------------------------------- Common Stock (Listed on the New York Stock Exchange, Symbol AZ)
Fiscal Year 1995 Fiscal Year 1994 ---------------- ---------------- Quarter Ended High Low High Low - --------------- ------- ------- ------- ------- September 30 $6 1/4 $4 1/2 $5 1/4 $3 1/8 December 31 5 2 4 7/8 3 1/4 March 31 2 1/2 1 1/4 10 4 1/4 June 30 2 1/8 1 3/8 9 3/4 6 1/8
No dividends were declared in fiscal years 1995 or 1994. At June 30, 1995, there were approximately 22,000 holders of record of the Common Stock. ITEM 6. SELECTED FINANCIAL DATA -----------------------
For the Year Ended June 30, (amounts in Thousand except per Share Data) 1995 1994 1993 1992 1991 -------- -------- -------- -------- ------- INCOME STATEMENT DATA Mining Revenue $ 2,328 $ 19,478 $ 19,280 $ 29,624 $30,625 loss from continuing operations $(20,397) $(12,040) $(28,066) $ (7,177) $(2,483) Income (loss) from discontinued operations $ 621 $ 2,175 $ (875) $ (76) $(3,880) Net loss $(19,776) $ (9,865) $(29,909) $ (7,253) $(6,363) PER SHARE OF COMMON STOCK: Loss from continuing operations $ (1.23) $ (1.45) $ (4.43) $ (1.17) $ (.41) Income (loss) from discontinued operations $ .04 $ .26 $ (.14) $ (.01) $ (.65) Net loss $ (1.19) $ (1.19) $ (4.72) $ (1.18) $ (1.06) Cash dividends per share -- -- -- -- -- BALANCE SHEET DATA: Cash and cash equivalents $ 4,453 $ 3,767 $ 1,734 $ 552 $ 465 Total Assets $ 43,497 $ 19,847 $ 19,549 $ 59,212 $66,060 Long-term obligations $ 15,160 $ 15,767 $ 14,807 $ 13,726 $28,442 Working Capital (deficit) $ 5,611 $ (239) $ (2,816) $(14,344) $ 2,293 Total stockholders equity (deficit) $ 24,833 $ (2,475) $ (4,407) $ 25,502 $31,309 Book value per share $ 1.34 $ (.26) $ (.70) $ 4.02 $ 5.14
9 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ----------------------------------- The following comments should be read in conjunction with the Financial Statements and accompanying notes. CHANGE IN FISCAL YEAR END In order to allow the timely inclusion of Granges' results from operations in the Company's financial reports, the Board of Directors authorized a change in Atlas fiscal year-end to December 31. This change will be implemented at December 31, 1995, and will result in financial reporting being issued for a six month period. In the future, the Companys results will be reported on a time schedule consistent with its industry peers. RESULTS OF OPERATIONS - --------------------- In January 1994, production from the Gold Bar Property was halted, after a confirmatory drill program indicated that mining to the originally designed Gold Canyon pit bottom would have been uneconomical due to the occurrence of more refractory material than had been previously forecast. Management initiated the processing of low grade stockpiled ores in an effort to avoid the suspension of milling operations. Engineering and metallurgical studies focusing on the development of short term reserves were accelerated. On September 16, 1994, stockpiled ores were depleted and the Company was forced to suspend milling operations and to temporarily place the Gold Bar project on standby. As a result, fiscal year 1995 reflects only three months of operations. REVENUES Revenues for fiscal 1995 and 1994 were $2,328,000 and $19,478,000, respectively. Gold production decreased to 6,021 ounces in fiscal 1995 from 51,700 ounces in fiscal 1994. The decreases in revenue and gold production in fiscal 1995 reflect the suspension of operations at the Gold Bar property after only three months of production. The average price per ounce of gold realized in fiscal 1995 was $387 versus $377 in fiscal 1994. Revenues for fiscal 1993 were $19,280,000, reflecting a decrease of $198,000, or 1 percent, compared to fiscal 1994 revenues of $19,478,000. Gold production in fiscal 1994 was 51,700 ounces down from 55,100 ounces in fiscal 1993. The decrease in production was the result of processing low grade stockpiled material after the January 1994 suspension of mining operations. The decrease in production was offset by an increase in gold prices. The average gold price realized increased from $350 an ounce in fiscal 1993 to $377 an ounce in fiscal 1994. PRODUCTION COSTS Production costs for fiscal 1995 and 1994 were $2,683,000 and $16,526,000, respectively. Production costs per ounce in fiscal 1995 and 1994 were $446 and $319, respectively. The 10 decrease in production costs are a result of the suspension of operations at the Gold Bar property after only three months of production in fiscal 1995. The higher production costs per ounce reflect the lower grades run prior to the suspension of operations in 1995. The Company incurred $1,485,000 in shutdown and standby costs during the last three quarters of fiscal 1995. Such costs included severance payments, continuing onsite security and maintenance as well as general and administrative expenditures. Production costs in fiscal 1994 decreased $1,266,000, or 7 percent, from fiscal 1993 production costs of $17,792,000 because of lower production levels. On a unit cost basis, direct minesite cash costs decreased to $319 per ounce in fiscal 1994 versus $323 in fiscal 1993. Production cost as a percentage of mining revenue was 85 percent in fiscal 1994 a decrease from 92 percent in fiscal 1993. During the fourth quarter of fiscal 1994, the Company and an independent consultant began evaluating the Gold Bar mine plan and remaining known ore reserves. As a result, the Company determined that its remaining unamortized costs could not be recovered from undiscounted cash flows over the remaining mine life and the Company recognized an impairment to adjust the carrying value of its assets. This adjustment resulted in a charge to operations of $5,355,000 in the fourth quarter of fiscal 1994. In the fourth quarter of fiscal 1993, the Company also reduced the carrying value of its producing and nonproducing properties by $28,716,000 and $2,796,000, respectively. DEPRECIATION, DEPLETION AND AMORTIZATION The Gold Bar property was written down to estimated salvage value during fiscal 1994. Depreciation, depletion and amortization charges of $348,000 in fiscal 1995 represent the flow through of non-cash costs contained in stockpiled ore inventory at the end of fiscal 1994 and the write-off of capital expenditures incurred during the three months of operations in fiscal 1995. Depreciation, depletion and amortization in fiscal 1994 totaled $4,479,000, or $87 per ounce, down from $9,005,000, or $162 per ounce, in fiscal 1993. The decrease is primarily a result of the impairment adjustment recorded in fiscal 1993 which reduced the amortizable basis of the Company's assets. GENERAL AND ADMINISTRATIVE General and administrative expenses in fiscal 1995 decreased by $326,000, or 11 percent, from fiscal 1994. The primary reason for the fiscal 1995 decrease was a $400,000 reduction in salaries and severance costs. General and administrative expenses in fiscal 1994 were reduced by $1,081,000, or 26 percent, from fiscal 1993. This was primarily the result of reductions in personnel, a reduction in the use of consultants and a concentrated emphasis on cost control at the corporate level. Fiscal 1994 general and administrative expenses included approximately $390,000 in various change of 11 control and severance costs. As a percentage of mining revenue, general and administrative expenses decreased to 16 percent in fiscal 1994 from 22 percent in fiscal 1993. OPERATING INCOME AND CASH USED IN OPERATIONS The operating loss for fiscal 1995 was $2,188,000, a decrease from $6,882,000 in fiscal 1994. The 1994 loss includes a full year of operations and the $5,355,000 impairment noted above, whereas 1995 represents only three months of operations and standby costs incurred through the end of the fiscal year. Cash used in operations increased from $4,355,000 in fiscal 1994 to $6,261,000 in fiscal 1995 reflecting the lost production noted above. The impairment of $28,716,000 recorded in fiscal 1993 is the primary reason for the $29,351,000 reduction in 1994 operating loss from 1993. Cash used in operations decreased from $5,345,000 in fiscal 1993 to $4,355,000 in fiscal 1994, reflecting an increase in the average realized gold price in fiscal 1994 versus fiscal 1993. OTHER Exploration costs of $1,911,000 were incurred in fiscal 1995, a decrease of approximately $400,000 from fiscal 1994. The decrease is attributable to the reduction of land holding costs, as current joint venture partners (see below) are responsible for land royalties and lease payments, and a reduction of personnel. Exploration costs in fiscal 1994 increased $430,000 from fiscal 1993 as a result of an underground drilling program commenced in the fourth quarter of fiscal 1994 and ended during the first quarter of fiscal 1995. In October 1992, the Company leased to another mining company gold properties in Oregon ("Grassy Mountain") and Idaho ("Musgrove Creek") for a period of 35 years with options for three additional 10 year extensions. The total consideration was $30 million, consisting of a $22.5 million initial payment and a $7.5 million advance royalty payment. The Company retained a 5 percent royalty on each of the properties which will first be applied against the advance royalty and interest thereon. A substantial portion of the proceeds from this transaction were used to repay the entire balance of the Company's bank borrowings and to provide cash collateral for a letter of credit. The balance of the proceeds were used for working capital and exploration. This transaction resulted in a gain of $17,803,000 in the second quarter of fiscal 1993. Notes 10 and 11 to the Financial Statements provide details and a discussion of discontinued operations for the past three fiscal years. The Company's revenues and operating results for the periods set forth are not necessarily indicative of the results for any future period because revenues and profits from sales of gold may vary significantly between periods depending on the amount of gold produced, production costs and gold prices. 12 OPERATIONS AND JOINT VENTURES After a change of control of the Company in September of 1993, management began an extensive drilling program aimed at confirming and evaluating the current reserves at the Gold Canyon, Gold Pick and Gold Ridge deposits. The first phase consisted of a 23 hole confirmatory drill program at Gold Canyon. Based on the higher than anticipated level of refractory ore encountered and the higher costs associated with processing this material, mining activities were suspended in January 1994. Phase two drilling, which commenced in March of 1994, consisted of 55 underground drill holes at Gold Pick and 28 exploration drill holes at the Goldstone deposit. The program was designed to identify underground reserves while providing additional information about the open pit reserves. While the program did not generate underground reserves, it did provide additional information on geological structures present within the Gold Pick deposit. Phase three drilling, which commenced in April of 1994, consisted of a 303 hole surface drilling program designed to confirm and expand the Gold Pick and Gold Ridge reserves. Both the phase two and three programs were completed by September 1994. As a result of the information generated by these programs, the determination was made in September 1994 to re-evaluate the development of the Gold Pick and Gold Ridge deposits and, in the interim, to temporarily place the Gold Bar project on standby. Management continued to perform and evaluate metallurgical, engineering, and geotechnical studies aimed at optimizing the economics of the existing reserve base while attempting to reduce the capital requirements necessary to resume operations. Based upon the results of the studies and using a $390 per ounce gold price, the Company has calculated a proven and probable gold reserve of 3.1 million tons at a grade of .063, containing 192,000 ounces. This reserve is contained in the Gold Pick and Gold Ridge deposits and represents a reduction of 48,000 ounces from the 240,000 ounces reported in the prior year. The reduction is the result of new pit designs and revised cost estimates. Under the revised mine plan, open pit mining methods will continue to be employed using a contract miner. Plans call for average production of 52,000 ounces per year over a three year period at an estimated average cash cost of $330 per ounce. Non-cash costs are expected to average $30 per ounce. The Company is currently holding discussions with various mining contractors and is examining financing alternatives for approximately $7 to $9 million in capital and startup expenses. Pending financing and successful contract mining negotiations, mining is anticipated to resume in late 1995. The current mine plan calls for a six month period of preproduction stripping and ore stockpiling prior to the resumption of milling operations. The Company continues to explore for gold, principally on the Gold Bar claim block. During the fourth quarter of fiscal 1995, an 18 hole drill program was concluded on an area adjacent to the original Gold Bar deposit. Holes were drilled to the northwest and southeast of the original pit. All of the 13 holes to the northwest encountered gold mineralization with 3 holes having grades in excess of 0.1 ounce per ton over a distance of at least 20 feet and 0.055 ounce per ton over 80 feet. Based on the results of this program, the Company is currently permitting a second phase of drilling to further define this target. In order to accelerate the exploration and development of its large land position, the Company elected to enter into agreements for the joint exploration and development of certain portions of 13 the Gold Bar claim block. Areas which contain known mineralization, or identified but as yet untested targets, were not included in such agreements. To date, Atlas has entered into a joint venture agreement and two separate exploration agreements with options to joint venture which together cover approximately 46 percent of the claim block. In August 1994, Atlas signed a mining venture agreement with Rayrock Mines Inc. covering approximately 29 square miles on the northern portion of the claim block. In order to earn a 60 percent interest in that property, Rayrock is required to (i) spend $1.5 million on exploration and development of the property on or before October 1, 1997 (with an option to extend the time period for earning that 60 percent interest through October 1, 1999 for an additional $1.5 million in expenditures), and (ii) complete a positive engineering study for the property. In September 1994, Atlas entered into an exploration agreement with option for joint venture with Homestake Mining Company on the southern 14 square miles of the Gold Bar claim block. The agreement gives Homestake the right to earn a 60 percent interest in that property over a five year period, by expenditure of an aggregated amount of $3 million in exploration and development expenses, starting with a minimum of $200,000 in the first year with annual commitments increasing over time up to $1 million in the fifth year. In addition to incurring the minimum required exploration expenditures to earn its 60 percent interest, Homestake must also complete an engineering report evaluating the viability of developing a commercial mining operation on the property and commit to proceeding with commercial development. In October 1994, Atlas signed an agreement with Hemlo Gold Mines (USA), Inc. on an approximately 4.5 square mile area located four miles northeast of the Gold Bar claim block. That agreement calls for Hemlo, in order to maintain the agreement in effect, to spend a minimum of $400,000 on exploration over a four year period. After Hemlo spends $400,000, Atlas may elect to participate in further development of the property pursuant to a mining venture agreement on a 30/70 basis with Hemlo or, if Atlas chooses not to participate, Hemlo may continue to develop the property with Atlas receiving a production royalty equal to 7 percent of the net operating proceeds. Since signing the agreement, Hemlo has drilled and surrendered a portion of the property, reducing the property position covered under this agreement to approximately 3 square miles. On August 17, 1995, the Company announced that it had reached an agreement to purchase the Doby George Gold Project, located in Nevada, from Independence Mining Company Inc. Doby is an early stage development project with an indicated gold resource of 3.7 million tons at an average grade of 0.060 ounces per ton, containing approximately 220,000 ounces. The Doby land position covers approximately 14 square miles on public land. The terms of the agreement call for delivery of 1.4 million shares of Atlas Corporation Common Stock to Independence along with a payment of $400,000 upon closing. The purchase is subject to a sixty day due diligence period and negotiation of a definitive contract to be completed on or before October 13, 1995. On September 7, 1995, the Company announced that it had entered into letter agreements for one year purchase options on the Commonwealth and Dixie Comstock properties. The Commonwealth project, optioned from Harvest Gold Corporation and located in central Arizona, is a two square mile, late stage exploration property. To date, 126 holes have been drilled on the site but the identified areas of mineralization have not been fully defined nor has the exploration 14 potential of the property been fully evaluated. Under the terms of the agreement, the Company has made an initial payment of $125,000 and is committed to spend $425,000 for exploration and development of the property. If the option is exercised, Atlas would pay Harvest $25 per equivalent ounce of recoverable gold reserve as determined by an independent reserve study. This amount would be payable 75 percent in Atlas Common Stock, the value to be calculated by averaging the current price and the price on the date the option is exercised, and 25 percent in cash, with cash not to exceed $1,300,000. The Dixie Comstock project, optioned from Horizon Gold Corporation and located in western Nevada, is a four square mile late stage exploration property. The option agreement called for an initial payment of $65,000 and a second payment of $25,000 on November 1, 1995, to maintain the option for its one year term. If the option is exercised, Horizon will receive 250,000 shares of Atlas Common Stock. Horizon would also retain a 7.5 percent net operating profit royalty. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY - --------------------------------------- On April 28, 1994, Atlas entered into an agreement to purchase 12,694,200 shares, or 37.2 percent of the outstanding shares, of Granges Inc.("Granges") from M.I.M. (Canada) Inc. (M.I.M.) for approximately Cdn. $50 million (US $37 million). Granges is a Canadian-based, precious metals mining company whose shares are traded on the American and Toronto Stock Exchange under the symbol GXL. Granges controlled, via its 50.5 percent subsidiary Hycroft Resources and Development Corporation (Hycroft), the Crofoot/Lewis mine, located in northwestern Nevada. This mine reported production of 94,900 ounces of gold in 1994. Effective May 1, 1995, Granges amalgamated with Hycroft with the resultant company being named Granges Inc. The amalgamation resulted in each common share of Hycroft being exchanged for 0.88 of a common share of "new" Granges Inc. In addition, each Granges common share outstanding prior to the amalgamation was exchanged for one common share of "new" Granges Inc. After giving effect to the amalgamation, the Companys 12,694,200 shares of "new" Granges Inc. represented 27.7 percent of the outstanding common shares of that company. The Company recorded the acquisition of the Granges shares using purchase accounting and reports the results of Granges operations using the equity method. During the period of Atlas ownership, Granges has reported a net loss of $644,000. Due to the amortization of excess basis in the investment over the net assets acquired and differences between United States and Canadian Generally Accepted Accounting Principles, the Company during the same period has recorded a loss of $1,361,000 on equity in unconsolidated subsidiary. In connection with the amalgamation of Granges and Hycroft, the Company re- evaluated its investment in Granges relative to the market values implied in the amalgamation and to the known reserves at the Crofoot/Lewis mine. As a result thereof, the Company recorded an impairment of $11,419,000 of its investment in unconsolidated subsidiary at June 30, 1995. 15 The Company intends to pursue strategies that offer both companies the potential of economic benefits, including, but not limited to, joint exploration activities and a business combination. WORKING CAPITAL - --------------- Over the last three years, the Company has financed acquisitions and raised working capital through the issuance of equity securities and instruments. During the summer of 1994, the Company conducted a private placement of 9,090,909 Units, for a purchase price of $5.50 per Unit, each Unit consisting of one share of Atlas Common Stock and one-half of one warrant (exercisable for five years) to purchase one share of Atlas Common Stock at an exercise price of $7.00 per share. The $50 million equity financing was completed in August 1994. Of these funds, $35.5 million was released on August 15, 1994, allowing Atlas to complete the acquisition of the Granges shares. The remaining $14.5 million was released on December 15, 1994, following shareholder approval of a proposal to increase the number of shares authorized for issuance. On January 18, 1994, the Company, in a private placement, sold 1.5 million shares of Atlas Common Stock for $5.00 per share for gross proceeds of $7.5 million. The shares were placed outside the United States with a number of gold funds and institutional investors in Canada and Europe. On September 20, 1993, the Company, under a Securities Purchase Agreement with Phoenix Financial Holding Inc. ("Phoenix"), closed on the sale for an aggregate of $8,375,000 of (i) 1,500,000 shares of Atlas Common Stock, (ii) a Redeemable Convertible Debenture due in 1998 in the amount of $3,500,000 which is convertible as to principal into Atlas Common Stock at the rate of $4.00 per share and bears interest at the rate of 9 percent per annum payable in cash or Atlas Common Stock at the rate of $4.00 per share, and (iii) Warrants to purchase for three years 2,000,000 shares of Atlas Common Stock at $3.625 per share. Working capital was $5,611,000 at June 30, 1995, which compares to a working capital deficit of $239,000 at June 30, 1994 and a deficit of $2,816,000 at June 30, 1993. The Company's current ratio was 2.60 to 1 at June 30, 1995, .96 to 1 at June 30, 1994, .69 to 1 at June 30, 1993. The positive change in working capital reflects the funds received from issuance of equity securities as described above. The proceeds from the Phoenix transaction provided relief from liquidity difficulties the Company was experiencing at June 30, 1993, by allowing for repayment of short term debt and increasing working capital. The January 18, 1994, financing provided working capital to fund development and exploration drilling programs, expand the Gold Bar claim block, and fund the $1,843,000 deposit on the Granges transaction. The June 30, 1995, working capital position was the result of funds generated from the December 15, 1994, release of escrowed private placement funds. The proceeds were used to repay a short term loan, to pay fees related to the private placement, to acquire 2.4 million shares of Dakota Mining Corp. for $3,000,000 and for continuing exploration and administration expenses. The Company will utilize its working capital and equity investments to address the lack of cash flow from current operations. The Company will also address this problem by pursuing: 1) 16 business combination strategies with Granges Inc., 2) sale of non-core assets, 3) issuance of debt, and 4) acquisitions. The Company's capital expenditures in fiscal 1995 were $625,000, compared to $5,263,000 in fiscal 1994 and $3,795,000 in fiscal 1993. In fiscal 1995, approximately $360,000 was spent on the development of the Tucker Hill perlite deposit with the remainder being spent on the Gold Bar property. In fiscal 1994 and 1993, substantially all of the capital expenditures were for the development of the Gold Bar property. The Company currently projects that $1 to $2 million will be needed to secure, explore and develop the recently announced Doby George acquisition and investigate the Commonwealth and Dixie Comstock options. The Company anticipates funding these expenditures through current working capital, the sale of non-core assets and borrowings secured by the assets of the Company. Restarting Gold Bar operations will be contingent upon negotiation of acceptable mining contracts and receipt of project financing commitments. The Company currently estimates that additional capital expenditures to develop and mine its Tucker Hill perlite deposit in Oregon will be approximately $2 million, all of which could be required during the next fiscal year pending successful permitting. At present, it is anticipated the funding will be obtained through project borrowings. There is no assurance that the Company will be able to obtain the financing commitments mentioned in the preceding paragraphs. See also "Environmental Matters" below. ENVIRONMENTAL MATTERS - --------------------- The Company is subject to extensive federal, state and local environmental laws and regulations. These laws, which are constantly changing, regulate the discharge of materials into the environment and may require the Company to mitigate any environmental effects caused by its operations. The Company believes that it is currently in substantial compliance with all federal, state and local environmental regulations applicable to its current and discontinued operations. The Company is obligated to decommission and reclaim its uranium mill site located near Moab, Utah. When the Company discontinued its uranium operations in 1987, estimated shut-down and reclamation expenses of $17,406,000 were accrued. Reclamation and decommissioning costs of $1,497,000, $1,159,000 and $623,000 in fiscal 1995, 1994 and 1993 have been charged against this accrual. The balance of this accrual at June 30, 1995 was $5,702,000 and the reclamation plan as proposed by the Company extends over the next four to seven years. Title X of "The Comprehensive National Energy Policy Act" ("Title X"), which was enacted in October 1992, provides for reimbursement by the federal government of past and future reclamation expenses in proportion to the extent that the site's tailings were 17 generated by Atomic Energy Commission (AEC) contracts. With respect to the Company's discontinued uranium operations, 56 percent of the tailings were generated by AEC contracts. Requests for reimbursement under Title X must be submitted to the Department of Energy (DOE) and are subject to review and audit. The timing on the repayment of costs approved for reimbursement is a function of Congressional appropriation. The Company's proposed reclamation plan, which provides for capping the tailings on site, is the subject of an Environmental Impact Statement, a public draft of which is scheduled for release by the Nuclear Regulatory Commission in November 1995. The Company is confident that the ultimate result of this review process will be the approval of its reclamation plan and that its remaining accrual, when combined with anticipated reimbursements of reclamation costs under the Title X program, is sufficient to cover future reclamation costs. In July 1994, the Company submitted a claim under Title X for approximately $5.0 million of reclamation costs incurred from fiscal 1986 through fiscal 1994. The Company has received notification that the DOE has given interim approval on approximately $4.5 million of the claim and $2.5 million in reimbursement with $0.5 million being disallowed. On December 29, 1994, the Company received $846,000 as a partial payment of the approved reimbursement which was recorded as income from discontinued operations. Based upon the Company's analysis of the reclamation liability, it is anticipated that all subsequent reimbursements under Title X will be used to increase the reclamation accrual. In June 1995, the Company submitted a second claim under Title X for approximately $3.6 million for reclamation costs incurred from fiscal 1980 through fiscal 1985, from June 1994 through May 1995 and appealed reclamation costs previously disallowed. The June 1995 claim is currently undergoing audit, the results of which are anticipated to be released late in 1995. The Company has received notification from the DOE that $1 million of the claim does not fall under the current definition of a reimbursable cost under Title X and has been disallowed. It is the Company's intention to appeal this determination. If the June 1995 claim of $3.6 million is approved in full, the Company will receive reimbursement of approximately $2 million. Estimated reclamation costs relating to the Gold Bar Resource Area are recorded based on the units of production method. Total reclamation costs expensed in fiscal 1995, 1994 and 1993 were $0, $732,000 and $313,000, respectively. As part of the impairment recorded during the fourth quarter of fiscal year 1994 (see results of operations, above), the Company increased it accrued expense by an additional $1,244,000. No charges were recorded in 1995 since analysis indicated the $3,342,000 accrued for reclamation costs at the Gold Bar Resource Area is adequate. Although the Gold Bar mine is currently on temporary standby, the Company expects to restart mining, subject to financing and negotiations with mining contractors. The Company believes it can meet the estimated closing and reclamation costs of its uranium and gold mining operations from internally generated funds, from the $5,659,000 in restricted cash which serves as collateral for a letter of credit and reclamation bonds relating to these costs, and from reimbursements under Title X, without a significant impact on its working capital position. It is presently anticipated that these obligations will be satisfied over the next four to seven years. 18 During fiscal 1988, the United States Environmental Protection Agency (EPA) notified the Company that it was one of several potentially responsible parties ("PRPs") under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") for cleanup costs at the Company's former asbestos mine and mill site near Coalinga, California and in the City of Coalinga. A prolonged period of inquiry and administrative process concerning this matter followed. In fiscal 1993 and 1991, the Company established a reserve of, and recorded as an expense, $600,000 and $3,000,000, respectively, to cover the Company's share of costs to be incurred in connection with this matter. This accrual reflects participation by the BLM, another PRP. The Company instituted legal action against 13 insurance carriers which had issued insurance policies over a period of more than 25 years with respect to these sites. During fiscal 1994, the Company reached settlement with a number of these carriers and recorded a gain from discontinued operations of $2,175,000. All remaining claims with the carriers were settled in fiscal 1995. The proceeds were negligible. In October, 1994, the Environmental Protection Agency approved a remedial action plan for the sites. Due to unusually heavy rains experienced at the site during the spring and early summer of 1995, the Company experienced delays and cost overruns. As a result, the Company recorded an additional loss from discontinued operations of $225,000 in the fourth quarter of fiscal 1995. The Company believes the remaining reserve is sufficient to cover future costs incurred under the remedial action plan, which is scheduled to be completed in the fall of 1995. The Company is required to obtain permits from various governmental agencies in order to mine and mill. The Company has obtained all of the necessary permits relating to is present operations. The Company cannot anticipate whether the increasing costs of environmental compliance for its gold operations will have a material adverse impact on its future operations or competitive position. 19 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- INDEX TO FINANCIAL STATEMENTS Page Consolidated Statements of Operations for the Fiscal Years Ended June 30, 1995, 1994 and 1993 21 Consolidated Balance Sheets as of June 30, 1995 and 1994 22 Consolidated Statement of Stockholders' Equity (Deficit) as of June 30, 1995, 1994 and 1993 23 Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 1995, 1994 and 1993 24 Notes to Consolidated Financial Statements 25 - 39 Report of Independent Auditors 40 20 ATLAS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share)
For the Year Ended June 30, 1995 1994 1993 - --------------------------- ------ ------ ------ Mining revenue $ 2,328 $ 19,478 $ 19,280 - ------------------------------------------------------------------------ Costs and expenses: Production costs 2,683 16,526 17,792 Depreciation, depletion and amortization 348 4,479 9,005 Impairment of mineral properties (Note 4) -- 5,355 28,716 Shutdown and standby costs (Note 4) 1,485 -- -- - ------------------------------------------------------------------------ Loss from operations (2,188) (6,882) (36,233) - ------------------------------------------------------------------------ Other (income) and expense: Exploration and prospecting costs 1,911 2,315 1,783 General and administrative expenses 2,742 3,068 4,149 Equity in loss of unconsolidated subsidiary (Note 7) 1,361 -- -- Impairment of investment in unconsolidated subsidiary (Note 7) 11,419 -- -- Forfeiture of deposit on stock purchase agreement (Note 15) 1,144 Gain on mineral lease transaction (Note 4) -- -- (17,803) Impairment of nonproducing mineral properties (Note 4) -- -- 2,796 Interest expense (income), net (327) 205 (148) Other (income) expense (41) (430) 579 - ------------------------------------------------------------------------ Loss from continuing operations before income taxes (20,397) (12,040) (27,589) Provision for income taxes (Note 14) -- -- 477 - ------------------------------------------------------------------------ Loss from continuing operations (20,397) (12,040) (28,066) - ------------------------------------------------------------------------ Income (loss) from discontinued operations (Note 10) 621 2,175 (875) - ------------------------------------------------------------------------ Loss before cumulative effect of postretirement benefit obligations (19,776) (9,865) (28,941) Cumulative effect of post retirement benefit obligations (Note 13) -- -- (968) - ------------------------------------------------------------------------ Net loss $(19,776) $ (9,865) $(29,909) ======================================================================== Loss per share of common stock: Loss from continuing operations $(1.23) $ (1.45) $ (4.43) Income (loss) from discontinued operations .04 .26 (.14) Cumulative effect on prior years of postretirement benefit obligations -- -- (.15) - ------------------------------------------------------------------------ Net loss $(1.19) $ (1.19) $ (4.72) ======================================================================== Weighted average of common shares outstanding 16,549 8,264 6,336 ========================================================================
21 ATLAS CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands)
June 30, 1995 1994 - ------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 4,453 $ 3,767 Accounts receivable 131 970 Inventories (Note 2) 250 1,367 Investments in marketable equity securities (Note 3) 4,083 -- Prepaid expenses and other current assets 198 212 - ------------------------------------------------------------- Total current assets 9,115 6,316 Property, plant and equipment (Note 4) 47,686 50,476 Less: Accumulated depreciation, depletion and amortization and impairment (44,661) (47,637) - ------------------------------------------------------------- 3,025 2,839 Investment in unconsolidated subsidiary (Note 7) 25,452 -- Restricted cash and securities (Note 8) 5,659 7,993 Other assets (Note 8) 246 2,699 - ------------------------------------------------------------- $ 43,497 $ 19,847 ============================================================= LIABILITIES Current liabilities: Trade accounts payable $ 601 $ 2,109 Other accrued liabilities (Note 8) 2,103 3,146 Current portion of estimated uranium reclamation costs (Note 11) 800 1,300 - ------------------------------------------------------------- Total current liabilities 3,504 6,555 Convertible debenture (Note 15) 3,500 3,500 Other liabilities, long-term (Note 8) 11,660 12,267 Commitments and contingencies (Note 11) STOCKHOLDERS' EQUITY (DEFICIT) (NOTES 5, 6 AND 15) Common stock, par value $1 per share; authorized 50,000,000 and 25,000,000, issued and outstanding 18,577,500 and 9,410,012 at June 30, 1995 and 1994, respectively 18,578 9,410 Capital in excess of par value 68,678 31,555 Deficit (63,216) (43,440) Unrealized gain on investment in equity securities (Note 3) 896 -- Currency translation adjustment (103) -- - ------------------------------------------------------------- Total stockholders' equity (deficit) 24,833 (2,475) - ------------------------------------------------------------- $ 43,497 $ 19,847 =============================================================
22 ATLAS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (In thousands)
Capital in For the Three Years Common Common Excess of Ended June 30, 1995 Shares Stock Par Value Deficit Other Total - -------------------------------------------------------------------------------------------------- Balance at June 30, 1992 6,336 $ 6,336 $22,832 $ (3,666) -- $ 25,502 Current year loss -- -- -- (29,909) -- (29,909) - -------------------------------------------------------------------------------------------------- Balance at June 30, 1993 6,336 6,336 22,832 (33,575) -- (4,407) Issuance of Common stock (Note 15) 3,000 3,000 8,362 -- -- 11,362 Exercise of warrants 13 13 33 -- -- 46 Interest on Debenture 61 61 328 -- -- 389 Current year loss -- -- -- (9,865) -- (9,865) - -------------------------------------------------------------------------------------------------- Balance at June 30, 1994 9,410 9,410 31,555 (43,440) -- (2,475) Issuance of Common Stock (Note 15) 9,091 9,091 36,965 -- -- 46,056 Exercise of Warrants 15 15 39 -- -- 54 Interest on Debenture 40 40 50 -- -- 90 Shares issued to 401k plan 22 22 69 -- -- 91 Unrealized gain on investment (Note 3) -- -- -- -- 896 896 Currency translation adjustment -- -- -- -- (103) (103) Current year loss -- -- -- (19,776) -- (19,776) - -------------------------------------------------------------------------------------------------- Balance at June 30, 1995 18,578 $18,578 $68,678 $(63,216) $ 793 $ 24,833 ==================================================================================================
23 ATLAS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands)
For the Year Ended June 30, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- Operating activities: Net loss $ (19,776) $ (9,865) $ (29,909) (Income) loss from discontinued operations (621) (2,175) 875 Cumulative effect of postretirement benefit obligations -- -- 968 From continuing operations: Adjustments to reconcile loss to net cash used in operations: Depreciation, depletion and amortization 395 4,547 9,005 Equity loss in unconsolidated subsidiary 1,361 -- -- Forfeiture of deposit on stock purchase agreement 525 -- -- Write-down of investment in unconsolidated subsidiary 11,419 -- -- Write-down of mineral properties - producing -- 5,355 28,716 Write-down of mineral properties - nonproducing -- -- 2,796 Gain on mineral lease transaction -- -- (17,803) Other adjustments 498 -- 615 Changes in operating assets and liabilities (Note 9) (62) (2,217) (608) - ---------------------------------------------------------------------------------------------------------- (6,261) (4,355) (5,345) - ---------------------------------------------------------------------------------------------------------- Discontinued operations: Operating income (loss) (net of tax) 621 2,175 (875) Adjustments to reconcile income to net cash provided from operations: Decrease (increase) in accounts receivable 875 (875) -- Decrease in taxes payable -- -- (37) Increase in accrued liabilities 123 -- -- Increase (decrease) in other liabilities, long-term 102 (101) 877 Net decrease in estimated reclamation costs (1,497) (1,079) (623) - ---------------------------------------------------------------------------------------------------------- 224 120 (658) - ---------------------------------------------------------------------------------------------------------- Net cash used in operations (6,037) (4,235) (6,003) - ---------------------------------------------------------------------------------------------------------- Investing activities: Purchase of stock in unconsolidated subsidiary (36,492) -- -- Investment in equity securities (3,007) -- -- Proceeds from lease transaction -- -- 30,000 Additions to property, plant and equipment (625) (5,263) (3,795) Proceeds from sale of equipment and reduction in other assets 491 434 1,479 Collateral for letter of credit -- -- (6,500) - ---------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities (39,633) (4,829) 21,184 - ---------------------------------------------------------------------------------------------------------- Financing activities: Proceeds from borrowings on short term debt and line of credit 3,550 750 Principal payments on revolving line of credit and long-term debt -- -- (14,749) Repayment of short-term debt (3,550) (3,524) -- Proceeds from the issuance of common stock 50,054 12,421 -- Proceeds from the issuance of convertible debenture -- 3,500 -- Cost of issuance of convertible debenture and common stock (3,698) (1,300) -- - ---------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 46,356 11,097 (13,999) - ---------------------------------------------------------------------------------------------------------- Increase in cash and cash equivalents 686 2,033 1,182 Cash and cash equivalents at beginning of year 3,767 1,734 552 - ---------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 4,453 $ 3,767 $ 1,734 ==========================================================================================================
24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ 1. ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. INVENTORIES -- Inventories other than finished gold are recorded at the lower of average cost or net realizable value. Finished gold inventory is carried at realizable value. MINING COSTS -- During production periods, costs attributable to waste are charged to operations based on the average ratio of waste tonnage to ore tonnage. PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is stated at the lower of cost, or estimated net realizable value. Depreciation of milling facilities and depletion of mining properties is determined by the units of production method. The Company regularly assesses its ability to recover the carrying value of its assets and recognizes an impairment when it is determined that unamortized costs cannot be recovered from undiscounted cash flows over the remaining project life. Leasehold improvements are amortized on a straight-line basis over the terms of related leases or, if shorter, estimated useful life. Expenditures for maintenance and repairs are charged to operations as incurred Expenditures for additions and major renewals are added to the property, plant and equipment accounts. Interest expense allocable to the acquisition or construction of capital assets and deferred mine development is capitalized until operations commence. INVESTMENTS -- The Company uses the equity method to account for investments in common stock of companies 20 percent to 50 percent owned. Investments in equity securities of companies which are less then 20 percent owned are carried at the lower of cost or market value. Marketable equity securities available for sale are recorded at fair value with unrealized gains and losses reported as a separate component of stockholders' equity. FOREIGN CURRENCIES -- All assets and liabilities of foreign subsidiaries are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date, while income and expense items are translated at the weighted average exchange rate prevailing during the period. Unrealized exchange gains and losses are deferred and shown as a currency translation adjustment in shareholders' equity. EXPLORATION AND MINE DEVELOPMENT -- Exploration costs are expensed as incurred. When it is determined that a property has development potential, the subsequent costs of exploration and development are capitalized. Upon commencement of production the capitalized costs are amortized using the units of production method. MINING REVENUE -- Revenues are recorded when the finished product is available for shipment. 25 RECLAMATION -- Estimated reclamation, site restoration and closure costs for each mine are charged to operations over the expected life of the mine using the units of production method. INCOME TAXES -- Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under SFAS 109, income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred tax assets and liabilities represent the future tax return consequences of those differences which will either be taxable or deductible in the future when the assets and liabilities are recovered or settled. A valuation allowance is provided if it is more likely than not that any portion of the deferred tax assets will not be realized. Deferred tax assets are also recognized for operating losses and tax credits that are available to offset future taxable income or income taxes. CASH EQUIVALENTS -- The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. EARNINGS PER SHARE -- Earnings per share have been calculated based on the weighted average number of common shares outstanding during the year. Shares issuable under options and warrants are excluded from the computation when they are not dilutive. RECLASSIFICATIONS -- Certain of the comparative figures have been reclassified to conform with the current year's presentation. 2. INVENTORIES The following is a summary of inventories:
June 30, (In thousands) 1995 1994 - ----------------------------- ----- ------- Stockpiled ore $ -- $ 360 Work in process -- 593 Finished product -- 64 Materials and supplies 250 350 ----- ------ $ 250 $1,367 ===== ======
3. INVESTMENTS IN MARKETABLE EQUITY SECURITIES The following is a summary of investments in equity securities:
Gross Estimated Unrealized Fair June 30, 1995 ( In thousands) Cost Gains Value - ----------------------------------------------------------------------------------------------------- Dakota Mining Corporation Common Stock $ 3,187 $ 896 $4,083 =====================================================================================================
26 4. PROPERTY, PLANT AND EQUIPMENT The following is a summary of property, plant and equipment:
Accumulated Depreciation, Depletion Acquisition Amortization Net Book June 30, 1995 (In thousands) Costs & Impairment Value - ---------------------------- ------- ------- --------- Property and leaseholds $ 2,256 $ 2,256 $ -- Land improvements 5,734 5,734 -- Deferred exploration and development costs: Producing 3,470 3,470 -- Nonproducing 750 -- 750 Buildings and equipment 35,476 33,201 2,275 ------- ------- --------- Total $47,686 $44,661 $3,025 ======= ======= ========= Accumulated Depreciation, Depletion, Acquisition Amortization Net Book June 30, 1994 (In thousands) Costs & Impairment Value - -------------------------------------------------------------- ------- ------- --------- Property and leaseholds $ 2,256 $ 2,256 $ -- Land improvements 5,734 5,734 -- Deferred exploration and development costs: Producing 3,470 3,470 -- Nonproducing 388 -- 388 Buildings and equipment 38,620 36,177 2,451 ------- ------- --------- Total $50,476 $47,637 $2,839 ======= ======= =========
During September 1994, the Company placed the Gold Bar Mine on standby and recorded an expense of $1,275,000 for estimated shutdown and standby costs through the end of the fiscal year. During the fourth quarter of fiscal year 1995, the Company recorded $210,000 of additional shutdown and standby costs. During the fourth quarter of fiscal year 1994, the Company reviewed its mine plan and feasibility studies at certain Gold Bar properties. It was determined that the Company's unamortized investment could not be recovered from undiscounted cash flows over the remaining mine life, accordingly, the Company recorded an impairment of $5,355,000 in carrying value of its producing properties. This impairment is in addition to a similar reduction of $28,716,000 in the carrying value of its producing properties recorded in fiscal year 1993. The Company wrote off the $2,796,000 carrying value of certain nonproducing properties in the fourth quarter of fiscal 1993. 27 In October 1992, the Company leased to another mining company gold properties in Oregon and Idaho for a period of 35 years with options for three additional 10 year periods. The total consideration was $30 million, consisting of a $22.5 million initial payment and a $7.5 million advance royalty payment. The Company has retained a 5 percent royalty on each of the properties which will first be applied against the advance royalty and interest thereon. This transaction resulted in a gain of $17.8 million in fiscal year 1993. 5. STOCKHOLDERS' EQUITY At a Special Meeting of Stockholders held on December 15, 1994, an amendment was approved to the Company's Certificate of Incorporation increasing the number of authorized shares of common stock from 25 million to 50 million. The Company is also authorized to issue 1,000,000 shares of preferred stock, par value $1 per share. The preferred stock is issuable in series, with designations, rights and preferences to be fixed by the Board of Directors. The Board of Directors has established a series of 150,000 shares of Series Preferred Stock designated Series A Junior Participating Preferred Stock ("Series A Preferred Stock"), no shares of which have been issued. At June 30, 1995, there were 875,000 shares of Common Stock reserved for the conversion of an outstanding convertible debenture and 2,032,111 shares of Common Stock reserved for Option Warrants traded on the American Stock Exchange which are exercisable at a price of $15.625 per share and have no expiration date. Also at June 30, 1995, there were 6,517,955 shares of Common Stock reserved for Option Warrants outstanding with the following terms:
Date of Number Exercise Date Issuance of Shares Price of Termination ------------ --------- -------- -------------- Sept. 21, 1993 1,972,500 $3.625 Sept. 20, 1996 Aug. 17, 1994 3,243,405 $ 7.00 Aug. 16, 1999 Dec. 15, 1994 1,302,050 $ 7.00 Dec. 14, 1999
The Company has an Amended and Restated Rights Agreement under which a holder of Preferred Stock Purchase Rights ("Rights") is entitled to purchase from the Company 1/200th of a share of Series A Preferred Stock at a price of $45 per 1/200th of a share. Subject to action by the Board of Directors, the Rights become exercisable upon the occurrence of certain events, including acquisition by a person or group of 15 percent or more of the outstanding Common Stock of the Company. Upon any such acquisition, the amended Plan provides that upon exercise of Rights and payment of the purchase price, the exercising Rights holder is entitled to receive, in lieu of Series A Preferred Stock, shares of Common Stock having a market value equal to twice the purchase price. The Amended and Restated Rights Agreement was amended as of September 13, 1993 and August 15, 1994 to provide that the transactions with Phoenix Financial Holdings Inc., M.I.M. Holdings Limited and Mackenzie Financial Corporation would not cause the Rights to become exercisable (Note 15). 28 6. EMPLOYEE INCENTIVE PLANS The Company's Long Term Incentive Plan (the "LTIP") provides that key employees may be granted options to purchase Common Stock at the fair value of the shares on the date of grant. At a February 17, 1995 Meeting of Stockholders, the shareholders approved an amendment to the Long Term Plan (i) to increase by 850,000 the number of shares authorized for issuance under the LTIP, (ii) to provide for the automatic grant to non-employee directors of the Company of awards of stock options under the LTIP and (iii) to reduce the minimum period prior to which an option may be exercised for all options granted after January 6, 1995 from one year to six months. Options are exercisable for a maximum of ten years from the date of grant and no options may be granted after July 31, 1999. At June 30, 1995, 1,745,000 shares of Common Stock were authorized for issuance under the LTIP with 1,117,000 options outstanding.
Options Exercised -------------------------------------------------------------------- Date Option Number Prior to Outstanding Granted Price Granted (a) 1992 1992 1993 1994 1995 6/30/95 ------ --------- -------- ---- ---- ------- ---- --------- 03/11/93 $ 2.75 30,000 -- -- -- (30,000) -- -- 11/15/93 $ 4.25 409,500 -- -- -- -- -- 409,500 05/02/94 $ 8.00 5,000 -- -- -- -- -- 5,000 08/10/94 $ 4.75 37,500 -- -- -- -- -- 37,500 01/06/95 $2.125 80,000 -- -- -- -- -- 80,000 01/06/95 $ 4.50 350,000 -- -- -- -- -- 350,000 05/19/95 $ 2.00 235,000 -- -- -- -- -- 235,000 ------ --------- -------- ---- ---- ------- ---- --------- Total 1,147,000 -- -- -- (30,000) -- 1,117,000 --------- -------- ---- ---- ------- ---- ---------
(a) Options granted shown net of cancellations, of which 815,000 were canceled in fiscal year 1995 7. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY On August 15, 1994, the Company completed the purchase from M.I.M. (Canada) Inc. ("M.I.M.") of 12,694,200 common shares of Granges Inc. ("Granges") which represented 37.2 percent of the issued and outstanding shares of Granges. The purchase price was Cdn. $4.00 per share (U.S. $2.80), or an aggregate purchase price of Cdn. $50.8 million (U.S. $35.8 million). Granges is a Canadian-based precious metals mining company whose shares are traded on the Toronto Stock Exchange and the American Stock Exchange. Effective May 1, 1995, Granges amalgamated with Hycroft Resources and Development Corporation ("Hycroft"), which operates the Crofoot/Lewis mine located in Nevada,. Prior to the amalgamation, Granges had a 50.5 percent ownership position in Hycroft. The terms of the amalgamation called for each common share of Hycroft to be exchanged for 0.88 of a common share of "new" Granges Inc. and for each common share of Granges outstanding prior to the amalgamation, to be exchanged for one common share of "new" Granges Inc. After the amalgamation, the Company continued to hold 12,694,200 shares of "new" Granges Inc., representing 27.7 percent of the outstanding common shares of Granges. 29 The Company has reported the results of Granges' operations on the equity method since it was acquired on August 15, 1994. A summarized Statement of Operations (Unaudited, U.S. dollars and U.S. GAAP) of Granges for the twelve month period ended June 30, 1995 and a summarized Balance Sheet (Unaudited, U.S. dollars and U.S. GAAP) is presented below:
Twelve Months Ended STATEMENT OF OPERATIONS (In thousands) June 30, 1995 - -------------------------------------- ------------- Sales $42,833 Cost of sales 34,179 Depreciation, depletion, & amortization 4,773 ------- Income from operations 3,880 Net loss $(1,405) ======= BALANCE SHEET (In thousands) Current assets $34,109 Non-current assets $28,137 Current liabilities $ 5,346 Non-current liabilities $ 3,206 Net equity $53,694
Under the equity method, the Company recorded a loss of $1,361,000 for the period from August 15, 1994 (date of acquisition) to June 30, 1995, respectively. Excess cost of investment over the net assets acquired of $9,002,000 is being amortized on a unit of production (gold ounces) basis and is included in the reported loss. In connection with May 1, 1995 amalgamation of Granges Inc. and Hycroft Resources and Development Corporation, the Company has re-evaluated its investment in Granges relative to the fair values implied in the amalgamation and to known reserves at the Crofoot/Lewis mine. As a result, the Company has elected to record an $11,419,000 impairment of its investment in unconsolidated subsidiary as of June 30, 1995. 8. DETAILS OF CERTAIN BALANCE SHEET CAPTIONS A summary of restricted cash and securities is as follows:
June 30, (In thousands) 1995 1994 - ---------------------- ------- ------- Collateral for a $4,592,000 letter of credit (a)(c) $ 4,869 $ -- Collateral for a $6,500,000 letter of credit (a) -- 6,500 Collateral for a $1,500,000 reclamation bond (b) 790 775 Other restricted cash (c) -- 718 ------- ------- $ 5,659 $ 7,993 ======= =======
(a) Securing $6,500,000 performance bond related to the Company's uranium reclamation obligations. (b) Securing $1,500,000 performance bond related to the Company's Gold Bar reclamation obligation. (c) Securing $1,826,000 performance bond related to the Company's Gold Bar reclamation obligation. 30 A summary of other assets is as follows: June 30, (In thousands) 1995 1994 - ----------------------- ------- ------- Deposit paid for Granges Inc. shares $ -- $ 1,843 Deposit paid for Dakota Mining Corporation shares (Note 15) -- 525 Other 246 331 ------- ------- $ 246 $ 2,699 ======= ======= A summary of other accrued liabilities is as follows: June 30, (In thousands) 1995 1994 - ---------------------- ------- ------- Accrued compensation $ 230 $ 596 Mine reclamation accrual (short-term) 300 300 Accrued asbestos reclamation costs (Note 11) 566 1,400 Other 1,002 850 ------- ------- $ 2,103 $ 3,146 ======= ======= A summary of other liabilities, long-term is as follows: June 30, (In thousands) 1995 1994 - ---------------------- ------- ------- Long term uranium reclamation cost (Note 11) $ 4,902 $ 5,899 Pension and deferred compensation obligations 1,405 1,335 Mine reclamation accrual 3,042 3,100 Accrued postretirement benefit obligation (Note 13) 1,232 1,203 Other 1,079 730 ------- ------- $11,660 $12,267 ======= ======= 9. DETAILS OF CERTAIN STATEMENTS OF CASH FLOW CAPTIONS The components of the changes in operating assets and liabilities as reflected in the Consolidated Statements of Cash Flows are as follows:
Year Ended June 30, (In thousands) 1995 1994 1993 - --------------------------------- -------- -------- -------- Decrease (increase) in trade accounts receivable $ (36) $ -- $ 68 Decrease in inventories 843 1,024 614 Decrease (increase) in prepaid expenses and other current assets (69) (57) 160 Decrease (increase) in other assets and restricted cash and securities 2,419 (2,565) (390) Increase (decrease) in trade accounts payable (1,500) 860 (1,110) Decrease in other accrued liabilities (1,784) (182) (1,015) Increase (decrease) in income taxes payable -- (477) 477 Increase (decrease) in other liabilities, long-term 65 (820) 588 ------- ------- ------- $ (62) $(2,217) $ (608) ======= ======= =======
31 Net cash required for operating activities reflects cash payments for interest and income taxes as follows: Year Ended June 30, (In thousand) 1995 1994 1993 - -------------------------------- ------- ------- ------- Interest (net of amounts capitalized) $ 99 $ 562 $ 61 Income taxes $ -- $ -- $ -- 10. DISCONTINUED OPERATIONS During fiscal year 1995, the Company recognized income of $621,000 from discontinued operations, this included a gain of $846,000 recorded upon the receipt of a payment from the Department of Energy under Title X of the Energy Policy Act (Note 11) in connection with the reclamation of the Company's uranium mine and mill site in Moab, Utah. The gain was partially offset by a loss of $225,000 due to cost overruns at the Company's Coalinga, California asbestos mine and mill reclamation project (Note 11). During fiscal year 1994, the Company recognized income of $2,175,000 from discontinued operations primarily due to the recovery from insurance carriers of cleanup costs at the Coalinga reclamation project. During fiscal year 1993, the Company charged $912,000 ($875,000 net of tax) to discontinued operations including $600,000 for estimated reclamation costs at the Coalinga project and $312,000 for litigation related to the sale of the Atlas Building Systems Division in a prior fiscal year. The items above are included in the consolidated statements of operations under the heading "Income (loss) from discontinued operations". The following table summarizes the operating income (loss) of the discontinued businesses:
Building Asbestos Products & Mining & Ready-Mix Service & Year ended (In thousands) Milling Concrete Other Total ------------------------- --------- ---------- ------- -------- June 30, 1995 $ (225) $ -- $846 $ 621 June 30, 1994 $1,997 $ 136 $(42) $2,175 June 30, 1993 $ (600) $(312) $ -- $ (912)
11. COMMITMENTS AND CONTINGENCIES The Company is obligated to decommission and reclaim its uranium mill site located near Moab, Utah. The Company discontinued its uranium operations and permanently shut down its uranium mill and mines in 1987, estimated shut-down expenses and reclamation costs of $17,406,000 were accrued. The balance in this accrual at June 30, 1995 was $5,702,000. Title 32 X of "The Comprehensive National Energy Policy Act" ("Title X"), enacted in October 1992, provides for the reimbursement of past and future reclamation expenses related to uranium sites operated under Atomic Energy Commission contracts. The Company's uranium reclamation cost will be reduced by this Government cost sharing program since 56 percent of its tailings were generated under government contracts. The Company believes the accrual, when combined with anticipated reimbursements under the Title X program, is sufficient to cover future reclamation costs. In July 1994, the Company submitted a claim to the Department of Energy (the "DOE") under Title X of approximately $5 million for reclamation costs incurred from fiscal year 1986 through fiscal year 1994. The DOE has given interim approval on approximately $4.5 million of the claim and $2.5 million in reimbursement, disallowing $.5 million. On December 29, 1994, the Company received $846,000 as a partial payment of the approved reimbursement which was recorded as income from discontinued operations. In June 1995, the Company submitted a second claim to the DOE under Title X for approximately $3.6 million which included reclamation costs incurred from fiscal year 1980 through fiscal year 1985, from June 1994 through May 1995, and reclamation costs previously disallowed. The Company anticipates the DOE audit of the June 1995 claim will be completed in the fall of 1995. If the June 1995 claim is approved in full, the Company would receive reimbursement of approximately $2.0 million. Timing of payments for approved reimbursements is a function of Congressional appropriation of Title X funding. During fiscal year 1988, the United States Environmental Protection Agency notified the Company that it was one of several potentially responsible parties for cleanup costs at the Company's former asbestos mine and mill site near Coalinga, California and in the City of Coalinga. A prolonged period of inquiry and administrative process concerning this matter followed. In fiscal years 1995, 1993 and 1991, the Company established a reserve, and recorded as an expense, $225,000, $600,000 and $3,000,000, respectively, to cover the Company's share of cleanup costs. In fiscal year 1992, the Company started legal action against thirteen insurance carriers which had issued insurance policies, with respect to the site. During fiscal year 1994, the Company reached settlement with a number of the carriers and recorded a gain from discontinued operations of $2,175,000. All claims with remaining carriers were settled in fiscal year 1995. The proceeds were negligible. The remedial action plan commenced October 1994 and is now scheduled to be completed in the fall of 1995 after delays caused by unusually heavy rains in central California during the spring and summer of 1995. Minimum future rental commitments under the Company's non-cancelable operating leases having a remaining term in excess of one year at June 30, 1995 are as follows: Year ended June 30, (In thousands) - ---------------------------------- 1996 $ 283 1997 283 1998 283 1999 283 33 2000 94 Later years -- ------ Total minimum payments required $1,226 ====== Amounts charged to rent expense in fiscal years 1995, 1994 and 1993 were $550,000, $670,000 and $1,263,000, respectively 12. EMPLOYEE RETIREMENT PLANS The Company has a trusteed and insured retirement plan covering substantially all salaried employees. The plan provides pension benefits that are based on final average compensation minus certain adjustments for primary social security benefits. The Company's funding policy for the plan is to make at least the minimum annual contributions required by applicable government regulations. Plan assets are invested primarily in equity securities, corporate and government bonds and money market funds.
For the Year Ended June 30, (In thousands) 1995 1994 1993 - ------------------------------------------------------ ------ ------ ------ Service costs-benefits earned during the year $ 83 $ 123 $ 195 Interest cost on projected benefit obligation 432 441 500 Actual return on plan assets (218) (90) (252) Net amortization and deferral (223) (399) (262) ----- ----- ----- Net periodic pension cost for the year $ 74 $ 75 $ 181 Assumed long-term rate of return on plan assets 8.5% 8.5% 8.5%
The following table sets forth the plans' funded status and amounts recognized in the Company's financial statements at June 30, 1995 and 1994:
For the Year Ended June 30, (In thousands) 1995 1994 - ----------------------------------------- -------- ------- Accumulated benefit obligation based on salaries to date, including vested benefit obligation of $5,449,000 for 1994 and $5,338,000 for 1995 $(5,344) $(5,494) Additional benefit obligation based on estimated future salary levels (145) (157) ------- ------- Projected benefit obligation (5,489) (5,651) Fair value of plan assets 4,971 5,342 ------- ------- Funded status (518) (309) Unrecognized net obligation at July 1, 1989 and 1988 being recognized over approximately 15.88 years 58 71 Unrecognized net gain (42) (190) ------- ------- Accrued pension cost $ (502) $ (428) ======= ======= Assumed discount rate 8.25% 8.25% Assumed rate of increase in future compensation 5.0% 5.0%
34 The Company has an Investment and Savings Plan to assist eligible employees in providing for retirement or other future financial needs. Employee contributions (up to 10 percent of their earnings) are matched in Company stock by the Company at a rate of 100 percent up to a maximum of 6 percent of the employee earnings. In addition, the Company provides a 4 percent contribution for all eligible employees compensated on an hourly scale. The Company's contributions to this Plan in fiscal years 1995, 1994 and 1993 were $93,000, $179,000 and $284,000, respectively. 13. OTHER POSTRETIREMENT BENEFIT PLANS In addition to the Company's defined benefit pension plan the Company has two defined benefit postretirement plans covering most salaried employees. One plan provides medical benefits and the other provides life insurance benefits. The postretirement health care plans are contributory, with retiree contributions adjusted annually, and contain other cost-sharing features such as deductibles and coinsurance. The accounting for the health care plans anticipates future cost-sharing changes to the written plan that are consistent with the Company's expressed intent to increase the retiree contribution rate annually for the expected general inflation rate for that year. The life insurance plan is non- contributory. The Company's policy is to fund the cost of the postretirement health care benefits in amounts determined at the discretion of management and to make annual contributions to the life insurance plan in level amounts over the plan participant's expected service period. In fiscal year 1993, the Company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. The effect was a one-time charge to operations of $968,000. This cumulative catch-up adjustment as of July 1, 1992 represents the discounted present value of expected future retiree health and insurance benefits attributed to employees' service rendered prior to that date. The new standard results in additional annual expense which totaled $102,000, $149,000 and $138,000 in fiscal years 1995, 1994 and 1993 respectively. The following table shows the plan's combined funded status reconciled with the amounts recognized in the Company's financial statements:
Life Medical Insurance June 30, 1995 (In thousands) Plans Plans Total - --------------------------- ------ -------- ------ Accumulated postretirement benefit obligation: Retirees $(194) $(492) $ (686) Fully eligible active plan participants -- -- -- Other active participants (152) (38) (190) ----- ----- ------- Accrued postretirement benefit cost $(346) $(530) $ (876) Unrecognized prior service cost (32) (91) (123) Unrecognized net gain (234) 1 (233) ----- ----- ------- Accrued postretirement benefit cost $(456) $(593) $(1,232) ===== ===== =======
35 Components of net periodic postretirement benefit cost: Service cost $ 41 $ 8 $ 49 Interest cost 35 40 75 Net amortization and deferral (12) (10) (22) - --------------------------------------------------------- ----- ----- ------- Net periodic postretirement benefit cost $ 64 $ 38 $ 102 ===== ===== =======
Life ----- Medical Insurance June 30, 1994 (In thousands) Plans Plans Total - --------------------------- ------- ------ ------ Accumulated postretirement benefit obligation: Retirees $(202) $(460) $ (662) Fully eligible active plan participants -- -- -- Other active participants (235) (47) (282) ----- ----- ------- (437) (507) (944) Unrecognized prior service cost (34) (98) (132) Unrecognized net gain (99) (28) (127) ----- ----- ------- Accrued postretirement benefit costs $(570) $(633) $(1,203) ===== ===== ======= Components of net periodic postretirement benefit cost: Service cost $ 55 $ 12 $ 67 Interest cost 37 45 82 ----- ----- ------- Net periodic postretirement benefit cost $ 92 $ 57 $ 149 ===== ===== =======
The weighted-average annual assumed rate of increase in per capita cost of covered benefits (i.e. health care cost trend rate) for the medical plan is 13 percent for fiscal year 1995, 12 percent for fiscal year 1996 and is assumed to decrease gradually to 6 percent in 2002 and remain at that level thereafter, and for the dental plan 8.625 percent for fiscal year 1995, 8.25 percent in fiscal 1996 and is assumed to decrease gradually to 6 percent in 2002 and remain level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation for the medical plans as of June 30, 1995 by $32,000 and 1994 by $54,000 and the aggregate of the service cost and interest cost components of net periodic postretirement benefit cost for June 30, 1995 by $12,000. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.5 percent and 8.25 percent at June 30, 1995 and June 30, 1994. 14. INCOME TAXES Effective July 1, 1993, the Company adopted SFAS No. 109, Accounting for Income Taxes. The adoption of SFAS No. 109 resulted in no material change to the Company's deferred tax liability. Financial Statements for prior periods have not been restated. 36
June 30, (In thousands) 1995 1994 1993 - ----------------------- ----- ---- ---- Deferred $-- $-- $-- Current -- -- 477 Operating loss and credit carryovers -- -- -- ----- ----- ----- Income tax expense/(benefit) $ -- $ -- $ 477 ===== ===== =====
Deferred income taxes result from temporary differences in the timing of income and expenses for financial and income tax reporting purposes. The primary components of deferred income taxes result from exploration and development costs; depreciation, depletion, and amortization expenses; impairments; and reclamation accruals. The net deferred tax balances in the accompanying June 30, 1995 and 1994 balance sheets include the following components:
June 30, (In thousands) 1995 1994 - ----------------------- ------- ------ Deferred tax assets: Net operating loss (NOL) carryovers $ 33,711 $ 29,877 Tax credit carryovers 756 964 Impairment of mineral properties 12,359 12,359 Depreciation, depletion and amortization 882 2,244 Reclamation accruals 3,399 4,216 Postretirement benefit accrual 431 421 Impairment of investment in unconsolidated subsidiary 3,997 -- Equity in unconsolidated subsidiary 512 -- -------- -------- Total deferred tax assets 56,047 50,081 Deferred tax asset valuation allowance (51,664) (45,020) -------- -------- Net deferred tax assets 4,383 5,061 -------- -------- Deferred tax liabilities: Depreciation, depletion, and amortization 4,069 4,853 Unrealized gain on investment of equity securities 314 -- Other -- 208 -------- -------- Total deferred tax liabilities 4,383 5,061 -------- -------- Net deferred tax balances $ -- $ -- ======== ========
The change in the Company's valuation allowance is summarized as follows: June 30, (In thousands) 1995 1994 - ---------------------- -------- -------- Valuation allowance, beginning of year $ 45,020 $ 41,567 Continuing operations 7,139 4,214 Discontinued operations (217) (716) Other (278) -- -------- -------- Valuation allowance, end of year $ 51,664 $ 45,020 ======== ========
37 The 1994 components of deferred tax liabilities and assets have been revised from amounts previously reported to reflect changes in assumptions on the availability of NOL carryovers. A reconciliation of expected federal income taxes on income from continuing operations at statutory rates with the expense/(benefit) for income taxes is as follows:
June 30, (In thousands) 1995 1994 1993 - ---------------------- ------ ------ ----- Income tax at statutory rates $(7,139) $(4,214) $(9,380) Increase in deferred tax asset valuation allowance 7,139 4,214 -- Net operating loss utilization limitation -- -- 9,380 ------- ------- ------- Income tax expense/(benefit) $ -- $ -- $ -- ======= ======= =======
At June 30, 1995, the Company has unused NOL carryovers and investment tax credit carryovers of approximately $96,316,000 and $629,000, respectively, which begin to expire in 1996. The Company has approximately $127,000 of alternative minimum tax credit carryover which can be carried forward indefinitely. 15. PRIVATE PLACEMENTS The Company conducted a private placement of 9,090,909 Units of Atlas securities during the summer of 1994 for a purchase price of $5.50 per Unit, each Unit consisting of one share of the Company's common stock and one-half of a warrant (exercisable for five years) to purchase a share of the Company's common stock at an exercise price of $7.00 per share in order to finance the acquisition 12,894,200 common shares of Granges (Note 7) and 1,500,000 common shares and 3,100,000 preferred shares of Dakota Mining Corporation ("Dakota"). The first portion of such private placement, consisting of the sale of 6,486,809 Units for an aggregate purchase price of $35,677,450, was completed on August 15, 1994, and the proceeds thereof were applied primarily to the price of the Granges shares. In connection with closing the first portion of the private placement, the Company entered into a $3.5 million secured, short-term credit agreement to cover certain expenses of the private placement. The Company pledged the Granges Shares as part of the security for such loan. On October 29, 1994, the Company determined not to proceed with acquisition of the Dakota shares (see below). The second portion of the private placement, the sale of an additional 2,604,100 Units for an aggregate purchase price of $14,322,550, was completed on December 15, 1994 following the shareholder approval of an increase in the authorized share capital of the Company. Upon closing the second portion of the private placement, the Company used a portion of the proceeds to repay the balance of $800,000 due on short-term security agreement. Of the Units sold in the private placement, Mackenzie Financial Corporation ("Mackenzie Financial") acquired 1,820,000 Units, consisting of 1,820,000 shares of Common Stock and 910,000 warrants to purchase shares of Common Stock, and M.I.M. Holdings Limited ("M.I.M.") acquired 2,000,000 Units, consisting of 2,000,000 shares of Common Stock and 1,000,000 warrants to purchase shares of Common Stock. Since such date, Mackenzie Financial 38 has acquired an additional 591,000 shares of Common Stock. Following such purchases, to the best of the Company's knowledge and belief, Mackenzie Financial and M.I.M. have beneficial ownership of, respectively, 18.8 percent and 15.3 percent of the shares of Common Stock of the Company outstanding as of September 10, 1995. On May 31, 1994, the Company, Dakota and VenturesTrident, L.P. and VenturesTrident II, L.P. entered into an agreement in principle providing for (i) the purchase of 1,500,000 common shares of Dakota from the VenturesTrident Partnerships, for $4.00 per share, and, subject to the completion of the purchase of the VenturesTrident Shares, (ii) the subscription by Atlas to 3,100,000 newly-to-be issued convertible preferred shares of Dakota. On October 28, 1994, the Company determined that it was in the best interests of its shareholders not to proceed with the Dakota acquisition and forfeited $1,000,000 in nonrefundable deposits to the VenturesTrident Partnerships. Costs of $144,000 incurred in conjunction with the Dakota transaction were also expensed. On March 9, 1995, Atlas and Dakota entered into a Subscription Agreement, under which Atlas purchased 2,419,355 Special Warrants of Dakota at a price of $1.24 per Special Warrant which were subsequently converted into 2,419,355 Common Shares of Dakota. As a result of such purchase, the Company owns about 9 percent of the outstanding Common Shares of Dakota. In connection with the purchase by the Company of Special Warrants, the Company and Dakota executed a mutual limited release, whereby each party released the other from any liability arising out of the May 31, 1994 agreement. On January 18, 1994, the Company sold for $7,500,000 in gross proceeds, 1,500,000 shares of Common Stock for $5.00 per share in a private placement. The shares were placed outside the United States with a number of gold funds in Canada and European institutional investors. On September 20, 1993, the Company sold to Phoenix Financial Holdings Inc. for an aggregate of $8,375,000 (i) 1,500,000 shares of the Company's Common Stock, (ii) a Redeemable Convertible Debenture due 1998 in the principal amount of $3,500,000, which is convertible as to principal into Common Stock at the rate of $4.00 per share and bears interest at the rate of 9 percent per annum payable in cash or Common Stock at the rate of $4.00 per share, and (iii) Warrants to purchase for three years 2,000,000 shares of Common Stock at $3.625 per share. Of such securities, the 1,500,000 shares of the Company's Common Stock and 750,000 of the Warrants to Purchase Common Stock were sold to various investors in a private placement. 39 REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ATLAS CORPORATION We have audited the accompanying consolidated balance sheets of Atlas Corporation and subsidiaries as of June 30, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended June 30, 1995. 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. The financial statements of Granges Inc., (a corporation in which the Company has a 27.7 percent interest), have been audited by other auditors whose report has been furnished to us; insofar as our opinion on the 1995 consolidated financial statements relates to data included for Granges Inc., it is based solely on their report. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlas Corporation and subsidiaries at June 30, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles. As discussed in Note 13 to the financial statements, in 1993 the Company changed its method of accounting for postretirement benefits other than pensions. /s/ Ernst & Young LLP Denver, Colorado September 6, 1995 40 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- Not applicable PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY ----------------------------------------------- DIRECTORS The Company's directors are divided into three classes and hold office for a term of three years ending with the annual meeting of stockholders for the fiscal year 1995 in the case of Class II, for fiscal 1996 in the case of Class III and for fiscal 1997 in the case of Class I. There are currently seven directors. Information Concerning Directors The following table sets forth certain information concerning each director. Principal Occupation, Past Five Director Years' Business Experience Name Since and Other Directorships Held Age - --------------------------- -------- ------------------------------------ --- CLASS II David J. Birkenshaw 1993 Chairman and Chief Executive 40 Officer of the Company, since September 1993; Chairman, Birkenshaw & Company, Ltd., a merchant bank; Chairman, Phoenix Financial Holdings Inc., a holding company (June 1991 to March, 1995). Vice Chairman of the Board of Directors of Granges Inc., a 27.7% subsidiary of the Company; and Director of Dakota Mining Corporation, a company in which Atlas currently holds 9 percent of the outstanding common stock. Mr. Birkenshaw's business address is that of the Corporation. James H. Dunnett 1995 Director of Endeavour Financial 46 Inc., an investment banking firm specializing in the mining industry. Mr. Dunnett is a director of Phoenix Financial Holdings, Inc. and is serving, until September 30, 1995, as a director of Granges Inc., a 27.7 percent subsidiary of the Company. Mr. Dunnett's 41 Principal Occupation, Past Five Director Years' Business Experience Name Since and Other Directorships Held Age - --------------------------- -------- ------------------------------------ --- business address is 1111 West Georgia St., Suite 404, Vancouver, BC, Canada V6E 4M3 C. Thomas Ogryzlo 1993 President and Chief Operating 56 Officer, Kilborn Engineering & Construction Limited; formerly a principal of Wright Engineers Limited, an engineering firm; director of Carib Gold Resources Inc. and Rio Amarillo Mining Limited. Mr. Ogryzlo's business address is 2200 Lake Shore Boulevard West, Toronto, Ontario, Canada M8V 1A4. CLASS III Douglas R. Cook 1988 President of Cook Ventures Inc., a 69 geological consulting firm; formerly Senior Vice President and Director of Freeport-McMoran Gold Company; formerly President of Freeport Exploration Company; and Director, Pegasus Gold Corporation. Mr. Cook's business address is 2485 Greensboro Drive, Reno, Nevada 89509. Michael B. Richings 1995 President, Chief Executive Officer 50 and Director of Granges Inc., a Canadian mining company and 27.7% subsidiary of the Company, since June 1, 1995. President and Chief Operating Officer of the Company (January 6, 1995 to May 31, 1995). Formerly President of Lac Minerals Ltd. South America (February 1993 to December 1994). Employed by the Corporation, As Vice President- Special Projects (June 1992 to December 1992) and as Vice President Operations, (July 1990 to May 1992). Mr. Riching's business address is 2230 - 885 W. Georgia St., Vancouver, BC, Canada V6C 3E8. 42 Principal Occupation, Past Five Director Years' Business Experience Name Since and Other Directorships Held Age - --------------------------- -------- ------------------------------------ --- CLASS I Philip R. Mengel 1995 Chief Executive Officer and member 51 of the Board of Glen-Gery Corporation, a leading US manufacturer of brick and concrete building materials. Member of the Board of Ibstock, PLC, the UK parent of Glen-Gery. Previously Chairman and Chief Executive Officer of Mengel and Co., Inc., an investment bank. Mr. Mengel's business address is Corporate Office, 1166 Spring St., P.O. Box 7001, Wyomissing, PA 19610-6001. David P. Hall 1993 President and Chief Executive 48 Officer of Aurizon Mines Ltd., a mineral exploration and development company and management firm; formerly President of CanGold Resources Inc. (to January 31, 1995) and formerly President of Hughes Lang Corporation (to January 31, 1994). Mr. Hall's business address is 1414 - 700 West Georgia St., Vancouver, BC V7Y 1A3. EXECUTIVE OFFICERS The information concerning the Company's executive officers required by this Item is included in Part I, Item 4, under the caption "Executive Officers of the Company." 43 COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT Under Section 16 of the Exchange Act, the Corporation's directors and officers and persons holding more than 10 percent of the Corporation's Common Stock are required to report their initial ownership of Common Stock and subsequent changes to that ownership to the Securities and Exchange Commission and the New York Stock Exchange by specified due dates. To the best of the Company's knowledge, all of these filing requirements were satisfied, except that Richard E. Blubaugh, Vice President, Gerald E. Davis, President, James R. Jensen, Controller, and J. Michael Washington, formerly Chief Financial Officer of the Company, each filed a late report in connection with receipt of employee stock options under the Corporation's Long Term Incentive Plan; CanGold Resources filed a late report with respect to an interest payment (paid in common stock) on a convertible debenture of the Corporation; and the controlling persons of Phoenix Financial Holdings, Inc., including formerly David J. Birkenshaw, Chairman and Chief Executive Officer of the Company, are required to file certain reports reflecting their indirect partial interests in transactions by Phoenix Financial Holdings, Inc. and its subsidiary CanGold Resources. ITEM 11. EXECUTIVE COMPENSATION ---------------------- The following table sets forth all compensation paid by the Corporation for the three fiscal years ended June 30, 1995, to Messrs. David J. Birkenshaw and Gerald E. Davis. No other person who was serving as an executive officer of the Corporation at June 30, 1995 had total cash and cash-equivalent remuneration which exceeded $100,000 during such fiscal year. SUMMARY COMPENSATION TABLE
Long Term Annual Compensation Compensation Fiscal Year ------------------- --------------------- Name and Principal Ended Other Annual Stock All Other Position June 30, Salary Bonus Comp Options Comp - --------------------------- ----------- ------------------- ------ ------------- ------- ------------ David J. Birkenshaw 1995 $154,167 -- -- 350,000 -- (Chief Executive Officer) 1994 $ 75,000 -- -- 300,000 -- 1993 -- -- -- -- -- Gerald E. Davis 1995 $134,561 $3,500 $ 6,813(2) 75,000 $7,560(3) (President) 1994 $120,000 -- $45,437(1)(2) 25,000 $1,800(3) 1993 $ 98,150 -- $ 885(2) 21,000 $2,769(3) ---- -------- ------ --------- ------- ---------
(1) Amount includes $35,625 paid by the Company upon exercise of options to purchase 15,000 shares of Common Stock by Mr. Davis following the change in control of September 20, 1993 described below, representing the difference between the option price and the market price of such shares. (2) Includes certain perquisites, such as car allowances and life insurance premiums, paid by the Company. (3) Includes contributions by the Corporation to the Investment Savings Plan for Employees of Atlas Corporation. EMPLOYMENT AGREEMENTS. David J. Birkenshaw, the Chairman of the Board and Chief Executive Officer of the Corporation, has an employment agreement providing for his 44 employment as an officer of the Corporation, at a minimum annual salary of $200,000 (as of August 28, 1995), until the termination of his employment by either Mr. Birkenshaw or the Corporation or his normal retirement in accordance with the Corporation's retirement programs in place at the time. Gerald E. Davis, President of the Corporation, has an employment agreement providing for his employment as an officer of the Corporation, at a minimum annual salary of $150,000, until the termination of his employment by Mr. Davis or the Corporation or his normal retirement in accordance with the Corporation's retirement programs in place at the time. Messrs. Birkenshaw and Davis each are entitled, upon termination of such person's employment by the Corporation without "Cause" or by him with "Good Reason" (as such terms are defined in their employment contracts), to a severance payment equal to one year's salary, amounts accrued but unpaid under his employment contract and amounts payable under existing employee benefit plans; except that upon the termination of his employment by the Corporation without "Cause" or by him with "Good Reason", either within three months prior to a change of control or within two years after a change of control, each of Messrs. Birkenshaw and Davis would be entitled to an amount equal to two times his annual salary then in effect, all amounts accrued but not paid under his employment agreement and all amounts payable under existing employee benefit plans. See also, with respect to Messrs. Birkenshaw and Davis, the section entitled "Options" below. INVESTMENT AND SAVINGS PLAN. The Atlas Corporation Investment and Savings Plan benefits employees of the Corporation and certain subsidiaries who have completed six months of service. Each participant under this plan must be at least 21 years of age. Under this plan, an employee may elect to contribute, pursuant to a salary reduction election, not less than 1 percent and not more than 10 percent of the employee's annual compensation. The Corporation makes a matching contribution of 100 percent of the amount contributed by the employee, but not more than 6 percent of the employee's annual compensation. In addition, the Corporation may make special contributions to this plan, but these special contributions may not exceed the maximum amount deductible under Section 404(a)(3)(A) of the Code. Employee contributions may be invested in a number of investment options, but not Common Stock of the Corporation. All matching and special contributions to this plan are invested in shares of Common Stock of the Corporation. 1978 RETIREMENT PLAN. Eligible employees, including officers, participate in the Atlas Corporation 1978 Retirement Plan (the "1978 Retirement Plan"), a noncontributory defined benefit pension plan. Benefits under the 1978 Retirement Plan are based on years of service and the participant's compensation during the participant's three consecutive highest compensated years out of the participant's final five years as a participant. Benefits under the 1978 Retirement Plan are payable upon disability, death or retirement at age 55 or later and may be distributed in the form of a single-life annuity, a joint and survivor annuity covering the participant and a beneficiary or installments over a term of years. The following table shows the estimated annual benefits payable upon retirement in the form of a single-life annuity under the 1978 Retirement Plan to persons in the specified compensation and years-of-service classifications. 45
PENSION PLAN TABLE Average Annual Compensation on which Retirement Benefits are Estimated Annual Retirement Benefits at Age Based 65 for Indicated Years of Credited Service (10) (15) (20) (25) (30) - ----------------------- ------- ------- ------- ------- ------- $ 50,000................ $ 8,704 $13,056 $17,408 $21,760 $26,112 $100,000................ $18,704 $28,056 $37,408 $46,760 $56,112 $150,000................ $28,704 $43,056 $57,408 $71,760 $86,112 $200,000................ $28,704 $43,056 $57,408 $71,760 $86,112 $250,000................ $28,704 $43,056 $57,408 $71,760 $86,112 $300,000................ $28,704 $43,056 $57,408 $71,760 $86,112
Retirement benefits under the 1978 Retirement Plan are based on salaries and additional compensation, such as awards under the Annual Incentive Plan. These benefits are not affected by directors' fees. Benefits listed in the table are net of an offset for part of the participant's Social Security benefits. There is no other offset. Years of service credited through June 30, 1995 under the 1978 Retirement Plan for the officers listed in the Summary Compensation Table are 1 year for Mr. Birkenshaw and 4 years for Mr. Davis. The Internal Revenue Code of 1986, as amended (the "Code"), sets limits on a participant's annual benefits on retirement under the 1978 Retirement Plan. To assure that participants' retirement benefits are not reduced in the future because of the Code limits, the Board of Directors adopted a Supplemental Executive Retirement Plan, which provides retirement benefits on an unfunded basis to participants whose benefits under the 1978 Retirement Plan would be limited by the Code in an amount equal to the difference between the annual retirement benefit permitted under the 1978 Retirement Plan by the Code and the amount that would have been paid but for the limitation imposed by the Code. THE LONG TERM INCENTIVE PLAN. Under the Company's Long Term Incentive Plan (the "Plan"), incentive awards in the form of restricted stock, restricted stock units, stock options or stock appreciation rights, with respect to the common stock of the Company, may be made by the Company's Compensation Committee (the "Compensation Committee") to selected key employees. An award of restricted stock entitles an employee to all the rights of a stockholder with regard to such stock, except that, during the restricted period, the stock is nontransferable and forfietable. An award of a restricted stock unit entitles an employee to elect, at the end of the restricted period, a payment in the form of a share of stock or a cash amount of equivalent fair market value. An award of a stock option entitles an employee to purchase stock at the exercise date at a price equal to or greater than the fair market value of the stock at the grant date. A stock appreciation right, which may be granted only in tandem with a stock option and the exercise of which extinguishes the related stock option, entitles an employee to receive, in stock or in cash, an amount equal to the increase in value of the related stock between the date of 46 grant and the date of exercise. Awards may be made to selected key employees at any time during the term of the Plan, subject to the Plan provisions expressly limiting the amount of stock with respect to which awards may be made. All restrictions with regard to such awards terminate and all rights vest fully and immediately upon a change of control, as defined in the Plan. Upon a change of control, employees who have been granted stock options under the Plan have the right to surrender their options within 30 days following the change of control and to receive, in lieu of exercising their options, a cash payment in the amount by which the highest fair market value of the shares subject to the options during the 60-day period proceeding the change of control exceeds the exercise price of such options. As of June 30, 1995, no awards other than stock options were outstanding under the Plan. The Plan provides for the automatic granting of a non-qualified option to purchase 20,000 shares of Common Stock to non-employee directors as of January 6, 1995, or for a person becoming a director after such date, as of the date such person becomes a director. The options become exercisable in three cumulative annual installments and have a term of ten years. The Compensation Committee has no power to determine eligibility for grants or the terms of grant to any non-employee director. Upon the occurrence of a change of control, as defined in the Plan, all options granted to non-employee directors become fully vested. ANNUAL INCENTIVE PLAN. Under the Corporation's Annual Incentive Plan, incentive compensation may be paid to key employees selected by the Compensation Committee based on the achievement by the Corporation and the selected employees of performance goals established for each fiscal year by the Compensation Committee. In addition to target awards, which recognize achievement of the predetermined goals, the Compensation Committee may establish threshold and maximum awards to recognize performance which has only been minimally acceptable and performance which has been significantly above target. Target, threshold and maximum awards are expressed as a percentage of the selected employees' base salary for the pertinent fiscal year. The Compensation Committee may consider the adverse impact of external circumstances on the Corporation's performance in evaluating the achievement of individual employee goals and in determining whether to exercise its authority in such circumstances to make alternative or supplemental awards. For the fiscal year ended June 30, 1995, no awards were made under the Annual Incentive Plan. OPTIONS OPTION GRANTS IN THE LAST FISCAL YEAR. The following table sets forth information relating to stock options granted during the fiscal year ending June 30, 1995 to Messrs. Birkenshaw and Davis. 47
% of Total Options Grant Number of Granted to Exercise Date Options Employees in Price(1) Expiration Present Name Granted the Fiscal Year (per share) Date Value(2) - ------------------- ---------- --------------- --------- -------- -------- David J. Birkenshaw 350,000(3) 30.77% $4.50 11/15/03 $457,000 Gerald E. Davis 15,000(4) 1.32% $4.75 8/09/04 $ 53,000 60,000(5) 5.27% $2.00 5/18/05 $ 69,000
(1) Exercise price is equal to or greater than the market value at date of grant. (2) Calculated using the Black-Scholes option pricing model, with reference to the most recent 60-month period for determining price volatility. The actual value, if any, that an executive may realize from the options will be the excess of the market price of the Common Stock on the day of exercising the options over the exercise price of the options. (3) Options granted on January 6, 1995, which vest in three equal installments on each of the first, second and third anniversaries from the date of grant. (4) Options vested on August 10, 1995. (5) Options granted on May 19, 1995, which vest in three equal installments on each of the first, second, and third anniversaries from the date of grant. AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR END OPTIONS. The following table provides information relating to the number and value of stock options exercised in the last fiscal year and the number of exercisable and unexercisable stock options held by executive officers at June 30, 1995.
Number of Unexercised Options At Fiscal Year End Shares Acquired Value -------------------------- Name on Exercise Realized Exercisable Unexercisable - ------------------- --------------- -------- ----------- ------------- David J. Birkenshaw -- -- 300,000 350,000 Gerald E. Davis -- -- 25,000 75,000
There were no of the fiscal year ended June 30, 1995, all outstanding options of the Company with an exercise value in excess of $2.00 per share were canceled and replaced (subject, in the case of options held by Mr. Birkenshaw, to shareholder approval at the next Annual Meeting of Shareholders) with options bearing an exercise price of $2.00 per share. COMPENSATION OF DIRECTORS Fees paid to directors are paid only to directors who are not employees of the Corporation and currently consist of a $7,500 annual fee, a $1,000 fee for each Board of Directors meeting attended in person, a $500 fee for each Board of Directors meeting attended by telephone and a $500 fee for each committee meeting attended. The Long-Term Incentive Plan provides for the automatic granting of an option to purchase 20,000 shares of Common Stock of the Company to non-employee directors the time of their election or appointment to the Board of Directors or such persons who were directors of the 48 Company on January 6, 1995. Such option shall become exercisable in three cumulative installments and shall have a term of three years. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During the fiscal year ended June 30, 1995, Mr. James D. Beatty, Mr. David B. Knight (until his resignation from the board on November 4, 1994) and Mr. C. Thomas Ogryzlo served on the Compensation Committee. None of such persons is or has been at any time an officer of the Company or any of its subsidiaries. Mr. Knight is a partner of the Toronto, Ontario, law firm Lang Michener, which provides legal services to the Company. The current members of the Compensation Committee are Douglas R. Cook, Philip R. Mengel and C. Thomas Ogryzlo, none of such persons is or has been at any time an officer of the Company or any of its subsidiaries. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- Security Ownership The following table sets forth certain information at September 21, 1995, regarding the beneficial ownership, including shares of Common Stock which may be acquired upon the exercise of stock options or warrants, or the conversion of any securities, within 60 days of September 21, 1995, of the Corporation's Common Stock by (i) persons known to the Corporation to own more than 5 percent of the Corporation's Common Stock, (ii) each director of the Corporation, and (iii) all directors and executive officers as a group. As of September 21, 1995, none of the directors or executive officers of the Corporation owned beneficially any of the Corporation's outstanding securities other than Common Stock.
Number of Shares and Nature of Percent Name Beneficial Ownership (7) of Class - -------------------------------- ------------------------ ---------- Mackenzie Financial Corporation 3,806,900(1) 19.2%(1) 150 Floor Street West, Suite 805 Toronto, Ontario M5S 3B5 M.I.M. Holdings Limited 3,000,000(2) 15.1%(2) M.I.M. Plaza, 410 Anne St. Brisbane, Queensland, 4000 Australia Phoenix Financial Holdings Inc. 1,150,000(3) 5.8%(3) Scotia Plaza 40 King Street W., Suite 5306 Toronto, Ontario M5H 3Y2
49 Gregory H. Bailey 1,150,000(3) 5.8%(3) London Strauss Capital Corp. Suite 210, 20 Richmond Street East Toronto, Ontario M5C 2R9 David J. Birkenshaw 400,000(4) 2.1%(4) Douglas R. Cook 2,000 * James H. Dunnett 115,000(5) * Philip R. Mengel -- -- David P. Hall -- -- C. Thomas Ogryzlo -- -- Michael B. Richings -- -- All current executive officers and directors as a group (8 persons) 522,624(4)(5)(6) 2.7%(4)(5)(6)
* Ownership does not exceed 1 percent of class. (1) On January 18, 1995, Atlas received a copy of Schedule 13G filed with the Securities and Exchanged Commission by Mackenzie Financial reflecting beneficial ownership of 2,776,900 shares of Common Stock. To the best of the Corporation's knowledge, Mackenzie Financial also beneficially owns warrants issued by the Corporation which are exercisable into 910,000 shares of Common Stock at an option price of $7.00 per share and into 120,000 shares of Common Stock at an option price of $3.625 per share. (2) M.I.M. Holdings is the direct beneficial owner of (i) 2,000,000 shares of Common Stock and (ii) warrants issued by the Corporation which are exercisable into 1,000,000 shares of Common Stock at an exercise price of $7.00 per share. (3) Phoenix is the direct beneficial owner of warrants issued by the Corporation which are exercisable into 1,150,000 shares of Common Stock at an exercise price of $3.625 per share. Because of his direct and indirect beneficial share ownership in Phoenix, Gregory H. Bailey may be deemed to be the indirect beneficial owners of securities directly or indirectly owned by Phoenix. (4) Includes (i) 300,000 shares obtainable upon exercise by Mr. Birkenshaw of options granted to him under the Long Term Incentive Plan, and (ii) 100,000 shares obtainable upon the exercise of warrants to purchase shares of Common Stock, which warrants are exercisable at an exercise price of $7.00 per share. (5) James H. Dunnett may be deemed, by virtue of his 25 percent interest in Acorn Capital Financial Corporation, which is the direct beneficial owner of (i) 70,000 shares of Common Stock and (ii) warrants issued by the Corporation which are exercisable into 45,000 shares of Common Stock at an exercise price of $7.00 per share, to be the indirect beneficial owner of securities directly owned by Acorn Capital Financial Corporation. (6) Includes (i) 300,000 shares obtainable upon exercise of options granted under the Long Term Incentive Plan, (ii) 110,000 shares obtainable upon the exercise of warrants with an exercise of warrants with an exercise price of $7.00 per share, (iii) 115,000 shares of Common Stock beneficially owned by Acorn Capital Financial Corporation, including 45,000 shares of Common Stock issuable upon the exercise of warrants at $7.00 per share, and (iv) 7,624 shares of Common Stock directly owned. (7) Does not include shares issuable on the exercise of options which have not vested and will not vest within sixty days of this report. 50 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- Mr. Richings, who served as the President and Chief Operating Officer of the Company from January 6, 1995 until June 1, 1995, has served since June 1, 1995, as a director of Granges Inc., a 27.7 percent subsidiary of the Company, and as of June 1, 1995, was granted a leave of absence by the Company in order to permit him to serve, at the Company's request, as President and Chief Executive Officer of Granges Inc. Mr. Dunnett is a director of Endeavour Financial Corporation, an investment banking firm, which acts as a financial advisory to the Company. During fiscal 1995, the Company paid Endeavour Financial Corporation $904,000 in advisory fees, most of which related to advisory fees associated with the acquisition of the Granges Inc. shares (see Item 1. Business, section headed Acquisition of Granges Inc. Investment, for the description and terms of the acquisition). Mr. Dunnett is serving, from August 17, 1994 until September 30, 1995, as an Atlas nominee on the Board of Directors of Granges Inc. Mr. Birkenshaw, Chief Executive Officer of the Company, is the Chairman of Birkenshaw & Company, Ltd., a merchant bank, and was the Chairman of Phoenix Financial Holdings Inc., a holding company, until March 1995. During fiscal year 1995, the Company paid $174,000 to Birkenshaw & Company, Ltd. and Phoenix Financial Holdings, Inc. for reimbursement of expenses incurred on behalf of the Company. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K --------------------------------------------------------------- (a) (1) Financial Statements: See Index to Financial Statements and Schedules on page 58. (2) Financial Statement Schedules: See Index to Financial Statements and Schedules on page 58. (3) Exhibits: Exhibit Number Exhibits - ------------------------------------------------------ 3.1 Restated Certificate of Incorporation of the Company, dated January 3, 1990 (filed as Exhibit 3.2 to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 1989, and incorporated herein by reference). 3.2 By-Laws of the Company, as amended on January 3, 1990 (filed as Exhibit 3.3 to the Company's quarterly report on Form 10-Q 51 for the quarter ended December 31, 1989 and incorporated herein by reference). 3.3 By-Laws of the Company, as amended on July 12, 1995. 4.1 Term Loan Agreement dated August 15, 1994 between the Company and Gerald Metals, Inc.(filed as an Exhibit 10.22 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference). 4.2 Security Agreement dated August 15, 1994 between the Company and Gerald Metals, Inc.(filed as an Exhibit 10.23 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference). 4.3 Pledge Agreement dated August 15, 1995 between the Company and Gerald Metals, Inc. (filed as an Exhibit 10.24 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference). 10.1 Atlas Corporation Management Incentive Compensation Plan (filed as Exhibit 10.2 to the Company's annual report on Form 10-K (file no. 1-2714) for the fiscal year ended June 30, 1981 and incorporated herein by reference). 10.2 Form of Indemnity Agreement entered into between the Company and certain of its directors (filed as Exhibit 10.14 to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1987 and incorporated herein by reference). 10.3 Amended and Restated Rights Agreement dated as of August 2, 1989 between the Company and Manufacturers Hanover Trust Company (filed as Exhibit 1 to the Company's current report on Form 8-K dated August 2, 1989 and incorporated herein by reference). 10.4 Long Term Incentive Plan of the Company dated November 1, 1989 (filed as Exhibit 10.28 to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1989 and incorporated herein by reference). 10.5 Atlas Corporation Supplemental Executive Retirement Plan dated as of January 3, 1990 (filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1990 and incorporated herein by reference). 52 10.6 Atlas Corporation Retirement Plan for Outside Directors dated April 4, 1990 (filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1990 and incorporated herein by reference). 10.7 Restated Employment Agreement dated as of September 12, 1990 between the Company and Richard R. Weaver (filed as Exhibit 10.22 to the annual report on Form 10-K for the fiscal year ended June 30, 1990 and incorporated herein by reference). 10.8 Amendment No. 1, dated as of March 6, 1991, to the Amended and Restated Employment Agreement, dated as of September 12, 1990, between the Company and Richard R. Weaver (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1991 and incorporated herein by reference). 10.9 Atlas Corporation Annual Incentive Plan adopted by the Board of Directors of the Company on March 6, 1991(filed as Exhibit 10.20 to the Company's annual report on Form 10-K for the year ended June 30, 1991 and incorporated herein by reference). 10.10 Agreement dated September 10, 1992 among Atlas Precious Metals, Inc., the Company and Newmont Mining Corporation (filed as Exhibit 10.22 to the Company's annual report on Form 10-K for the year ended June 30, 1992 and incorporated herein by reference). 10.11 Amendment dated September 10, 1992 to the Agreement dated September 10, 1992 among Atlas Precious Metals, Inc., the Company and Newmont Mining Corporation (filed as Exhibit 10.23 to the Company's annual report on Form 10-K for the year ended June 30, 1992 and incorporated herein by reference). 10.12 Securities Purchase Agreement dated September 3, 1993 between the Company and Phoenix Financial Holdings Inc. (filed as Exhibit 2 to the Company's Report on Form 8-K filed on September 9, 1993 and incorporated herein by reference). 10.13 Amendment dated as of September 15, 1993 to the Amended and Restated Rights Agreement dated as of August 2, 1989 between the Company and Chemical Bank, as successor by merger with Manufacturers Trust Company (filed as Exhibit 10.25 to the Company's annual report on Form 10-K for the year ended June 30, 1993 and incorporated herein by reference). 53 10.14 Employment agreement made as of September 22, 1993, between the Company and David J. Birkenshaw (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1994 and incorporated herein by reference). 10.15 Amendment dated as of August 28, 1995 to the employment agreement made as of September 22, 1993, between the Company and David J. Birkenshaw. 10.16 Share Purchase Agreement dated April 28, 1994 between the Company and M.I.M. (Canada) Inc. (filed as an Exhibit 10.18 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference). 10.17 Agreement dated May 10, 1994 between the Company and Granges Inc. (filed as an Exhibit 10.19 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference). 10.18 Registration Rights Agreement dated August 15, 1994, between the Company and First Marathon Securities Limited (filed as Exhibit 10.20 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference). 10.19 Indemnity Agreement dated August 15, 1995 between the Company and M.I.M. Holdings Limited (filed as an Exhibit 10.21 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference). 10.20 Purchase Agreement dated May 31, 1994 among the Company, Dakota Mining Corporation, VenturesTrident L.P. and VenturesTrident II L.P. (filed as an Exhibit 10.25 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference). 10.21 Second Amendment dated as of August 15, 1994 to the Amended and Restated Rights Agreement dated August 2, 1989 between the Company and Chemical Bank, as successor by merger with Manufacturers Hanover Trust Company (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference). 10.22 The Company's Long Term Incentive Plan, as amended dated February 17, 1995 (filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference). 54 10.23 Employment Agreement made as of January 16, 1995 between the Company and Michael B. Richings (filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference). 10.24 Employment Agreement made as of February 17, 1995 between the Company and Richard E. Blubaugh (filed as Exhibit 10.4 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference). 10.25 Agreement dated February 24, 1995 between the Company and Granges Inc. to vote the common shares of Granges Inc., held by the Company, in favor of the proposed amalgamation of Granges Inc. and Hycroft Resources & Development Corporation. 10.26 Atlas Subscription Agreement dated March 9, 1995 between the Company and Dakota Mining Corporation. 10.27 Amendment dated September 15, 1995 to the employment agreement made as of February 17, 1995 between the Company and Richard E. Blubaugh. 10.28 Employment Agreement dated June 1, 1995 between the Company and Gerald E. Davis. 10.29 Amendment dated September 20, 1995 to the employment agreement dated June 1, 1995 between the Company and Gerald E. Davis. 21 Subsidiaries of the Company 24 Consent of Independent Auditors 27 Financial Data Schedule (b) Reports on Form 8-K: The Company filed no reports on Form 8-K during the fourth quarter of fiscal 1995. For purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned hereby undertakes as follows, which undertaking shall be incorporated by reference into the Company's Registration Statement on Form S-8 No. 33-18316 (filed on November 3, 1987, as amended by Post Effective Amendment No. 1 filed on December 15, 1987): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised 55 that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by the director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. _____________________________ Note concerning Exhibits: The Company will furnish copies of Exhibits to security holders of the Company upon request. The Company may charge a fee in connection with such a request, which will be limited to the Company's reasonable expenses in furnishing any such Exhibit. 56 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ATLAS CORPORATION By: /s/ Gerald E. Davis ------------------- Gerald E. Davis President Date: September 27, 1995 ------------------ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. /s/ David J. Birkenshaw Chief Executive Office - ------------------------- and Director September 27, 1995 David J. Birkenshaw /s/ Jerome C. Cain Principal Financial Officer September 27, 1995 - ------------------------- Jerome C. Cain /s/ James R. Jensen Controller and Principal - ------------------------- Accounting Officer September 27, 1995 James R. Jensen /s/ Douglas R. Cook Director September 22, 1995 - ------------------------- Douglas R. Cook /s/ James H. Dunnett Director September 26, 1995 - ------------------------- James H. Dunnett /s/ David P. Hall Director September 22, 1995 - ------------------------- David P. Hall /s/ Philip R. Mengel Director September 25, 1995 - ------------------------- Philip R. Mengel /s/ C. Thomas Ogryzlo Director September 25, 1995 - ------------------------- C. Thomas Ogryzlo /s/ Michael B. Richings Director September 25, 1995 - ------------------------- Michael B. Richings 57 ATLAS CORPORATION AND ITS SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND SCHEDULES JUNE 30, 1995, 1994 AND 1993 Page ---- FINANCIAL STATEMENTS OF ATLAS CORPORATION Consolidated Statements of Operations for the Fiscal Years Ended June 30, 1995, 1994 and 1993 21 Consolidated Balance Sheets as of June 30, 1995 and 1994 22 Consolidated Statements of Stockholder's Equity (Deficit) as of June 30, 1995, 1994 and 1993 23 Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 1995, 1994 and 1993 24 Notes to Consolidated Financial Statements 25 - 39 Report of the Independent Auditors 40 Consent of Independent Auditors 59 SCHEDULES FOR THE FISCAL YEARS ENDED JUNE 30, 1995, 1994 AND 1993: VIII Valuation and Qualifying Accounts and Reserves 60 Consolidated Financial Statements of Granges Inc. 61 - 80 58 CONSENT OF INDEPENDENT AUDITORS We consent to the addition of the financial statement schedule, listed in the accompanying index to the financial statements, to the financial statements covered by our report dated September 6, 1995, included herein. We also consent to the incorporation by reference in Post Effective Amendment Number 19 to Registration Statement Number 2-8439 on Form S-3 dated November 10, 1983, Post Effective Amendment Number 1 to Registration Statement Number 33- 18316 on Form S-8 dated December 14, 1987 and Registration Statement Number 33- 87992 on Form S-3 dated January 13, 1995 and the Related Prospectuses of our report on the finical statements and schedule included in this Annual Report on Form 10-K of Atlas Corporation for the year ended June 30, 1995. /s/ Ernst & Young LLP Denver, Colorado September 26, 1995 59 ATLAS CORPORATION AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended June 30, 1995, 1994 and 1993 (In thousands)
Column A Column B Column C Column E Column F Additions ---------------------- (1) Balance at Charged to Charge to Balance at Beginning of Costs and Other (2) End of Classification Period Expenses Accounts Deductions Period - ----------------------------------------------------------------------------------------- YEAR ENDED JUNE 30, 1995 Provisions for loss from disposal of discontinued operations $ 9,327 $225 $ -- $(2,502) $7,050 (3) YEAR ENDED JUNE 30, 1994 Provision for loss from disposal of discontinued operations $11,689 $ -- $102 $(2,464) $ 9,327 YEAR ENDED JUNE 30, 1993 Provision for loss from disposal of discontinued operations $11,958 $912 $170 $(1,351) $ 11,689 - -----------------------------------------------------------------------------------------
(1) Represents net proceeds from the disposition of assets. (2) Represents costs incurred. (3) The balance at June 30, 1995 includes $800,000 in Accrued liabilities and $4,902,000 in Other liabilities, long-term represents the liability for reclamation and uranium shutdown costs. 60 CONSOLIDATED FINANCIAL STATEMENTS OF GRANGES INC. 61 Auditors' Report To the Directors of GRANGES INC. We have audited the consolidated balance sheets of Granges Inc. as at December 31, 1994 and 1993 and the consolidated statements of earnings (loss), deficit and changes in cash resources for each of the years in the three year period then ended. These consolidated financial statements are the responsibility of Granges' 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 an audit to obtain reasonable assurance 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. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Granges as at December 31, 1994 and 1993 and the results of its operation and changes in its cash resources for each of the three years then ended in accordance with generally accepted accounting principles. As required by the British Columbia Company Act, we report that, in our opinion, these principles have been applied on a consistent basis. Vancouver, B.C. (signed) Coopers & Lybrand February 17, 1995 except as to Chartered Accountants Note 20 which is as of February 24, 1995 62 GRANGES INC. CONSOLIDATED STATEMENTS OF EARNINGS (Canadian dollars in thousands, except per share data)
YEAR ENDED DECEMBER 31 ----------------------------------------- 1994 1993 1992 ----------------------------------------- REVENUES $ 54,432 $ 55,297 $ 63,703 ----------------------------------------- EXPENSES Operating costs 44,099 48,360 44,290 Depreciation, depletion and provision for future reclamation and mine 3,539 5,904 9,071 closure Amortization of deferred stripping 4,246 - - ----------------------------------------- 51,884 54,264 53,361 ----------------------------------------- RESULTS OF MINING OPERATIONS 2,548 1,033 10,342 Mineral exploration 5,046 4,590 5,899 Corporate administrative 4,022 5,349 4,677 Interest income - net (Note 2) (2,132) (1,333) (867) Other expense (income) 789 (704) 462 Gain on sale of mineral properties and investments (12,570) (2,265) - (Note 3) Dilution gain on issue of - (7,398) - subsidiary shares (Note 4) ----------------------------------------- (4,845) (1,761) 10,171 ----------------------------------------- EARNINGS BEFORE INCOME TAXES 7,393 2,794 171 CURRENT INCOME TAXES (Note 5) 408 33 121 ----------------------------------------- NET EARNINGS $ 6,985 $ 2,761 $ 50 ========================================= EARNINGS PER SHARE $0.20 $0.08 nil ========================================= WEIGHTED AVERAGE SHARES OUTSTANDING 34,164,260 34,095,575 33,819,800 =========================================
63 GRANGES INC. CONSOLIDATED STATEMENTS OF DEFICIT (Canadian dollars in thousands)
YEAR ENDED DECEMBER 31 ---------------------------------- 1994 1993 1992 ---------------------------------- Deficit, Beginning of Year $(82,447) $(85,208) $(85,258) Net Earnings 6,985 2,761 50 ---------------------------------- Deficit, End of Year $(75,462) $(82,447) $(85,208) ==================================
The accompanying notes are an integral part of these consolidated financial statements. 64 GRANGES INC. CONSOLIDATED BALANCE SHEETS (Canadian dollars in thousands)
YEAR ENDED DECEMBER 31 ------------------------- 1994 1993 ------------------------- ASSETS Current Assets Cash and cash equivalents $ 45,113 $ 26,699 Marketable securities 327 357 Accounts Receivable 2,772 5,600 Inventories (Note 6) 14,027 9,003 ------------------------- 62,239 41,659 Property, Plant and Equipment 36,587 41,550 (Note 3A, 7, 11) ------------------------- $ 98,826 $ 83,209 ========================= LIABILITIES Current Liabilities Bank loan (Note 9) $ - $ 4,983 Accounts payable and 19,960 6,596 accrued liabilities (Note 10) Current portion of 366 570 long-term debt (Note 11) Deferred revenue - 572 ------------------------- 20,326 12,721 Long-Term Debt (Note 11) - 277 Provisions for Future 4,179 3,891 Reclamation and Closure Costs (Note 3) ------------------------- 24,505 16,889 ------------------------- SHAREHOLDERS' EQUITY Common Shares, without par value (Issued 1994 - 34,177,000 shares; 1993 - 34,157,000 shares) 146,227 146,198 Contributed Surplus 3,803 3,803 Deficit (75,462) (82,447) Currency Translation Adjustment (Note 13) (247) (1,234) ------------------------- 74,321 66,320 ------------------------- $ 98,826 $ 83,209 =========================
Contingencies and commitments (Note 18) Approved by the Board (signed) John S.Auston (signed) Peter Walton Director Director The accompanying notes are an integral part of these consolidated financial statements. 65 GRANGES INC. CONSOLIDATED STATEMENTS OF CHANGES IN CASH RESOURCES (Canadian dollars in thousands)
YEAR ENDED DECEMBER 31 -------------------------------- 1994 1993 1992 -------------------------------- Operating Activities Net earnings (loss) $ 6,985 $ 2,761 $ 50 Items not involving cash Depreciation and depletion 2,699 4,710 7,326 Amortization of deferred 4,246 - - stripping Provision for future reclamation and closure costs 894 1,275 1,745 Deferred revenue recognized (572) (797) (2,758) Gain on sale of equipment (88) (320) - Gain on sale of mineral properties and marketable securities (Note 3) (12,570) (2,121) - Dilution gain on issue of subsidiary shares (Note 4) - (7,398) - Foreign exchange loss - (35) 82 -------------------------------- 1,594 (1,925) 6,445 Deferred revenue - 1,136 - Currency translation adjustment (2) 168 648 Change in working capital, excluding cash and cash equivalents (Note 14) 11,198 2,002 (992) -------------------------------- 12,790 1,381 6,101 -------------------------------- Investing Activities Property, plant and equipment (21,131) (11,155) (4,156) Proceeds from sale of mineral properties and marketable securities (Note 3) 32,296 2,394 - Investment in subsidiary (Note 4) - (2,756) - Proceeds from sale of equipment 140 655 - -------------------------------- 11,305 (10,862) (4,156) -------------------------------- Financing Activities Bank loan advances (repayments) (5,195) (9,782) 14,300 Equipment note proceeds (net) (515) - - Long-term debt proceeds - (311) 1,002 Long-term debt repayments - - (10,980) Common shares repurchased and - - (348) cancelled Contributed surplus - - 253 Issue of shares for options 29 289 - Issue of shares for settlement of litigation (Note 12) - 276 - Issue of subsidiary shares (Note 4) - 10,154 - -------------------------------- (5,681) 626 4,227 --------------------------------
66 Increase (decrease) in Cash and Cash 18,414 (8,855) 6,172 Equivalents Cash and Cash Equivalents, Beginning of Year 26,699 35,554 29,382 -------------------------------- Cash and Cash Equivalents, End of Year $ 45,113 $ 26,699 $ 35,554 ================================ The accompanying notes are an integral part of these consolidated financial statements. 67 GRANGES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular information in thousands of Canadian dollars, except per share data) 1. SIGNIFICANT ACCOUNTING POLICIES (a) Generally Accepted Accounting Principles The consolidated financial statements of Granges Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in Canada. These principles differ in certain material respects from those accounting principles generally accepted in the United States. The differences are described in Note 19. (b) Principles of Consolidation The consolidated financial statements include the accounts of Granges Inc., its subsidiaries and its proportionate share of the assets, liabilities, revenues and expenses of its unincorporated joint ventures. The Company's subsidiaries, principal joint venture and its percentage ownership as at December 31, 1994 are: (see Note 3A)
Ownership ---------- Hycroft Resources & Development Corporation and its wholly owned 50.5% subsidiaries: Hycroft Resources & Development, Inc. Hycroft Lewis Mine, Inc. Granges (U.S.) Inc. and its wholly owned subsidiary Granges 100% (Arizona) Inc. 493744 Ontario Limited 100%
(c) Foreign Currency Translation Self-sustaining foreign operations are translated using the current rate method. Under this method, assets and liabilities are translated at the rate of exchange on the balance sheet date, and revenue and expenses at the average rate of exchange during the period. Exchange gains and losses are deferred and shown as a currency translation adjustment in shareholders' equity until transferred to earnings when the net investment in the foreign operation is reduced. Foreign currency denominated monetary items of the Company, excluding its foreign operations, are translated at the year-end exchange rate. Exchange gains and losses on these items are recognized in earnings in the year they arise. 68 (d) Revenue Recognition Sales are recorded as soon as the product is considered available for sale. Gains and losses on forward sales and option contracts are deferred until the scheduled maturity date of such contracts. (e) Mineral Exploration Acquisition and exploration expenditures on mineral properties are expensed when incurred until such time as the property indicates the potential of being developed into a mine, and thereafter the expenditures are capitalized. Previously capitalized expenditures are expensed if the project is determined to be uneconomic. (f) Cash Equivalents Cash equivalents consist of highly liquid debt instruments such as certificates of deposit, commercial paper, and money market accounts purchased with an original maturity date of three months or less. The Company's policy is to invest cash in conservative, highly rated instruments and limit the amount of credit exposure to any one institution. Cash equivalents are stated at cost plus accrued interest which approximates market value. (g) Inventories Product inventory is valued at the lower of average cost (excluding deferred stripping costs) and net realizable value. Supplies are valued at the lower of average cost and net realizable value. (h) Property, Plant and Equipment (i) Developed Mineral Properties Property acquisition and development costs are carried at cost less accumulated amortization and writedowns. Amortization is provided on the unit-of-production method based on proven and probable reserves. Carrying values are reviewed on a regular basis and, where necessary, are written down to their estimated recoverable amount. (ii) Plant and Equipment Plant and equipment are recorded at cost and depreciated using the straight line method over their estimated useful life or the unit-of- production method. (iii) Deferred Stripping During production, mining costs associated with waste rock removal are deferred and charged to operations on the basis of the average strip ratio for the life of the 69 mine. The average strip ratio is calculated as a ratio of the tons of waste expected to be mined to the tons of ore estimated to be mined (i) Provision for Future Reclamation and Closure Costs Costs related to ongoing site restoration programs are expensed when incurred. A provision for mine closure and site restoration costs (based upon estimated costs to comply with existing reclamation legislation) is being charged to earnings over the estimated remaining life of the mines. 2. INTEREST INCOME - NET
YEAR ENDED DECEMBER 31 --------------------------- 1994 1993 1992 --------------------------- Interest income $(2,286) $(1,849) $(1,762) Short-term debt interest 89 463 446 Long-term debt interest 65 53 449 --------------------------- $(2,132) $(1,333) $ (867) ===========================
3. GAIN ON SALE OF MINERAL PROPERTIES AND MARKETABLE SECURITIES (a) Mineral properties Effective March 31, 1994 the Company sold its 29 percent interest in the Trout Lake joint venture, as well as a number of exploration properties, to its co-venturer Hudson Bay Mining and Smelting Co., Limited (HBMS) for total cash consideration of $33 million, realizing a gain of $12.6 million. As part of the terms of sale, HBMS assumed all environmental liabilities arising due to past or future activities of the Trout Lake Mine. Accordingly, the $810,000 reclamation and closure accrual related to the mine has been removed from the Company's books and included in the calculation of the gain. On May 27, 1993, the Company sold its 40 percent interest in the Jualin joint venture in Alaska, and its related 22.3 percent equity investment in International Curator Resources Ltd. for proceeds of $1.7 million. The costs associated with this project had been included in mineral exploration in prior years. (b) Marketable Securities On October 7, 1993, the Company sold its 200,000 shares of Pan Orvana Resources for net proceeds of $694,000 and realized a gain of $494,000. 4. SUBSIDIARY SHARE ISSUE 70 In July 1993, the Company's subsidiary, Hycroft Resources & Development Corporation, completed a sale of 10.5 million common shares. The Company acquired 2.65 million of the 10.5 million shares, which resulted in a reduction of its interest in Hycroft from 67 percent to 50.5 percent. The net effect on the consolidated financial statements of the Company was to increase cash and cash equivalents by $7.4 million and report a gain on the reduction of its interest in the subsidiary of the same amount. 5. INCOME TAXES A reconciliation of the combined Canadian federal and provincial income taxes at statutory rates and the Company's effective income tax expenses is as follows:
YEAR ENDED DECEMBER 31 ---------------------------- 1994 1993 1992 ---------------------------- Income taxes at statutory rates $ 3,371 $ 1,075 $ 63 Increase (decrease) in taxes from: - - - Resource and depletion allowance - (304) (886) Non-taxable portion of capital gain (203) - - Non-taxable portion of dilution gain - (845) - Financing costs on share issue (69) (348) (341) Application of prior years' loss (1,379) (1,113) - carry forward Utilization of resource and asset (5,772) - - pools Recovery of prior years' taxes (124) (82) - Deferred tax debit not recognized 4,643 1,855 1,698 Differences in foreign tax rates (178) (254) (479) ------- ------- ------ 289 (16) 55 Large corporations tax 119 49 66 ------- ------- ------ Income taxes per statements of earnings $ 408 $ 33 $ 121 (loss) ======= ======= ======
The Company has incurred income tax losses in prior periods of $13.8 million which may be carried forward and applied against future taxable income when earned. No benefit in respect of these losses has been recorded in these accounts. The losses expire as follows:
UNITED CANADA STATES TOTAL ------------------------------ 1997 $ 117 $ - $ 117 1998 5 - 5 2001 - 1,229 1,229 2002 - 1,905 1,905 2003 - 7,600 7,600 2004 - 1,927 1,927 2008 - 1,049 1,049
71 ------------------------------ $ 122 $13,710 $13,832 ==============================
6. INVENTORIES 1994 1993 ------------------- Product inventory $11,273 $ 6,276 Supplies 2,754 2,727 ------------------- $14,027 $ 9,003 =================== 7. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is comprised of the following:
Property Metals Produced Acquired/Commenced Production - -------------------------------------------------------------------------------------------------------------- Trout Lake mine copper, zinc, gold, silver 1982 (interest disposed of March 31, 1994 - see note 3A) Crofoot/Lewis mine gold, silver Lewis 1987, Crofoot 1988 Tartan mine gold 1987 (suspended 1989)
1994 1993 ---------------------------------------------------------------------------------- Accumulated Accumulated Depreciation, Depreciation, Depletion Depletion amortization and amortization and Cost Writedowns Net Cost Writedowns Net - --------------------------------------------------------------------------------------------------------------- Producing Mines Trout Lake mine $ - $ - $ - $ 35,164 $14,008 $21,156 Crofoot/Lewis mine 81,193 49,342 31,851 59,026 45,433 13,593 ---------------------------------------------------------------------------------- 81,193 49,342 31,851 94,190 59,441 34,749 Non-Producing Mine Tartan Lake mine 5,209 2,699 2,510 5,396 2,863 2,533 Corporate Assets 1,123 565 558 1,054 511 543 ---------------------------------------------------------------------------------- 87,525 52,606 34,919 100,640 62,815 37,825 Deferred stripping costs - Crofoot/Lewis 6,002 4,334 1,668 3,725 - 3,725 ---------------------------------------------------------------------------------- $93,527 $56,940 $36,587 $104,365 $62,815 $41,550 ==================================================================================
(a) Recoverable amounts 72 Management regularly reviews the mining plans, ore reserves, ore grades and recovery rates of its mines. These reviews indicated that no writedowns have been necessary since 1991 when the carrying values of certain properties were in excess of their estimated net recoverable amounts, and accordingly they were written down as follows:
1991 --------- Tartan mine $ 6,500 Crofoot/Lewis mine 13,000 --------- $19,500 =========
(b) Deferred stripping During 1993 the amounts of waste moved at the Crofoot/Lewis mine were in excess of the life-of-mine average. The mining plan indicates that this will continue to be the case from time to time whereas previously there was little variation in the ratio of waste to ore. To accommodate these variations, mining costs associated with removal of waste in excess of the life-of-mine average will be deferred and charged to operations subsequently in periods when ratios are below the average. Stripping costs deferred this year amounted to $1,958,000 (1993 - $3,725,000). Amortization of previously deferred costs was $4,246,000 in 1994 (1993 - Nil). (c) Royalties The Crofoot property is subject to 4 percent net profits royalties. No royalty payments were made in 1993 and 1994 because minimum royalty payments made prior to 1993 aggregating US$2.8 million are available for credit against current and future royalty obligations. No further payments are expected to be required under these royalty agreements. The Lewis property is subject to a 5 percent net smelter royalty on gold produced from the Lewis property. During 1993 and 1994 only nominal minimum royalties were required in relation to this property. 8. JOINT VENTURES The Company proportionately consolidates its share of the assets, liabilities, revenues and expenses of its joint ventures. Prior to March 31, 1994 the Company's principal joint venture was the -Trout Lake mine in which it owned 29 percent (see Note 3A). The 1994 results include the Company's share of production, revenues and expenses from the Trout Lake mine to the date of disposal. The proportionate amounts of the above joint venture included in the consolidated accounts are as follows: 1994 1993 ------------------ 73 Assets $ - $23,033 ================== Liabilities $ $ 292 - ================== 1994 1993 1992 ------------------------------------------ Revenue $3,257 $14,267 $18,727 ========================================== Expenses $3,905 $14,568 $14,586 ========================================== 9. BANK LOAN 1994 1993 ------------------ Bank loan (1994 - US$Nil; 1993 - US$3,750,000) $ - $ 4,983 ================== The bank loan represents advances under a US$15 million credit facility, bears interest at the London Interbank Offer Rate (LIBOR) plus 5/8 percent per annum and is secured by cash and cash equivalents. Mandatory semi-annual installments of 25 percent of the loan outstanding on May 1992 commenced November 30, 1992. The loan was repaid in full in May 1994, and all security interests have been discharged. 10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
1994 1993 ----------------- Accounts payable $17,563 $3,547 Accrued liabilities 2,397 3,049 $19,960 $6,596 =================
Accounts payable at December 31, 1994 includes $13.1 million (US$9.3 million) to purchase mining equipment for the development of the Brimstone deposit. These amounts are due for payment in the second quarter of 1995 and are secured by a first charge on the equipment. 11. LONG-TERM DEBT
1994 1993 ------------ Notes payable due 1994 and 1995, 7.75% to 9.85% (1994 - US$261,000, 1993 - US$640,000) $ 366 $ 847 Less: amounts due within one year 366 570 ------------ $ - $ 277 ============
74 Certain equipment has been pledged as collateral for the notes payable. 12. SHARE CAPITAL (A) Authorized share capital comprises 750,000,000 common shares without par value. (B) Common shares issued and outstanding:
SHARES AMOUNT ---------------------- At December 31, 1992 33,807,000 $145,633 Issued in 1993 350,000 565 ---------------------- At December 31, 1993 34,157,000 $146,198 Issued in 1994 20,000 29 ---------------------- At December 31, 1994 34,177,000 $146,227 ======================
(C) Litigation settlement Settlement of the action commenced in 1989 by Oxford Acquisitions Inc. against Granges and Outokumpu Mines Ltd. occurred in February 1993 with mutual releases. The Company's only other obligation in the settlement was the issuance of 150,000 Granges shares to the plaintiff. (D) Common share options At December 31, 1994, 740,000 common shares were reserved for issuance under options granted to directors, officers and management employees. These options expire as follows: 2000 - 40,000, 2001 - 40,000; 2003 - 130,000; 2,004 - 530,000.
SHARE OPTIONS OPTION PRICE -------------------------------- At December 31, 1992 310,000 $1.45 Granted in 1993 130,000 $1.90 to $2.85 Exercised in 1993 (200,000) $1.45 Expired in 1993 (10,000) $1.45 --------------- At December 31, 1993 230,000 $1.45 to $2.85 Granted in 1994 530,000 $2.28 to $3.30 Exercised in 1994 (20,000) $1.45
75
--------------- At December 31, 1994 740,000 $1.45 to $3.30 ===============
13. CURRENCY TRANSLATION ADJUSTMENT The currency translation adjustment represents the foreign currency translation loss on the Company's investment in its self-sustaining foreign operations.
1994 1993 1992 ------------------------------------ Currency translation adjustment, beginning of year (1,234) $(1,483) $(2,305) Unrealized gain (loss) for the year 987 249 822 ------------------------------------ Currency translation adjustment, end of year (247) $(1,234) $(1,483) ====================================
14. CHANGES IN WORKING CAPITAL, EXCLUDING CASH AND CASH EQUIVALENTS
1994 1993 1992 ------------------------------------ 1994 1993 1992 Accounts receivables 2,828 $ 520 $ 2,149 Marketable Securities 30 - - Inventories (5,024) 290 (3,352) Accounts payable and accrued liabilities 13,364 1,192 211 ------------------------------------ 11,198 $ 2,002 $ (992) ====================================
15. RELATED PARTY TRANSACTIONS In 1994, consulting fees of $72,000 (1993 - $72,000) were paid to a director of the Company. In prior years, consulting fees were paid to certain other directors of the Company (1993 - $Nil; 1992 - $10,000). 16. SEGMENTED INFORMATION The Company operates in the mining industry in Canada and the United States. Its major products to March 31, 1994 were gold, copper and zinc and thereafter its major product was gold. Geographic segments are presented below.
1994 1993 1992 ---------------------------- Sales Canada $ 3,257 $14,267 $18,757 U.S. 51,175 41,030 44,946 $54,432 $55,297 $63,703 ============================
Earnings (loss) from mining operations 76
Canada $ (476) $ 554 $ 5,055 U.S. 3,024 479 5,287 ---------------------------- $ 2,548 $ 1,033 $10,342 ============================
1994 1993 ------------------- Identifiable assets Canada $45,156 $50,628 U.S. 53,670 32,581 ------------------- $98,826 $83,209 ===================
17. RETIREMENT PLANS The Company provides a voluntary money purchase retirement plan to permanent Canadian employees in which the Company makes contributions, depending on length of employment, from 2 percent to 4 percent of salary. No other post- retirement benefits are provided by the Company. 18. CONTINGENCIES AND COMMITMENTS (a) Lease Commitments The Company is committed to U.S. dollar payment under certain operating leases for mining equipment. Future payments under these leases in each of the next five years and in the aggregate are:
CDN $000'S US $000'S EQUIVALENT ------------------------ 1995 1,998 2,802 1996 1,998 2,802 1997 1,998 2,802 1998 1,055 1,479 1999 - - ------------------------ $7,049 $9,885 ========================
Letters of credit totalling US$3.5 million (1993 - US$3.8 million) have been provided as security under these mine equipment operating leases. The Company is also committed to payments under a lease for office space ending May 31, 1997. Annual payments under the lease, net of subtenancy receipts, are $487,000. (b) Letters of credit 77 The Company has outstanding letters of credit totalling $4.7 million at December 31, 1994 (1993 - $4.8 million), including those provided as security under the operating leases. (c) As part of its gold hedging program, the Company has entered into agreements with major financial institutions to deliver gold. Realization under these agreements is dependent upon the ability of those financial institutions to perform in accordance with the terms of the agreements. As at December 31, 1994, the Company's consolidated hedging program consists of: (i) fixed forward sales contracts totalling 56,000 ounces at an average price of US$390 per ounce for deliveries within one year; (ii) matching option contracts for 32,000 ounces of gold under which the Company has the opportunity to sell that number of ounces at US$392 per ounce and, if called upon, the obligation to sell the same number of ounces at US$465 per ounce. These options have various expiry dates over the next two years and result in no net cost to the Company. 19. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The significant differences between generally accepted accounting principles (GAAP) in Canada and in the United States are as follows: (a) Under Canadian GAAP, interest costs relating specifically to assets under construction may be capitalized during the construction period. When construction is completed, further interest costs are expensed. Under U.S. GAAP, interest to be capitalized for qualifying assets is intended to be that portion of the interest cost incurred during the assets' acquisition periods that theoretically could have been avoided if expenditures for the assets had not been made. (b) Under U.S. GAAP, the gain on the sale of mineral properties and the dilution gain on the issue of subsidiary shares are considered to be extraordinary while under Canadian GAAP, these transactions are not considered extraordinary items. (c) Under U.S. GAAP, contingent gains or losses not previously recorded are recorded in the year the uncertainty as to their likelihood or amount is resolved. Under Canadian GAAP, contingent gains or losses, when confirmed, are treated as prior period adjustments and the effect of the change is applied retroactively to the years to which they relate. (d) Under Canadian GAAP, corporate income taxes are accounted for using the deferral method of income taxes allocation. Under this method, deferred income taxes represent a deferral to future periods of a benefit obtained or expenditures incurred currently, and are accordingly computed at current tax rates without subsequent adjustment to the accumulated balance to reflect changes in taxes rates. Deferred 78 taxes are provided on differences between accounting and taxable income due to the difference in timing of recognition of items for accounting and tax purposes ("timing differences"). Under U.S. GAAP, corporate income taxes are accounted for using the liability method of income tax allocation. Under this method, deferred income taxes are considered to reflect the recognition in the current period of taxes expected to be payable or recoverable in a future period, and accordingly, the accumulated tax allocation balance is adjusted in future periods to reflect changes in tax rates. Deferred taxes are provided on "temporary differences", which is a broader concept than "timing differences" and deferred tax liabilities and assets are not offset against each other, as under Canadian GAAP. Under U.S. GAAP, deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As at December 31, 1994 and 1993 the Company has recognized no deferred tax assets or liabilities for U.S. GAAP purposes. The tax benefit of the Company's loss carry forwards at December 31, 1994 would be $6,307,000 (1993 - $6,741,000). The significant differences in the statements of earnings (loss) and deficit relative to U.S. GAAP were as follows:
YEAR ENDED DECEMBER 31 -------------------------------- 1994 1993 1992 -------------------------------- Net earnings following Canadian GAAP $ 6,985 $ 2,761 $ 50 Net interest capitalized (amortized) (36) 55 (124) Extraordinary items dilution gain on issue of subsidiary shares - (7,398) - gain on sale of mineral properties (12,601) - - Deferred income tax recovery 5,333 1,846 - -------------------------------- Net earnings (loss) before extraordinary item, following U.S. GAAP (319) (2,736) (74) Dilution gain on issue of subsidiary shares (net of deferred income taxes) - 5,552 - Extraordinary gain on sale of mineral properties (net of deferred income taxes) 6,803 - - -------------------------------- Net earnings (loss), following U.S. GAAP 6,484 2,816 (74) Deficit, beginning of year following U.S. GAAP (80,648) (83,464) (83,390) -------------------------------- Deficit, end of year following U.S. GAAP $(74,164) $(80,648) $(83,464) ================================
79
Primary loss per share before extraordinary items $(0.01) $(0.08) nil ========================= Primary earnings (loss) per share after extraordinary item $(0.19) $ 0.08 nil
20. SUBSEQUENT EVENT On January 13, 1995 the Company made an offer to its subsidiary Hycroft Resources & Development Corporation to amalgamate Granges and Hycroft. Under the offer shareholders of Granges would receive 1 common share of the amalgamated company for each common shares of Granges and shareholders of Hycroft would receive 0.88 of a common share of the amalgamated company for each common share of Hycroft. The proposed amalgamation, which has been recommended by the boards of directors of Granges and Hycroft to their respective shareholders, requires shareholder, regulatory and court approvals. 80 SCHEDULE OF EXHIBITS
Exhibit Number Exhibits Page - -------------------------------------------------------------- 3.1 Restated Certificate of Incorporation * of the Company, dated January 3, 1990 (filed as Exhibit 3.2 to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 1989, and incorporated herein by reference). 3.2 By-laws of the Company, as amended on * January 3, 1990 (filed as Exhibit 3.3 to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 1989 and incorporated herein by reference). 3.3 By-laws of the Company, as amended on 86 July 12, 1995. 4.1 Term Loan Agreement dated August 15, * 1994 between the Company and Gerald Metals, Inc.(filed as an Exhibit 10.22 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference) 4.2 Security Agreement dated August 15, * 1994 between the Company and Gerald Metals, Inc.(filed as an Exhibit 10.23 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference) 4.3 Pledge Agreement dated August 15, 1995 * between the Company and Gerald Metals, Inc. (filed as an Exhibit 10.24 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference) 10.1 Atlas Corporation Management Incentive * Compensation Plan (filed as Exhibit 10.2 to the Company's annual report on Form 10-K (file no. 1-2714) for the fiscal year ended June 30, 1981 and incorporated herein by reference). 10.2 Form of Indemnity Agreement entered * into between the Company and certain of its directors (filed as Exhibit 10.14 to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1987 and incorporated herein by reference). 10.3 Amended and Restated Rights Agreement * dated as of August 2, 1989 between the Company and Manufacturers Hanover Trust Company (filed as Exhibit 1 to the Company's current report on Form 8-K dated August 2, 1989 and incorporated herein by reference).
81
Exhibit Number Exhibits Page - -------------------------------------------------------------- 10.4 Long Term Incentive Plan of the Company * dated November 1, 1989 (filed as Exhibit 10.28 to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1989 and incorporated herein by reference). 10.5 Atlas Corporation Supplemental * Executive Retirement Plan dated as of January 3, 1990 (filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1990 and incorporated herein by reference). 10.6 Atlas Corporation Retirement Plan for * Outside Directors dated April 4, 1990 (filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1990 and incorporated herein by reference). 10.7 Restated Employment Agreement dated as * of September 12, 1990 between the Company and Richard R. Weaver (filed as Exhibit 10.22 to the annual report on Form 10-K for the fiscal year ended June 30, 1990 and incorporated herein by reference). 10.8 Amendment No. 1, dated as of March 6, * 1991, to the Amended and Restated Employment Agreement, dated as of September 12, 1990, between the Company and Richard R. Weaver (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1991 and incorporated herein by reference). 10.9 Atlas Corporation Annual Incentive Plan * adopted by the Board of Directors of the Company on March 6, 1991(filed as Exhibit 10.20 to the Company's annual report on Form 10-K for the year ended June 30, 1991 and incorporated herein by reference). 10.10 Agreement dated September 10, 1992 * among Atlas Precious Metals, Inc., the Company and Newmont Mining Corporation (filed as Exhibit 10.22 to the Company's annual report on Form 10-K for the year ended June 30, 1992 and incorporated herein by reference). 10.11 Amendment dated September 10, 1992 to * the Agreement dated September 10, 1992 among Atlas Precious Metals, Inc., the Company and Newmont Mining Corporation (filed as Exhibit 10.23 to the Company's annual report on Form 10-K for the year ended June 30, 1992 and incorporated herein by reference).
82
Exhibit Number Exhibits Page - -------------------------------------------------------------- 10.12 Securities Purchase Agreement dated * September 3, 1993 between the Company and Phoenix Financial Holdings Inc. (filed as Exhibit 2 to the Company's Report on Form 8-K filed on September 9, 1993 and incorporated herein by reference). 10.13 Amendment dated as of September 15, * 1993 to the Amended and Restated Rights Agreement dated as of August 2, 1989 between the Company and Chemical Bank, as successor by merger with Manufacturers Trust Company (filed as Exhibit 10.25 to the Company's annual report on Form 10-K for the year ended June 30, 1993 and incorporated herein by reference) 10.14 Employment agreement made as of * September 22, 1993, between the Company and David J. Birkenshaw (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1994 and incorporated herein by reference) 10.15 Amendment dated as of August 28, 1995 92 to the employment agreement made as of September 22, 1993, between the Company and David J. Birkenshaw 10.16 Share Purchase Agreement dated April * 28, 1994 between the Company and M.I.M. (Canada) Inc. (filed as an Exhibit 10.18 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference) 10.17 Agreement dated May 10, 1994 between * the Company and Granges Inc. (filed as an Exhibit 10.19 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference) 10.18 Registration Rights Agreement dated * August 15, 1994 between the Company and First Marathon Securities Limited (filed as an Exhibit 10.20 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference) 10.19 Indemnity Agreement dated August 15, * 1995 between the Company and M.I.M. Holdings Limited (filed as an Exhibit 10.21 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference)
83
Exhibit Number Exhibits Page - -------------------------------------------------------------- 10.20 Purchase Agreement dated May 31, 1994 * among the Company, Dakota Mining Corporation, VenturesTrident L.P. and VenturesTrident II L.P. (filed as an Exhibit 10.25 to the Company's annual report on Form 10-K for the year ended June 30, 1994 and incorporated herein by reference) 10.21 Second Amendment dated as of August 15, * 1994 to the Amended and Restated Rights Agreement dated August 2, 1989 between the Company and Chemical Bank, as successor by merger with Manufacturers Hanover Trust Company (filed as Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference) 10.22 The Company's Long Term Incentive Plan, * as amended dated February 17, 1995 (filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference) 10.23 Employment Agreement made as of January * 16, 1995 between the Company and Michael B. Richings (filed as Exhibit 10.3 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference) 10.24 Employment Agreement made as of * February 17, 1995 between the Company and Richard E. Blubaugh (filed as Exhibit 10.4 to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by reference) 10.25 Agreement dated February 24, 1995 96 between the Company and Granges Inc. to vote the common shares of Granges Inc., held by the Company, in favor of the proposed amalgamation of Granges Inc. and Hycroft Resources & Development Corporation 10.26 Atlas Subscription Agreement dated 100 March 9, 1995 between the Company and Dakota Mining Corporation 10.27 Amendment dated September 15, 1995 to 127 the employment agreement made as of February 17, 1995 between the Company and Richard E. Blubaugh 10.28 Employment Agreement dated June 1, 1995 131 between the Company and Gerald E. Davis
84
Exhibit Number Exhibits Page - -------------------------------------------------------------- 10.29 Amendment dated September 20, 1995 to 138 the employment agreement dated June 1, 1995 between the Company and Gerald E. Davis 21 Subsidiaries of the Company 140 24 Consent of Independent Auditors 142 27 Financial Data Schedule 144 (b) Reports on Form 8-K: The Company filed no reports on Form 8-K during the fourth quarter of fiscal 1995.
For purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned hereby undertakes as follows, which undertaking shall be incorporated by reference into the Company's Registration Statement on Form S-8 No. 33-18316 (filed on November 3, 1987, as amended by Post Effective Amendment No. 1 filed on December 15, 1987): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by the director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. _____________________________ Note concerning Exhibits: The Company will furnish copies of Exhibits to security holders of the Company upon request. The Company may charge a fee in connection with such a request, which will be limited to the Company's reasonable expenses in furnishing any such Exhibit. 85 EX-3.3 2 BY-LAWS EXHIBIT 3.3 86 BY-LAWS OF ATLAS CORPORATION (As Amended July 12, 1995) SECTION 1. In addition to its principal office in the State of Delaware, the Corporation may also have offices at such other places within or without the State of Delaware as the Board of Directors shall from time to time determine. SECTION 2. Meetings of the stockholders and meetings of the Board of Directors may be held at any place or places within or without the State of Delaware. SECTION 3. The annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on such date and at such place and at such hour during regular business hours as may be determined by the Board of Directors. SECTION 4. Special meetings of the stockholders of the Corporation may be held upon call of the Chairman of the Board of Directors, the President, the Board of Directors or the Executive Committee. Such call shall state the time, place and purposes of the meeting. SECTION 5. Notice of the time and place of every meeting of stockholders and of the business to be acted on at such meeting shall be mailed by the Secretary or the officer performing his duties, at least ten days before the meeting, to each stockholder of record having voting power and entitled to such notice at his last known post office address; provided, however, that if a stockholder be present at a meeting, or in writing waive notice thereof before or after the meeting, notice of the meeting to such stockholder shall be unnecessary. SECTION 6. The holders of shares of stock of the Corporation representing a majority of the voting power of the outstanding voting stock of the Corporation present in person or by proxy shall constitute a quorum, but less than a quorum shall have power to adjourn any meeting from time to time without notice. The holders of shares of stock of the Corporation representing a majority of the voting power of the outstanding voting stock of the Corporation present and entitled to vote at a duly qualified meeting of stockholders shall have power to act. SECTION 7. At every meeting of stockholders each holder of Common Stock entitled to vote thereat shall be entitled to one vote for each share of Common Stock held by him, and may vote and otherwise act in person or by proxy; but no proxy shall be voted upon more than three (3) years after its date unless such proxy provides for a longer period. SECTION 8. At least ten days before each election of directors a complete list, arranged in alphabetical order, of the stockholders entitled to vote at the election shall be prepared and filed in the office where the election is to be held and shall, during the usual 87 hours of business, for said ten days, and during the election, be open to the examination of any stockholder. SECTION 9. Certificates of stock shall be of such form and design as the Board of Directors may elect and shall be signed by the Chairman of the Board, the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. If any such certificate is countersigned by a transfer agent other than the Corporation or its employee or by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. SECTION 10. The stock of the Corporation shall be transferable or assignable only on the books of the Corporation by the holders in person, or by attorney, on the surrender of the certificates therefor. The Board of Directors may appoint one or more transfer agents and registrars of the stock. SECTION 11. The following procedures shall govern actions by written consent of stockholders: (a) Any action which may be taken at any meeting of stockholders may be taken without a meeting and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. (b) In order that the Corporation may determine the stockholders entitled to express consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date is fixed, the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In the event of the delivery to the Corporation of a written consent or consents purporting to authorize or take corporate action in writing without a meeting and/or revocations thereof, the Secretary of the Corporation shall provide for the safekeeping of such consent, consents and/or revocations and shall immediately appoint duly qualified and objective inspectors to conduct, as promptly as is practical, such reasonable ministerial review as they deem necessary or appropriate for the purpose of ascertaining the sufficiency and validity of such consent, consents and/or revocations and all matters incident thereto, including, without limitation, whether holders of shares having the requisite voting power 88 to authorize or take the action specified in the consent or consents have given consent. If after such investigation the Secretary shall determine that valid consents by the holders of shares having not less than the minimum number of votes necessary to authorize or take such action have been received and not revoked, that fact shall be certified on the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders, and the consents shall be filed in such records, at which time the consents shall become effective as stockholder action. SECTION 12. The number of Directors of the Corporation which shall constitute the whole Board of Directors shall be such as from time to time shall be fixed by a resolution adopted by an affirmative vote of a majority of the entire Board of Directors, but in no case shall the number by less than six or more than 13. Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors at a meeting or to express a consent in writing without a meeting may nominate a person or persons for election as a director only if written notice of such stockholder's intent to make such nomination is given to the Secretary of the Corporation, either by personal delivery or by United States mail, postage prepaid, not later than (a) with respect to an election to be held at an annual meeting of stockholders, 90 days in advance of such meeting, (b) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh day following the date on which notice of such special meeting is first given to stockholders, and (c) in the case of any stockholder who wishes to nominate any person or persons for election as a director pursuant to consents in writing by stockholders without a meeting, 60 days in advance of the date on which materials soliciting such consents are first mailed to stockholders or, if no such materials are required to be mailed under applicable law, 60 days in advance of the date on which the first such consent in writing is executed. Each such notice shall set forth the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated for election as a director; a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting or to express such consent in writing and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or to execute such a consent in writing to elect such person or persons as a director; a description of all arrangements or understandings between the stockholder and each nominee and any other person between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations for election as a director are to be made by the stockholder; such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission if such nominee had been nominated, or was intended to be nominated, for election as a director by the Board of Directors; and the consent of each nominee to serve as a director of the Corporation if so elected. The Board of Directors may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. SECTION 13. Meetings of the Board of Directors shall be held at the times fixed by resolutions of the Board or upon call of the President and may be held outside of the State of Delaware. The Secretary or officer performing his duties shall give reasonable notice (which need not in any event exceed two (2) days) of all meetings of directors, provided that a 89 meeting may be held without notice immediately after the annual election, and notice need not be given of regular meetings held at times fixed by resolution of the Board. Meetings may be held at any time without notice if all the directors are present or if those not present waive notice either before or after the meeting. Notice by mail or telegraph to the usual business or residence address of the directors not less than the time above specified before the meeting shall be sufficient. SECTION 14. The Board of Directors shall have power to authorize the payment of compensation to the directors for services to the Corporation, including fees for attendance at meetings of the Board of Directors, of the Executive Committee and of other committees and to determine the amount of such compensation and fees. SECTION 15. The Board of Directors, as soon as may be after the election of directors in each year, may appoint one of their number a Chairman of the Board and shall appoint a President, a Secretary and a Treasurer and shall from time to time appoint such other officers as they may deem proper. SECTION 16. The term of office of all officers shall be until the next election of directors and until their respective successors are chosen and qualified, or until they shall die or resign, but any officer may be removed from office at any time by the Board of Directors. Vacancies in any office may be filled by the Board at any meeting. SECTION 17. The officers of the Corporation shall have such powers and duties as usually pertain to their offices, except as modified by the Board of Directors, and shall also have such powers and duties as may from time to time be conferred upon them by the Board of Directors. SECTION 18. The Board of Directors, as soon as may be after the election in each year, may, by a resolution passed by a majority of the whole Board, appoint an Executive Committee, to consist of the President and such number of the directors as the Board may from time to time determine, which shall have and may exercise during the intervals between the meetings of the Board all the powers vested in the Board except the power to fill vacancies in the Board, the power to change the membership of or fill vacancies in said Committee and the power to change the By-Laws. The Board shall have the power at any time to change the membership of such Committee and to fill vacancies in it. The Executive Committee may make rules for the conduct of its business and may appoint such committees and assistants as it may deem necessary. A majority of the members of said Committee shall constitute a quorum. The Chairman of the Board or if there is no Chairman of the Board the President shall be the Chairman of the Executive Committee. SECTION 19. The Board of Directors are authorized to select such depositories as they shall deem proper for the funds for the Corporation. All checks and drafts against such deposited funds shall be signed and countersigned by persons to be specified by the Board of Directors. SECTION 20. The corporate seal of the Corporation shall be in such form as the Board of Directors shall prescribe. 90 SECTION 21. In the event any transaction or contract is submitted, pursuant to the provisions of Paragraph "Ninth" of Article II of the Agreement of Merger dated as of November 30, 1955 among Atlas Corporation, Airfleets, Inc., Albuquerque Associated Oil Company, RKO Pictures Corporation, San Diego Corporation and Wasatch Corporation, to the Board of Directors, the Executive Committee or the stockholders of the Corporation, for authorization, ratification or approval, the interest of any director in any such transaction or contract shall be disclosed to the Board of Directors, Executive Committee or stockholder, as the case may be. This Section 21 shall not be altered, amended or repealed except by the stockholders of the Corporation at a meeting the notice of which includes notice of the proposed alteration, amendment or repeal. SECTION 22. Either the Board of Directors or the stockholders may alter or amend these By-Laws at any meeting duly held as above provided, the notice of which includes notice of the proposed alteration or amendment, except that Section 21 hereof may be amended only by the stockholders as provided in said section. 91 EX-10.15 3 AUG. 28 AMD. EMP. AGREEMENT EXHIBIT 10.15 92 August 28, 1995 Mr. David J. Birkenshaw Chairman of the Board and Chief Executive Officer Atlas Corporation Republic Plaza 370 Seventeenth Street Suite 3150 Denver, Colorado 80202 Dear Mr. Birkenshaw: It is proposed that certain revisions be made to the Employment Agreement (the "Agreement") made as of September 22, 1993 between yourself and Atlas Corporation (the "Company") in order to reflect the increase in the time which you must devote to your duties thereunder, to increase your base annual salary to $200,000, to conform the Agreement, where appropriate, to the terms of the Long Term Incentive Plan of the Company, to broaden the definition of "Good Reason" in Section 6.1(g) of the Agreement and to provide for look-back provisions with regard to Section 6.2 of the Agreement. Such revisions shall be as follows: 1. Section 2 shall be revised to define the time which Executive must devote to his duties thereunder as "(i.e., 100% of Executive's business time)." ---- 2. Section 3 shall be revised to read as follows: Salary. As compensation for the services to be furnished by Executive ------ to Employer hereunder, as long as Executive is employed by Employer hereunder, Employer shall pay Executive a salary at a minimum annual rate of $200,000 payable in accordance with Employer's standard payroll policies applicable to officers. 3. Section 6.1(c) shall be revised to read as follows (the underlined language, other than the defined term, is added): "Change of Control Event" means any one of the following: (i) ------------------------ Continuing Directors no longer constitute at least two thirds of the Directors constituting the Board; (ii) any person or group (as defined in Rule 13d-5 under 93 the Securities Exchange Act of 1934), together with its affiliates, other ----- than Phoenix Financial Holdings Inc., Mackenzie Financial Corporation or ------------------------------------------------------------------------ M.I.M. Holdings Limited (in each case, together with its affiliates), -------------------------------------------------------------------- becomes the beneficial owner, directly or indirectly, of 15% or more of Employer's then outstanding Common Stock or 15% or more of the voting power of Employer's then outstanding securities entitled generally to vote for the election of Directors, provided that the foregoing circumstances shall not constitute a Change of Control Event if such beneficial owner is Employer, any subsidiary of Employer, any employee benefit plan or employee stock plan of Employer or of any subsidiary of Employer, and provided ------------ further that, notwithstanding the foregoing, a Change of Control Event ---------------------------------------------------------------------- shall be deemed to occur if Mackenzie Financial Corporation, and its -------------------------------------------------------------------- affiliates, or M.I.M. Holdings Limited, and its affiliates, shall acquire ------------------------------------------------------------------------- 25% or more of the Employer's then outstanding Common Stock or the voting ------------------------------------------------------------------------- power of the Employer's then outstanding securities entitled generally to ------------------------------------------------------------------------- vote for the election of Directors; (iii) the approval by Employer's ---------------------------------- stockholders of the merger or consolidation of Employer with any other corporation, the sale of substantially all of Employer's assets or the liquidation or dissolution of Employer, unless, in the case of a merger or consolidation, the Continuing Directors in office immediately prior to such merger or consolidation constitute at least two thirds of the directors constituting the board of directors of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation; or (iv) at least two thirds of the Continuing Directors in office immediately prior to any other action taken or proposed to be taken by Employer's stockholders or by the Board determines that such action constitutes, or that such proposed action, if taken, would constitute, a Change of Control of Employer and such action is taken. 4. Section 6.1(g)(i)(A) shall be revised to read as follows: (1) the assignment to Executive of any duties and responsibilities, or any limitation of Executive's duties and responsibilities, inconsistent with Executive's positions, duties, responsibilities and status as an executive of Employer or (2) any removal of Executive from, or any failure to reelect Executive to, any of Executive's positions with Employer except for Cause or as a result of the death or Disability of Executive ... 5. Section 6.2(b)(i) shall be revised to add the following underlined language: Executive shall be entitled to compensation as specified in Section 6.2(b)(ii) and (iii) if (A) Employer terminates Executive's employment hereunder without Cause either prior to 3 months before a Change of Control ------------------ Event or more than two years after the last Change of Control Event, or (B) Executive voluntarily terminates his employment hereunder with Good Reason either prior to 3 months before a Change of Control Event or more than two ----------------- years after the last Change of Control Event. 6. Section 6.2(c)(i) shall be revised to add the following underlined language: 94 Executive shall be entitled to compensation as specified in Section 6.2(c)(ii) and (iii) if (A) Employer terminates Executive's employment hereunder without Cause either (1) within 3 months prior to a Change of ----------------------------------------------- Control Event or (2) upon or after a Change of Control Event but within two -------------------- years after the date of that Change of Control Event, or (B) Executive voluntarily terminates his employment hereunder with Good Reason either (1) ---------- within 3 months prior to a Change of Control Event or (2) upon or after a --------------------------------------------------------- Change of Control Event but within two years after the date of that Change of Control Event. Please sign and date this letter in the space indicated below in order to affirm your acceptance of and agreement to the proposed revisions to the Agreement, as above set forth. Very truly yours, ATLAS CORPORATION _________________________________ [Name] [Title] Accepted and agreed to this _____ day of ________, 1995: By: /s/ David J. Birkenshaw -------------------------------------------- David J. Birkenshaw 95 EX-10.25 4 AGREE. 2-24-95 GRANGES EXHIBIT 10.25 96 TO: Granges, Inc. RE: Amalgamation of Granges and Hycroft This letter records the agreement between Atlas Corporation ("Atlas") ad Granges Inc. ("Granges") pursuant to which Atlas will agree to vote its common shares in Granges in favor of the proposed amalgamation of Granges with Hycroft Resources & Development Co. Ltd. ("Hycroft") and the proposed share capital reduction to be approved b the shareholders of Granges at an extraordinary general meeting (the "EGM") to be held on March 30, 1995 or any adjournment thereof. Atlas will vote its common shares in Granges in favour of the amalgamation at the EGM provided that the amalgamation agreement to be entered into by Granges and Hycroft to be approved by a special resolution of the shareholders of Granges at the EGM contains the following provisions: 1. Board of Directors ------------------ The first board of director of the amalgamated company ("Amalg Co") will consist of the following 11 individuals: David Sinclair John Auston Al Thompson Ken Mathews Peter Walton David Birkenshaw Mike Richings James Dunnett John Walton Peter Steen William Calhoun David Sinclair will be the Chairman of the Board of Amalg Co and David Birkenshaw will be the Vice Chairman of the Board of Amalg Co. The amalgamation agreement will stipulate that the term of office for all the initial directors will be until the first annual general meeting of Amalg Co in 1996, with the exception of John Auston, Ken Mathews and James Dunnett whose terms will expire on September 30, 1995. The amalgamation agreement of Amalg Co will also stipulate that two of the three vacant positions occurring on September 30, 1995 will not be filled by the remaining directors, that one of the three vacant positions will be filled by Keith Steeves effective October 1, 1995 and that the directors to be elected at the first annual general meeting in 1996 97 will be nine in number. The following slate of directors will be proposed for election at the first annual general meeting of Amalg Co in 1996: David Sinclair Peter Walton Al Thompson David Birkenshaw Mike Richings Keith Steeves John Walton Peter Steen William Calhoun If, after September 30, 1995, any of the individuals set out above is unable or unwilling to act as a director of Amalg Co the remaining directors shall fill such casual vacancies in the board, up to nine, in accordance with the articles of Amalg Co. Atlas agrees to vote its common shares in Granges in favor of electing the above slate of directors at the first annual general meeting of Amalg Co in 1996. 2. President and Chief Executive Officer of Amalg Co ------------------------------------------------- John Auston will be the first president and chief executive officer of Amalg Co. His term as president and chief executive officer will end concurrently with the end of his term as a director of Amalg Co on September 30, 1995. Mike Richings will be appointed president and chief executive officer of Amalg Co on October 1, 1995. Mr. Richings' appointment will be subject to approval by the board of directors of Amalg Co. Such appointment and any employment contract or arrangement with Mike Richings will be subject to approval of the board of directors at the time of his appointment as president and chief executive officer. 3. Casting Vote ------------ The articles of Amalg Co will provide that the chairman of the board of directors will not have a casting vote in the event if a tie, either at a meeting of directors or at a meeting of shareholders. 4. Shareholder Rights Plan ----------------------- Atlas will cause its nominees on the board of directors of Amalg Co to vote in favor of a shareholder rights plan to become effective immediately following the amalgamation of Granges and Hycroft and to be made subject to shareholder ratification at an extraordinary general meeting of Amalg Co to be held on or before September 30, 1995, at which meeting Atlas will vote its common shares in Granges in favor of the shareholder rights plan, subject to the shareholder rights plan containing a grandfathering provision for Atlas on the same terms and conditions as the grandfathering provision set out in the draft Granges Shareholder Protection Rights Agreement dated December 1, 1993, a copy of which was provided to Atlas. 98 Atlas and Granges agree that the second paragraph contained in section no. 1 of the agreement (the "Stand-Still Agreement") between Atlas and Granges dated May 13, 1994 is hereby amended by deleting the said second paragraph and substituting therefor the following: "Atlas shall have the right to propose nominees to the Granges board of directors, such number of nominees to be equal to Atlas' proportionate holdings of common shares of Granges multiplied by the total number of directors on the Granges board, rounded up or down to the nearest whole number. For the purposes of rounding, all numbers ending in 0.5 shall be rounded up." Atlas and Granges hereby further agree that the Stand- Still Agreement, as amended, shall remain binding upon Atlas and Granges and shall be binding upon Amalg Co until such time as the shareholders rights plan contemplated by this letter agreement shall have been ratified by the shareholders of Amalg Co, after which time the Stand-Still Agreement, as amended, shall cease to be of any further force or effect, save and except with respect to Atlas' entitlement to propose nominees to the board of directors of Amalg Co, which right shall continue in full force and effect. 5. Special Committee ----------------- The first board of directors of Amalg Co will elect at their first meeting following the amalgamation of Granges and Hycroft, John Auston, Peter Steen and Mike Richings, to a committee to be known as the Special Committee. The said committee will review and advise the board on joint exploration ventures with Atlas, development of a South American program and the exchange of technical information with Atlas. 6. Share Exchange Ratio -------------------- The foregoing agreements by Atlas are subject to the share exchange ratio upon the amalgamation of Granges and Hycroft not exceeding the ratios recommended to the board of directors of Granges in a letter from Lancaster Financial Corporation dated January 11, 1995. DATED the 24th day of February , 1995. ---- -------- ATLAS CORPORATION By: /s/ David J. Birkenshaw ----------------------- Chairman and Chief Executive Officer Agreed and accepted this 24th day of February , 1995. ---- -------- GRANGES INC. By: /s/ Tryggve G. Angel -------------------- Chairman of the Board of Directors 99 EX-10.26 5 SUBSCRIPTION AGREEMENT EXHIBIT 10.26 100 THE SECURITIES ACQUIRED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS THE SECURITIES ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. ATLAS SUBSCRIPTION AGREEMENT ---------------------------- A completed and originally executed copy of this Subscription Agreement along with the Subscription Funds must be delivered by no later than 12:00 noon two days before the Closing to Goepel Shields & Partners Inc. at either of the following addresses: Goepel Shields & Partners Inc. Goepel Shields & Partners Inc. 16th Floor, 150 York Street P.O. Box 10111 Toronto, Ontario Suite 1100 Pacific Centre M5H 3S5 701 West Georgia Street Vancouver, British Columbia Attention: Michael Holmes V7Y 1C6 Telephone: (416) 360-7196 Fax: (416) 594-1008 Attention: Carol Chernov Telephone: (604) 661-1762 Fax: (604) 684-0475 ================================================================ TO: Dakota Mining Corporation AND TO: Goepel Shields & Partners Inc. Subscription. THE UNDERSIGNED (THE "PURCHASER") HEREBY TENDERS TO DAKOTA ------------ MINING CORPORATION (THE "COMPANY") THIS SUBSCRIPTION OFFER WHICH, UPON ACCEPTANCE BY THE COMPANY, WILL CONSTITUTE AN AGREEMENT (THE "SUBSCRIPTION AGREEMENT") OF THE PURCHASER TO SUBSCRIBE FOR, TAKE UP, PURCHASE AND PAY FOR, AND, ON THE PART OF THE COMPANY, TO ISSUE AND SELL TO THE PURCHASER, THE NUMBER OF SPECIAL WARRANTS OF THE COMPANY SET OUT ON PAGE 20 HEREOF (THE "PURCHASER'S SPECIAL WARRANTS") AT THE PRICE (THE "PURCHASE PRICE") OF U.S. $1.24 PER SPECIAL WARRANT , ALL ON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS SUBSCRIPTION AGREEMENT. 101 Private Placement. THE PURCHASER ACKNOWLEDGES THAT THE PURCHASER'S SPECIAL ----------------- WARRANTS WILL BE ISSUED IN CONNECTION WITH THE CREATION, ISSUE AND SALE IN TRANCHES, FROM TIME TO TIME, OF A MINIMUM OF 4,838,710 AND A MAXIMUM OF 6,451,613 SPECIAL WARRANTS OF THE COMPANY TO BE CREATED IN TWO SERIES AND TO BE SOLD BY THE COMPANY BY PRIVATE PLACEMENT PURSUANT TO AN AGREEMENT (THE "AGENCY AGREEMENT") DATED AS OF FEBRUARY 10, 1995 BETWEEN THE COMPANY AND GOEPEL SHIELDS & PARTNERS INC. (THE "AGENT") AND THAT THE DEFINITIVE TERMS AND CONDITIONS OF THE SPECIAL WARRANTS WILL BE SET FORTH IN THE SPECIAL WARRANT INDENTURE REFERRED TO IN SECTION 4 BELOW. Certain Definitions. AS USED IN THIS SUBSCRIPTION AGREEMENT, UNLESS THE ------------------- CONTEXT OTHERWISE REQUIRES: "APPLICABLE CLOSING DATE" has the meaning attributed to such term in ----------------------- section 5 hereto; "APPROVAL DATE" means the day on which Shareholder Approval is ------------- received; "BUSINESS DAY" means a day which is not a Saturday, a Sunday or a ------------ statutory holiday in the Provinces of British Columbia or Ontario; "CLOSING" means the completion of the issue and sale by the Company ------- and the purchase by the Purchasers of any tranche of Special Warrants pursuant to the Agency Agreement and the Subscription Agreements on any Applicable Closing Date; "CLOSING TIME" means 7:30 a.m. (Vancouver time) on any Applicable ------------ Closing Date as the Company and the Agent may agree; "COMMON SHARES" means common shares without par value in the capital ------------- of the Company; "FINAL PROSPECTUS" means a final prospectus of the Company relating to ---------------- the distribution of the Underlying Shares and, unless the context otherwise requires, includes any amendment or supplement thereto; "FIRST EXPIRY TIME" means 4:30 p.m. (Vancouver time) on the earlier of ----------------- (i) the sixth business day after the Qualification Date and (ii) June 30, 1995; "INITIAL CLOSING DATE" means March 9, 1995 or such other date as the -------------------- Company and the Agent may agree pursuant to the Agency Agreement on which date the first tranche of Special Warrants, which may be comprised of Series A Special 102 Warrants only or Series A Special Warrants and Series B Special Warrants, may be issued and sold to Purchasers; "1993 ANNUAL REPORT" means the 1993 Annual Report of the Company ------------------ mailed to its shareholders, including the consolidated financial statements of the Company, the notes thereto and the auditors report thereon included therein; "1994 PROSPECTUS" means the prospectus of the Company dated June 21, --------------- 1994 qualifying the distribution of 6,000,000 Common Shares on exercise of 6,000,000 previously distributed Special Warrants; "PRELIMINARY PROSPECTUS" means a preliminary prospectus of the Company ---------------------- relating to the distribution of the Underlying Shares and, unless the context otherwise requires, includes any amendment or supplement thereto; "PROSPECTUSES" means the Preliminary Prospectus and the Final ------------ Prospectus; "QUALIFICATION DATE" means the day on which a receipt is issued for ------------------ the Final Prospectus by the last of the Securities Commissions to issue a receipt for the Final Prospectus; "QUALIFYING JURISDICTIONS" means the Provinces of British Columbia and ------------------------ Ontario and such other provinces of Canada in which any of the Purchasers who enter into Subscription Agreements prior to any Closing are resident; "REDEMPTION DATE" means July 31, 1995; --------------- "REGULATION D" means Regulation D adopted by the SEC pursuant to the ------------ U.S Securities Act; "REGULATION S" means Regulation S adopted by the SEC pursuant to the ------------ U.S Securities Act; "SEC" means the United States Securities and Exchange Commission; --- "SECOND EXPIRY TIME" means 4:30 p.m. (Vancouver time) on the earlier ------------------ of (i) the sixth business day after the Qualification Date and (ii) the Redemption Date; "SECURITIES COMMISSIONS" means, collectively, the securities ---------------------- commission or other securities regulatory authority in each of the Qualifying Jurisdictions; "SERIES A SPECIAL WARRANTS" means the first series of Special Warrants ------------------------- created and authorized for issuance under the Special Warrant Indenture which series may comprise of no more than 5,340,027 Special Warrants; 103 "SERIES B SPECIAL WARRANTS" means the second series of Special ------------------------- Warrants created and authorized for issuance under the Special Warrant Indenture which series may comprise of no more than 1,111,586 Special Warrants; "SHAREHOLDER APPROVAL" has the meaning set out in section 4(e) hereof; -------------------- "SPECIAL WARRANTS" means up to 6,451,613 Special Warrants comprised of ---------------- Series A Special Warrants and Series B Special Warrants of the Company to be created and issued pursuant to the Special Warrant Indenture and to be sold by the Company pursuant to the Agency Agreement; "SPECIAL WARRANT INDENTURE" has the meaning attributed thereto in ------------------------- section 4 hereof; "STOCK EXCHANGES" means The Toronto Stock Exchange and the American --------------- Stock Exchange; "SUBSCRIPTION AGREEMENTS" means the subscription agreements or ----------------------- purchase agreements, including this Subscription Agreement, to be entered into between the Purchasers and the Company in respect of the purchase and sale of the Special Warrants; "SUBSEQUENT CLOSING DATES" means the dates after the Initial Closing ------------------------ Date on which the closing of the purchase and sale of any tranches of Special Warrants shall take place as determined by the Agent on two business days' notice to the Company and, in no event, shall such dates be later than March 22, 1995; "TRUSTEE" means Montreal Trust Company of Canada, as trustee under ------- the Special Warrant Indenture; "UNDERLYING SHARES" means the Common Shares from time to time issuable ----------------- upon the exercise or deemed exercise of the Special Warrants; "UNITED STATES" means the United States of America, its territories ------------- and possessions, any state of the United States and the District of Columbia; "U.S. PERSON" and "U.S. PERSON" have the meaning given to such terms ----------- ----------- in Regulation S; and "U.S. SECURITIES ACT" means the United States Securities Act of 1933, ------------------- as amended. 104 Special Warrants - Series. THE PURCHASER UNDERSTANDS AND ACKNOWLEDGES THAT ------------------------- THE SPECIAL WARRANTS WILL BE CREATED AND ISSUED IN TWO SERIES, THE FIRST SUCH SERIES TO BE COMPRISED OF NOT MORE THAN 5,340,027 SPECIAL WARRANTS AND TO BE DESIGNATED THE "SERIES A SPECIAL WARRANTS", AND THE SECOND SUCH SERIES TO BE COMPRISED OF NOT MORE THAN 1,111,586 SPECIAL WARRANTS AND TO BE DESIGNATED THE "SERIES B SPECIAL WARRANTS". THE SPECIAL WARRANTS MAY BE ISSUED IN TRANCHES OF ANY NUMBER OF SPECIAL WARRANTS PROVIDED THAT NO SERIES B SPECIAL WARRANTS SHALL BE ISSUED UNTIL ALL SERIES A SPECIAL WARRANTS HAVE BEEN ISSUED AND PROVIDED FURTHER THAT THE AGGREGATE NUMBER OF SERIES A SPECIAL WARRANTS AND SERIES B SPECIAL WARRANTS TOGETHER SHALL NOT EXCEED 6,451,613. THE PURCHASER FURTHER UNDERSTANDS AND ACKNOWLEDGES THAT ALL SPECIAL WARRANTS WILL BE ISSUED UNDER AND GOVERNED BY A SPECIAL WARRANT INDENTURE (THE "SPECIAL WARRANT INDENTURE") TO BE DATED AS OF THE INITIAL CLOSING DATE AND MADE BETWEEN THE COMPANY AND THE TRUSTEE, AS TRUSTEE THEREUNDER, AND TO CONTAIN PROVISIONS TO THE FOLLOWING EFFECT: RIGHT TO COMMON SHARES. Each Special Warrant will entitle the holder ---------------------- thereof, upon the exercise or deemed exercise thereof and without payment of any additional consideration, to be issued one Common Share. EXERCISE. Each holder of: -------- Series A Special Warrants will be entitled to exercise his Series A Special Warrants during the period commencing on the Applicable Closing Date and ending at the First Expiry Time; and Series B Special Warrants will be entitled to exercise his Series B Special Warrants during the period commencing on the Approval Date and ending at the Second Expiry Time. DEEMED EXERCISE. If: --------------- any Series A Special Warrants have not been exercised prior to the First Expiry Time such Series A Special Warrants will be deemed to have been exercised immediately prior to the First Expiry Time; the Approval Date occurs on or before June 30, 1995, any Series B Special Warrants not exercised prior to the First Expiry Time will be deemed to have been exercised immediately prior to the First Expiry Time; and the Approval Date occurs after June 30, 1995, any Series B Special Warrants not exercised prior to the Second Expiry Time will be deemed to have been exercised immediately prior to the Second Expiry Time; 105 (without any further action on the part of the holder thereof or the Company) whether or not the Qualification Date has occurred and subject to applicable securities laws. QUALIFICATION OF UNDERLYING SHARES. The Company will, as soon as ---------------------------------- practicable after the Initial Closing Date, file a Preliminary Prospectus with and thereafter use its reasonable best efforts to expeditiously obtain before June 30, 1995 receipts for a Final Prospectus from, the Securities Commissions in the Qualifying Jurisdictions to qualify the distribution of the Underlying Shares to Purchasers. SHAREHOLDER APPROVAL. If any Series B Special Warrants are issued to -------------------- Purchasers, the Company will call a special meeting of its shareholders and use its reasonable best efforts to obtain the approval ("Shareholder Approval") of a majority of such shareholders for the issuance of at least the number of Underlying Shares relating to the Series B Special Warrants so issued. NOTICES. Upon the occurrence of: ------- the Qualification Date the Company will forthwith, and in any event not later than the second business day thereafter, give written notice thereof to the Trustee and to the holders of Special Warrants; the Approval Date the Company will forthwith, and in any event not later than the second business day thereafter, give written notice thereof to the Trustee and to holders of Series B Special Warrants. OTHER PROVISIONS. The provisions of the Special Warrant Indenture and ---------------- the attributes and characteristics of the Special Warrants provided for therein shall be substantially as described herein, with such changes as the Agent, the Purchaser and the Company may agree to, and otherwise the Special Warrant Indenture shall be in such form and contain such terms and provisions as are satisfactory to the Company and the Agent, acting reasonably. Payment and Delivery. THE AGENT SHALL GIVE TWO DAYS' WRITTEN NOTICE OF THE -------------------- DATE (THE "APPLICABLE CLOSING DATE") ON WHICH THE PURCHASE AND SALE OF THE SPECIAL WARRANTS TO BE PURCHASED BY THE PURCHASER SHALL OCCUR, WHICH DATE SHALL BE EITHER THE INITIAL CLOSING DATE OR A SUBSEQUENT CLOSING DATE. PRIOR TO 4:00 P.M. ON THE DAY BEFORE THE APPLICABLE CLOSING DATE THE PURCHASER WILL DELIVER TO THE AGENT AT EITHER OF ITS ADDRESSES SET FORTH ON PAGE 1 (OR TO SUCH OTHER PERSON OR AT SUCH OTHER ADDRESS AS THE AGENT MAY DIRECT BY NOTICE TO THE PURCHASER), A CERTIFIED CHEQUE OR BANK DRAFT MADE PAYABLE ON OR BEFORE THE APPLICABLE CLOSING DATE TO OR TO THE ORDER OF "GOEPEL SHIELDS & PARTNERS INC." 106 IN AN AMOUNT EQUAL TO THE TOTAL PURCHASE PRICE FOR THE PURCHASER'S SPECIAL WARRANTS AS SET FORTH ON PAGE 20 HEREOF (THE "SUBSCRIPTION FUNDS") OR WILL MAKE SUCH OTHER ARRANGEMENTS FOR THE PAYMENT OF THE SUBSCRIPTION FUNDS AS MAY BE ACCEPTABLE TO THE AGENT. THE PURCHASER ACKNOWLEDGES AND AGREES THAT THIS OFFER, THE SUBSCRIPTION FUNDS AND ANY OTHER DOCUMENTS DELIVERED IN CONNECTION HEREWITH WILL BE HELD BY THE AGENT UNTIL SUCH TIME AS THE CONDITIONS REFERRED TO IN SECTION 8 HEREOF ARE SATISFIED BY THE COMPANY OR WAIVED BY THE AGENT. UPON SUCH SATISFACTION OR WAIVER, AT THE CLOSING THE AGENT WILL, ON BEHALF OF THE PURCHASER, DELIVER THIS OFFER AND ANY OTHER DOCUMENTS REQUIRED TO BE DELIVERED IN CONNECTION HEREWITH TO THE COMPANY AND WILL PAY TO THE COMPANY THE SUBSCRIPTION FUNDS AND, SUBJECT TO SECTION 9 BELOW, THE COMPANY WILL THEREUPON ISSUE AND SELL THE PURCHASER'S SPECIAL WARRANTS TO THE PURCHASER AND CAUSE TO BE ISSUED AND DELIVERED TO OR UPON THE DIRECTION OF THE AGENT, FOR DELIVERY TO THE PURCHASER IN ACCORDANCE WITH ITS "DELIVERY INSTRUCTIONS" ON PAGE 20 HEREOF, A DEFINITIVE CERTIFICATE REPRESENTING THE PURCHASER'S SPECIAL WARRANTS REGISTERED IN THE NAME OF THE PURCHASER (OR IN SUCH OTHER NAME OR NAMES AS ARE SET FORTH UNDER "REGISTRATION INSTRUCTIONS" ON PAGE 20 HEREOF). THE PURCHASER ACKNOWLEDGES AND AGREES WITH AND FOR THE BENEFIT OF THE AGENT THAT, IN THE EVENT THAT THE PURCHASER FAILS TO MAKE PAYMENT OF THE SUBSCRIPTION FUNDS TO THE AGENT IN THE MANNER AND BY THE TIME STIPULATED ABOVE AND THE AGENT IN ITS DISCRETION ELECTS TO PAY THE SUBSCRIPTION FUNDS ON BEHALF OF THE PURCHASER TO THE COMPANY AT THE CLOSING, SUCH PAYMENT WILL CONSTITUTE A LOAN MADE BY THE AGENT TO THE PURCHASER AND, IN SUCH EVENT, THE PURCHASER AGREES TO REPAY SUCH LOAN TO THE AGENT BY DELIVERING TO THE AGENT (OR TO SUCH OTHER PERSON AS THE AGENT MAY DIRECT BY NOTICE TO THE PURCHASER), ON THE APPLICABLE CLOSING DATE, A CERTIFIED CHEQUE OR BANK DRAFT MADE PAYABLE ON THE APPLICABLE CLOSING DATE TO OR TO THE ORDER OF "GOEPEL SHIELDS & PARTNERS INC." IN AN AMOUNT EQUAL THE SUBSCRIPTION FUNDS OR BY MAKING SUCH OTHER ARRANGEMENTS FOR THE PAYMENT OF THE SUBSCRIPTION FUNDS AS MAY BE ACCEPTABLE TO THE AGENT, AGAINST DELIVERY TO THE PURCHASER IN ACCORDANCE WITH ITS "DELIVERY INSTRUCTIONS" ON PAGE 20 HEREOF OF THE CERTIFICATE REPRESENTING THE PURCHASER'S SPECIAL WARRANTS REFERRED TO ABOVE. IN THE EVENT THAT THIS OFFER IS NOT ACCEPTED BY THE COMPANY OR THE CONDITIONS REFERRED TO IN SECTION 8 HEREOF ARE NOT SATISFIED BY THE COMPANY, OR WAIVED BY THE AGENT, WITHIN THE TIME THEREIN PROVIDED, THIS OFFER, THE SUBSCRIPTION FUNDS (IF PAID TO THE AGENT) AND ANY OTHER DOCUMENTS DELIVERED IN CONNECTION HEREWITH WILL BE RETURNED TO THE PURCHASER AT THE ADDRESS UNDER "NAME AND ADDRESS OF PURCHASER" SET FORTH ON PAGE 20 HEREOF. 107 Series B Escrow. THE PURCHASER ACKNOWLEDGES THAT IF ANY OF THE SPECIAL --------------- WARRANTS TO BE PURCHASED BY HIM HEREUNDER ARE SERIES B SPECIAL WARRANTS, THE SUBSCRIPTION FUNDS FOR SUCH SERIES B SPECIAL WARRANTS TO BE PAID TO THE COMPANY AT THE CLOSING ON THE APPLICABLE CLOSING DATE, LESS THE AMOUNT OF THE FEE PAID UNDER THE AGENCY AGREEMENT TO THE AGENT AT THE CLOSING, WILL BE DEPOSITED IN ESCROW AND INVESTED BY THE TRUSTEE IN ACCORDANCE WITH THE TERMS OF THE SPECIAL WARRANT INDENTURE AND THAT THE SPECIAL WARRANT INDENTURE WILL CONTAIN PROVISIONS TO THE EFFECT THAT SUCH DEPOSITED FUNDS AND INTEREST EARNED THEREON (I) IF THE APPROVAL DATE OCCURS PRIOR TO THE REDEMPTION DATE, WILL BE RELEASED FROM ESCROW AND PAID BY THE TRUSTEE TO THE COMPANY AS SOON AS PRACTICABLE AFTER THE COMPANY DELIVERS A WRITTEN CERTIFICATE TO THE TRUSTEE TO THE EFFECT THAT THE APPROVAL DATE HAS SO OCCURRED OR (II) IF THE APPROVAL DATE HAS NOT OCCURRED PRIOR TO THE REDEMPTION DATE, THE TRUSTEE TO CANCEL ALL OUTSTANDING SERIES B SPECIAL WARRANTS AND WILL REPAY TO EACH HOLDER THEREOF THE TOTAL PURCHASE PRICE PAID BY SUCH HOLDER FOR THE THEN CANCELLED SERIES B SPECIAL WARRANTS PLUS SUCH HOLDER'S PROPORTIONATE SHARE OF THE INTEREST EARNED BY THE TRUSTEE ON THE FUNDS DEPOSITED IN ESCROW FOR THE APPLICABLE TRANCHE OF SERIES B SPECIAL WARRANTS PURCHASED BY SUCH HOLDER FROM THE APPLICABLE CLOSING DATE TO AND INCLUDING THE DAY IMMEDIATELY PRECEDING THE REDEMPTION DATE. THE SPECIAL WARRANT INDENTURE WILL ALSO CONTAIN PROVISIONS WHICH REQUIRE THE COMPANY, PROMPTLY UPON REQUEST OF THE TRUSTEE, TO PAY TO THE TRUSTEE SUCH ADDITIONAL AMOUNTS AS MAY BE NECESSARY IN ORDER TO MAKE ANY SUCH PAYMENTS TO HOLDERS OF SERIES B SPECIAL WARRANTS IN FULL. Representations and Warranties of Company. THE COMPANY REPRESENTS AND ----------------------------------------- WARRANTS TO THE PURCHASER, AND ACKNOWLEDGES THAT THE PURCHASER WILL BE RELYING UPON SUCH REPRESENTATIONS AND WARRANTIES IN PURCHASING THE SPECIAL WARRANTS, THAT: the Company has been duly amalgamated and organized and is validly existing and in good standing under the laws of its jurisdiction of incorporation, is duly qualified to carry on its business as it is presently carried on and is duly qualified and authorized to carry on business and is in good standing as a foreign corporation in each jurisdiction in which the character of its properties or the nature of its business makes such qualification or authorization necessary and has all requisite power and authority to carry on its business as it is now carried on and to own, lease and operate its properties and assets, and to execute and deliver this Subscription Agreement and the Special Warrant Indenture, to consummate 108 the transactions contemplated hereby and thereby and to duly observe and perform all of its covenants and obligations herein and therein set forth; the Company has conducted and is conducting its business in compliance in all material respects with all applicable laws, rules, regulations and other lawful requirements which are applicable to it, and the Company is not aware of any legislation, regulation, rule or lawful requirements presently in force or proposed to be brought into force which the Company anticipates the Company will be unable to comply with without materially adversely affecting the financial condition, results of operations, business or prospects of the Company; the Company has no subsidiaries which are carrying on active business or which hold any material assets or have any material liabilities other than as described in the 1994 Prospectus; the Company is a reporting issuer for the purposes of and is not in default of any of the requirements relating thereto under the securities legislation of the Provinces of British Columbia and Ontario and is in compliance in all material respects with all United States federal and state securities regulatory filing requirements; the audited financial statements of the Company contained in the Company's 1993 Annual Report, the audited financial statements of the Company contained in the Company's 1993 annual report on Form 10K for the period ended December 31, 1993, the unaudited financial statements of the Company contained in the Company's quarterly report on Form 10-Q for the period ended September 30, 1994, the Company's 1994 Prospectus and any material change reports, reports on Form 8-K and press releases of the Company issued since June 21, 1994, at their respective dates, were true and correct in all material respects, contained no misrepresentation and were prepared in accordance with and complied with all securities laws, regulations, policy statements and rules applicable thereto; the audited financial statements of the Company as set forth in the Company's 1993 Annual Report were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby (after giving retroactive effect to any accounting changes described in the notes thereto) and accurately and fairly present the assets, liabilities (contingent or otherwise) and financial condition and position and the revenue, earnings, results of operations and changes in financial position of the Company as at such dates and during the periods covered thereby; the unaudited financial statements of the Company as set forth in the Company's quarterly report on Form 10-Q for the period ended September 30, 1994 were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby and, subject to year end adjustments, accurately and fairly present the assets, liabilities (contingent or 109 otherwise) and financial condition and position and the revenue, earnings, results of operations and changes in financial position of the Company as at such dates and during the periods covered thereby; the authorized capital of the Company consists of an unlimited number of Common Shares and 20,000,000 Preference Shares without par value, of which 21,360,108 Common Shares and no Preference Shares are issued and outstanding on the date hereof as fully paid and non-assessable shares and such Common Shares are listed and posted for trading on the Stock Exchanges and, except for options currently outstanding to directors and employees of the Company to purchase Common Shares and outstanding common share purchase warrants under which an aggregate of 6,666,737 Common Shares may be issued, no person has any right, agreement or option, present or future, contingent or absolute, or any right capable of becoming a right, agreement or option, for the issue or allotment of any unissued shares in the capital of the Company or any other security convertible into or exchangeable or exercisable for any such shares or to require the Company to purchase, redeem or otherwise acquire any of the issued and outstanding Common Shares; the Company is not in breach or violation of or default under (and no event has occurred and is continuing which with the giving of notice or lapse of time or both would constitute an event of default under), and neither the execution and delivery by the Company of this Subscription Agreement or the Special Warrant Indenture, nor the consummation of the transactions contemplated hereby or thereby nor the due observance and performance by the Company of any of its covenants or obligations contained herein or therein conflicts or will conflict with, results or will result in a breach or violation of, or constitutes or will constitute a default (or any event which with the giving of notice or lapse of time or both would constitute an event of default) under, any of the terms or provisions of the constating documents of the Company or of any resolutions of the directors or shareholders of the Company, or of any of the terms or provisions of any agreement or instrument to which the Company is a party or by which the Company is bound or to which any of its properties or assets are subject or of any judgement, decree, order, law, rule or regulation by which the Company is bound or to which any of its properties or assets are subject, the effect of any of which breaches, violations, conflicts or defaults, singularly or in the aggregate, might materially adversely affect the financial condition, results of operations, business or prospects of the Company or would impair the ability of the Company to consummate the transactions contemplated hereby or to duly observe and perform any of its covenants or obligations contained in this Subscription Agreement or the Special Warrant Indenture; no investigation, litigation, administrative proceeding, arbitration or other proceeding before or of any court, tribunal, arbitrator or regulatory or other governmental body or dispute with any regulatory or other governmental body is presently in process, pending or to the knowledge of the Company, threatened 110 against the Company, which, if determined adversely to the Company, might have a material adverse effect on the financial condition, results of operations, business or prospects of the Company or which would impair the ability of the Company to consummate the transactions contemplated hereby or to duly observe and perform any of its covenants or obligations contained in this Subscription Agreement or the Special Warrant Indenture; there has not occurred any adverse material change and there exists no adverse material fact, financial or otherwise, in the assets (including information or data relating to the estimated or book value of assets), liabilities (contingent or otherwise), business, affairs, ownership, management, operations, financial condition, capital or prospects of the Company since September 30, 1994 which has not been generally disclosed by way of appropriate filings (on a non- confidential basis) with applicable securities regulatory authorities; since September 30, 1994, except as has been generally disclosed by way of appropriate filings (on a non-confidential basis) with applicable securities regulatory authorities: there has not been any material change in the assets, liabilities (contingent or otherwise), business, operations, financial condition or prospects of the Company; there has not been any material change in the capital or indebtedness of the Company and the Company has not received or been informed that it will receive any demand for repayment of any such indebtedness; the financial position of the Company as at the date hereof is at least as good as that disclosed in the most recent balance sheet referred to in subparagraph (g) above, and there has not been and there is currently not contemplated any material revaluation of any assets or any write down or write up (except in the ordinary course of business and consistent with past practice) of the value of such assets or any cancellation of any debt or waiver or release of any rights or claims owed to or held by the Company (except for cancellations, waivers and releases in the ordinary course of business which in the aggregate are not material and the mutual limited release relating to that certain agreement or agreement in principle between the Company and Atlas Corporation dated May 31, 1994); there has not been any termination or amendment of, or any failure in any material respect to perform any obligations under, any material contract, lease or agreement, including, without limitation, the U.S. $4,000,000 Royalty Purchase Agreement between the Company and Repadre International Corporation dated on or before the Initial Closing Date, to which the Company is a party or by which the Company is bound; 111 the Company has carried on its business and operated and maintained its assets in the ordinary course of business and consistent with past practice, has not entered into and does not currently contemplate entering into any material transaction not in the ordinary course of business and has not made any material capital expenditures or commitments for material capital expenditures; and the Series A Special Warrants, including the Purchaser's Special Warrants, may be sold and issued and the Underlying Common Shares relating thereto may be issued to Purchasers upon the exercise or deemed exercise of the Series A Special Warrants without the approval of the shareholders of the Company. Conditions of Closing. THE OBLIGATIONS OF THE PURCHASER TO COMPLETE THE --------------------- PURCHASE OF SPECIAL WARRANTS AS CONTEMPLATED HEREBY SHALL BE CONDITIONAL UPON THE FULFILMENT AT OR BEFORE THE CLOSING TIME OF EACH OF THE FOLLOWING CONDITIONS, EACH OF WHICH ARE FOR THE EXCLUSIVE BENEFIT OF AND MAY BE WAIVED IN WHOLE OR IN PART BY THE PURCHASER. all actions required to be taken by or on behalf of the Company, including the passing of all requisite resolutions of directors of the Company, shall have been taken so as to validly create, issue and sell the Special Warrants; the Company shall have made all necessary filings and obtained all necessary approvals, consents and acceptances of appropriate regulatory authorities (including the Stock Exchanges) in order to permit the Company to issue and sell the Special Warrants to the Purchaser as contemplated hereby, subject only to conditions as may be required by the Stock Exchanges which the Company will satisfy forthwith following Closing; the Underlying Shares shall have been conditionally accepted for listing on the Stock Exchanges, subject to the filing of usual documentation and payment of fees; the Special Warrant Indenture shall have been entered into by and be in effect between the Company and the Trustee; the Company shall have duly accepted this Subscription Agreement; the Company shall have caused a favourable legal opinion, addressed to the Purchaser and the Agent and dated the Closing Date, and in form and content reasonably acceptable to the Purchaser and the Agent, to be delivered to the Purchaser and the Agent by the Company's counsel with respect to such matters as the Purchaser may reasonably request; 112 the Company shall have delivered to the Purchaser and the Agent a certificate signed on behalf of the Company by any two senior officers of the Company as are acceptable to the Purchaser, addressed to the Purchaser and dated the Closing Date, and in a form reasonably satisfactory to the Purchaser, certifying that, to the best of the knowledge, information and belief of such officers, having made due inquiry: no order ceasing or suspending trading in any securities of the Company or prohibiting the sale of the Special Warrants or the issuance of the Underlying Shares is in effect (except for any such order based upon the activities or alleged activities of the Purchaser and not of the Company) and, to the knowledge of such officers, no proceedings for such purpose are pending or threatened; the representations and warranties of the Company contained in section 7 hereof are true and correct in all material respects as of the Closing Time as if such representations and warranties had been made at and as of the Closing Time; the Company has in all material respects complied with all of the covenants and satisfied all of the terms and conditions of this Subscription Agreement on its part to be complied with or satisfied at or prior to the Closing Time; and the Company is a reporting issuer for the purposes of the securities legislation of the Provinces of British Columbia and Ontario and there is no material change in the affairs of the Company which presently requires disclosure under subsection 67(1) of the Securities Act (British Columbia) and no such disclosure has been made on a confidential basis; each of the Company and the Purchaser shall have executed and delivered to each other the mutual limited release in the form attached as Exhibit III hereto; and the Purchaser's Special Warrants shall be comprised of only Series A Special Warrants. Acceptance or Rejection. THE COMPANY WILL HAVE THE RIGHT TO ACCEPT THIS OFFER ----------------------- AT ANY TIME PRIOR TO THE CLOSING TIME. NOTWITHSTANDING THE FOREGOING, THE PURCHASER ACKNOWLEDGES AND AGREES THAT THE ACCEPTANCE OF THIS OFFER WILL BE CONDITIONAL UPON THE SALE OF THE SPECIAL WARRANTS TO THE PURCHASER BEING EXEMPT FROM ANY PROSPECTUS OR OFFERING MEMORANDUM REQUIREMENTS OF ALL APPLICABLE SECURITIES LAWS. THE COMPANY WILL BE DEEMED TO HAVE ACCEPTED THIS 113 OFFER UPON THE DELIVERY AT THE CLOSING OF THE CERTIFICATE REPRESENTING THE PURCHASER'S SPECIAL WARRANTS OR UPON THE DIRECTION OF THE PURCHASER IN ACCORDANCE WITH THE PROVISIONS HEREOF. Information and Documents. THE PURCHASER DELIVERS HEREWITH THREE COMPLETED ------------------------- AND ORIGINALLY EXECUTED COPIES OF THE PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING ATTACHED AS EXHIBIT I HERETO AND THE ACCREDITED INVESTOR CONFIRMATION ATTACHED AS EXHIBIT II HERETO AND WILL, PROMPTLY UPON REQUEST BY THE COMPANY, PROVIDE THE COMPANY WITH SUCH INFORMATION AND EXECUTE AND DELIVER TO THE COMPANY SUCH ADDITIONAL UNDERTAKINGS, QUESTIONNAIRES AND OTHER DOCUMENTS AS MAY BE REQUIRED IN CONNECTION WITH THE ISSUE AND SALE OF THE SPECIAL WARRANTS AND THE FILING OF THE PROSPECTUSES. THE PURCHASER ACKNOWLEDGES AND AGREES THAT SUCH UNDERTAKINGS, QUESTIONNAIRES AND OTHER DOCUMENTS, WHEN EXECUTED AND DELIVERED BY THE PURCHASER, WILL FORM PART OF AND WILL BE INCORPORATED INTO THIS SUBSCRIPTION AGREEMENT WITH THE SAME EFFECT AS IF EACH CONSTITUTED A REPRESENTATION AND WARRANTY OR COVENANT OF THE PURCHASER HEREUNDER IN FAVOUR OF THE COMPANY. THE PURCHASER CONSENTS TO THE FILING OF SUCH DOCUMENTS AS MAY BE REQUIRED TO BE FILED WITH ANY STOCK EXCHANGE OR SECURITIES REGULATORY AUTHORITY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY. Purchaser's Representations and Warranties. THE PURCHASER REPRESENTS AND ------------------------------------------ WARRANTS TO THE COMPANY, AS REPRESENTATIONS AND WARRANTIES THAT ARE TRUE AS OF THE DATE OF THIS OFFER AND WILL BE TRUE AS OF THE DATE OF THIS SUBSCRIPTION AGREEMENT AND AS OF THE CLOSING DATE, THAT: AUTHORIZATION AND EFFECTIVENESS. If the Purchaser is a corporation, ------------------------------- the Purchaser is a valid and subsisting corporation, has the necessary corporate capacity and authority to execute and deliver this offer and to observe and perform its covenants and obligations hereunder and has taken all necessary corporate action in respect thereof, or, if the Purchaser is a partnership, syndicate or other form of unincorporated organization, the Purchaser has the necessary legal capacity and authority to execute and deliver this offer and to observe and perform its covenants and obligations hereunder and has obtained all necessary approvals in respect thereof, and, in either case, upon acceptance by the Company, this offer constitutes a legal, valid and binding contract of the Purchaser enforceable against the Purchaser in accordance with its terms. 114 RESIDENCE. The Purchaser is a resident of the jurisdiction referred --------- to under "Name and Address of Purchaser" on page 20 hereof and is not a Canadian resident. PRIVATE PLACEMENT EXEMPTION. The Purchaser understands that the --------------------------- Special Warrants and the Underlying Shares have not been and will not be registered under the U.S. Securities Act and that the sale of the Special Warrants to the Purchaser is being made in reliance on a private placement exemption to accredited investors. ACCREDITED INVESTOR. The Purchaser is an "accredited investor" as ------------------- defined in Rule 501(a) under the U.S. Securities Act and is acquiring the Special Warrants and the Underlying Shares in respect thereof as principal for its own account or for the account of an "accredited investor" as to which it exercises sole investment direction, and not with a view to any resale, distribution or other disposition of the Special Warrants or the Underlying Shares in respect thereof in violation of the United States securities laws. PURCHASING FOR OWN ACCOUNT. The Purchaser is authorized to consummate -------------------------- the purchase of the Special Warrants and is purchasing as principal for its own account Special Warrants having an aggregate purchase price of at least U.S. $500,000 or for one or more accounts as to which it exercises sole investment discretion and each such account is purchasing Special Warrants having such a minimum aggregate purchase price. RESALE. The Purchaser agrees that if it decides to offer, sell, or ------ otherwise transfer any of the Special Warrants or the Underlying Shares in respect thereof, it will not offer, sell or otherwise transfer any of such Special Warrants or Underlying Shares, directly or indirectly, unless: the sale is to the Company; or the sale is made outside the United States in compliance with the requirements of Rule 903 or Rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations; or the sale is made pursuant to the exemption from registration under the U.S. Securities Act provided by Rule 144 thereunder, if available; or the Special Warrants or the Underlying Shares in respect thereof, as the case may be, are sold in a transaction that does not require registration under the U.S. Securities Act or any applicable United States state laws and regulations governing the offer and sale of securities, and it has prior to such transaction furnished to the Company an opinion of counsel to that effect from counsel of recognized standing. 115 LEGEND. The Purchaser understands and acknowledges that upon the ------ original issuance thereof, and until such time as the same is no longer required under applicable requirements of the U.S. Securities Act or applicable state laws, the certificates representing the Special Warrants, and all certificates issued in exchange therefor or in substitution thereof, including certificates representing the Underlying Shares in respect thereof, shall bear the following legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (D) IN COMPLIANCE WITH CERTAIN OTHER PROCEDURES SATISFACTORY TO THE COMPANY. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM MONTREAL TRUST COMPANY OF CANADA UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO MONTREAL TRUST COMPANY OF CANADA AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT"; provided, that if the Special Warrants or the Underlying Shares in -------- respect thereof, as the case may be, are being sold under subparagraph (f)(ii) above, the legend may be removed by providing to the Company an opinion of counsel of recognized standing reasonably satisfactory to, and at the expense of, the Company to the effect that such resale qualifies under Rule 903 or Rule 904 of Regulation S and providing a declaration to Montreal Trust Company of Canada as registrar and transfer agent, to the following effect (or as the Company may prescribe from time to time): 116 "The undersigned (A) acknowledges that the sale of the securities, to which this declaration relates is being made in reliance on Rule 903 or Rule 904 of Regulation S under the United States Securities Act of 1933 (the "Securities Act") and (B) certifies that, (1) he is not an affiliate of the Company, (2) the offer of such securities was not made to a person in the United States and either (a) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believed that the buyer was outside the United States or (b) the transaction was executed on or through the facilities of The Toronto Stock Exchange and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States and (3) neither the seller nor any person acting on its behalf engaged in any directed selling efforts in connection with the offer and sale of such securities. Terms used herein have the meanings given to them by Regulation S." and provided, that if any such Special Warrants or Underlying Shares -------- are being sold under subparagraph (f)(iii) above, the legend may be removed by delivery to Montreal Trust Company of Canada of an opinion of counsel of recognized standing reasonably satisfactory to, and at the expense of, the Company, that such legend is no longer required under the applicable requirements of the U.S. Securities Act or state securities laws. NOTATION. The Purchaser consents to the Company making a notation on -------- its records or giving instructions to any transfer agent of the Special Warrants or the Underlying Shares in order to implement the restrictions on transfer set forth and described herein. ABSENCE OF OFFERING MEMORANDUM. The offering and sale of the ------------------------------ Purchaser's Special Warrants to the Purchaser were not, so far as the Purchaser is aware, made through an advertisement of the Special Warrants in printed media of general and regular paid circulation, radio or television or any other form of advertisement and, except for this Subscription Agreement, the only documents, if any, delivered or otherwise furnished to the Purchaser in connection with such offering and sale were the annual or interim reports and other documents the contents of which are prescribed by statute or regulation and generally available research reports, memoranda and other materials concerning the Company prepared by others, which documents the Purchaser acknowledges do not, individually or collectively, constitute an offering memorandum or similar document (including an offering memorandum as such term is defined in section 32(1) of the Regulation to the Securities Act (Ontario)). The Purchaser acknowledges and agrees that the Company and the Agent take no responsibility for the accuracy or completeness of the information contained in any such 117 research reports, memoranda or other materials concerning the Company which have not been issued by the Company. NO UNDISCLOSED INFORMATION. The Purchaser's Special Warrants are not -------------------------- being purchased by the Purchaser as a result of any material information concerning the Company that has not been publicly disclosed and the Purchaser's decision to tender this offer and acquire the Special Warrants has not been made as a result of any verbal or written representation as to fact or otherwise made by or on behalf of the Company or any other person and is based entirely upon currently available public information concerning the Company. INVESTMENT SUITABILITY. The Purchaser has such knowledge and ---------------------- experience in financial and business affairs as to be capable of evaluating the merits and risks of the investment hereunder in the Special Warrants (and the Underlying Shares in respect thereof) and is able to bear the economic risk of loss of such investment. BRITISH COLUMBIA TRADES. The Purchaser understands and acknowledges ----------------------- that, with respect to any trade of Special Warrants or Underlying Shares acquired pursuant to a trade which occurs in British Columbia, if (i) the Purchaser trades any of the Special Warrants, or (ii) exercises its right to be issued Underlying Shares pursuant to the terms of the Special Warrants prior to the issuance of a receipt for a Final Prospectus qualifying the Underlying Shares for issuance and then trades any Underlying Shares so acquired, then, in either case, the Purchaser must file a report in the form attached to British Columbia Securities Commission Blanket Order #88/5, a copy of which may be obtained from the Company, within 10 days of the initial trade of such securities, but where the Purchaser has so filed such report, the Purchaser is not required to file a further report in respect of additional trades of Special Warrants or Underlying Shares acquired on the same date as the security which is the subject of the initial report. No Investigation by Agent. THE PURCHASER ACKNOWLEDGES AND AGREES THAT THE ------------------------- AGENT ASSUMES NO RESPONSIBILITY OR LIABILITY OF ANY AGENT WHATSOEVER FOR THE ACCURACY OR ADEQUACY OF ANY PUBLICLY AVAILABLE INFORMATION CONCERNING THE COMPANY OR AS TO WHETHER ALL INFORMATION CONCERNING THE COMPANY REQUIRED TO BE DISCLOSED BY IT HAS BEEN GENERALLY DISCLOSED. THE PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THE AGENT HAS NOT ENGAGED IN OR CONDUCTED ANY INDEPENDENT INVESTIGATION WITH RESPECT TO THE COMPANY OR ANY SUCH INFORMATION. Additional Resale Restrictions. THE PURCHASER UNDERSTANDS AND ACKNOWLEDGES ------------------------------ THAT THE PURCHASER'S SPECIAL WARRANTS (AND, IF THE SPECIAL WARRANTS ARE EXERCISED OR DEEMED TO BE EXERCISED BEFORE THE QUALIFICATION DATE, THE UNDERLYING SHARES ISSUED UPON SUCH EXERCISE OR DEEMED EXERCISE) 118 WILL BE SUBJECT TO CERTAIN RESALE RESTRICTIONS UNDER APPLICABLE SECURITIES LAWS AND THE PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING ATTACHED AS EXHIBIT I HERETO, AND THE PURCHASER AGREES TO COMPLY WITH SUCH RESTRICTIONS. THE PURCHASER ALSO ACKNOWLEDGES AND UNDERSTANDS THAT IT SHOULD CONSULT ITS OWN LEGAL ADVISORS WITH RESPECT TO APPLICABLE RESALE RESTRICTIONS AND THAT IT IS SOLELY RESPONSIBLE (AND THAT THE COMPANY IS NOT IN ANY MANNER RESPONSIBLE) FOR COMPLYING WITH SUCH RESTRICTIONS. No Revocation. THE PURCHASER AGREES THAT THIS OFFER IS MADE FOR VALUABLE ------------- CONSIDERATION AND MAY NOT BE WITHDRAWN, CANCELLED, TERMINATED OR REVOKED BY THE PURCHASER. Modification. NEITHER THIS SUBSCRIPTION AGREEMENT NOR ANY PROVISION ------------ HEREOF SHALL BE MODIFIED, CHANGED, DISCHARGED OR TERMINATED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM ANY WAIVER, CHANGE, DISCHARGE OR TERMINATION IS SOUGHT. Contractual Right of Action for Rescission. BY ITS ACCEPTANCE OF THIS ------------------------------------------ OFFER, THE COMPANY AGREES TO PROVIDE A RIGHT OF RESCISSION AS HEREINAFTER SET FORTH, WHICH RIGHT SHALL BE EXERCISABLE BY THE PURCHASER AND ANY SUBSEQUENT HOLDERS FROM TIME TO TIME OF THE PURCHASER'S SPECIAL WARRANTS: In the event that any holder of Special Warrants who acquires Underlying Shares upon the exercise or deemed exercise of his Special Warrants is or becomes entitled under applicable securities legislation to the remedy of rescission by reason of the Final Prospectus or any amendment thereto containing a misrepresentation, such holder shall be entitled to rescission not only of such holder's exercise of such Special Warrants but also of the purchase of such Special Warrants hereunder, and shall be entitled in connection with such rescission to a full refund of all consideration paid to the Company on the acquisition of such Special Warrants. In the event such holder is a permitted assignee of the interest of the original Purchaser of such Special Warrants, such permitted assignee shall be entitled to exercise the rights of rescission and refund granted hereunder as if such permitted assignee were such original Purchaser. The foregoing is in addition to any other right or remedy available to a holder of the Special Warrants under section 114 of the Securities Act (British Columbia), section 130 of the Securities Act (Ontario) or a 119 corresponding provision of other securities legislation or otherwise at law. Waiver of Rights of Withdrawal. THE PURCHASER EXPRESSLY WAIVES AND ------------------------------ RELEASES THE COMPANY FROM ALL RIGHTS OF WITHDRAWAL TO WHICH IT MIGHT OTHERWISE BE ENTITLED PURSUANT TO SECTION 66(3) OF THE SECURITIES ACT (BRITISH COLUMBIA), SECTION 71(2) OF THE SECURITIES ACT (ONTARIO) OR A CORRESPONDING PROVISION OF OTHER SECURITIES LEGISLATION. Authority of Agent. THE PURCHASER HEREBY IRREVOCABLY AUTHORIZES THE AGENT, ------------------ IN ITS SOLE DISCRETION: to act as the Purchaser's representative at Closing, to receive certificates for Special Warrants subscribed for and to execute in its name and on its behalf all closing receipts and documents required; and to approve the Special Warrant Indenture in accordance with section 4(g) hereof, any related documents and any opinions, certificates and other documents addressed to the Purchaser. Assignment. THIS SUBSCRIPTION AGREEMENT AND ANY INTEREST HEREIN OR ANY OF ---------- THE RIGHTS ARISING HEREUNDER MAY BE ASSIGNED ONLY TOGETHER WITH A TRANSFER OF THE SPECIAL WARRANTS PURCHASED HEREUNDER AND IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS AND THE RULES OF THE STOCK EXCHANGES, AND PROVIDED THAT IF THE ASSIGNEE RESIDES IN CANADA THAT HE RESIDES IN ONE OF THE QUALIFYING JURISDICTIONS AND THE ASSIGNEE AGREES TO BE BOUND BY THE TERMS AND CONDITIONS OF THIS SUBSCRIPTION AGREEMENT BY COMPLETING AND EXECUTING THE APPLICABLE FORM OF TRANSFER WHICH WILL BE ATTACHED TO THE CERTIFICATE REPRESENTING THE SPECIAL WARRANTS AND DELIVERING IT TO THE COMPANY OR THE TRUSTEE. Miscellaneous. THE AGREEMENT RESULTING FROM THE ACCEPTANCE OF THIS OFFER ------------- BY THE COMPANY CONTAINS THE WHOLE AGREEMENT BETWEEN THE COMPANY AND THE PURCHASER IN RESPECT OF THE SUBJECT MATTERS HEREOF AND THERE ARE NO WARRANTIES, REPRESENTATIONS, TERMS, CONDITIONS OR COLLATERAL AGREEMENTS, EXPRESS, IMPLIED OR STATUTORY, OTHER THAN AS EXPRESSLY PROVIDED FOR HEREIN AND IN ANY AMENDMENTS HERETO. ALL REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS MADE OR DEEMED TO BE MADE BY THE PURCHASER HEREIN WILL SURVIVE THE EXECUTION AND DELIVERY, AND ACCEPTANCE, OF THIS OFFER AND THE CLOSING. 120 TIME SHALL BE OF THE ESSENCE OF THIS SUBSCRIPTION AGREEMENT. THIS SUBSCRIPTION AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER WILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE PROVINCE OF BRITISH COLUMBIA. THIS SUBSCRIPTION AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, EACH OF WHICH WHEN DELIVERED, EITHER IN ORIGINAL OR FACSIMILE FORM, SHALL BE DEEMED TO BE AN ORIGINAL AND ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME DOCUMENT. Reliance on Facsimile. THE COMPANY SHALL BE ENTITLED TO RELY ON DELIVERY --------------------- OF A FACSIMILE COPY OF THIS SUBSCRIPTION AGREEMENT, AND ACCEPTANCE BY THE COMPANY OF A FACSIMILE COPY OF THIS SUBSCRIPTION AGREEMENT SHALL CREATE A LEGAL, VALID AND BINDING AGREEMENT BETWEEN THE PURCHASER AND THE COMPANY IN ACCORDANCE WITH THE TERMS HEREOF. Language. THE PURCHASER ACKNOWLEDGES ITS CONSENT AND REQUEST AND THE -------- PARTIES HERETO AGREE THAT ALL DOCUMENTS EVIDENCING OR RELATING IN ANY WAY TO ITS PURCHASE OF SPECIAL WARRANTS BE DRAWN UP IN THE ENGLISH LANGUAGE ONLY. NOUS RECONNAISSONS PAR LES PRESENTES AVOIR CONSENTI ET DEMANDE QUE TOUS LES DOCUMENTS FAISANT FOI OU SE RAPPORTANT DE QUELQUE MANIERE A NOTRE ACHAT SOIENT REDIGES EN ANGLAIS SEULEMENT. IN WITNESS WHEREOF the undersigned executes and agrees to be bound by this Subscription Agreement by executing the Signature Page and Registration and Delivery Instructions attached as page 20 hereto on the date therein indicated. NOTE: PURCHASER MUST EXECUTE AND COMPLETE ATTACHED SIGNATURE PAGE AND REGISTRATION AND DELIVERY INSTRUCTIONS A C C E P T A N C E The foregoing is acknowledged, accepted and agreed to this ____ day of ____________, 1995. DAKOTA MINING CORPORATION Per: _________________________________________ Title: 121 SIGNATURE PAGE AND REGISTRATION AND DELIVERY INSTRUCTIONS -------------------------------------- (PURCHASER TO COMPLETE) ISSUER: Dakota Mining Corporation ISSUE: Special Warrants exchangeable for Common Shares. TOTAL PURCHASE PRICE U.S. $____________ FOR SPECIAL WARRANTS: SIGNATURE OF PURCHASER: ________________ Dated ______, 1995 Name of Purchaser Per: Title: NAME AND ADDRESS OF PURCHASER: Name: _______________________________ Address: ________________________________ ______________ (Street Address) ______________ (State) ______________ (Postal Code) REGISTRATION INSTRUCTIONS: If other than in the name of the Purchaser: Name: ________________________________ Address: ________________________________ ______________ (Street Address) ______________ (State) ______________ (Postal Code) DELIVERY INSTRUCTIONS: If other than to the Purchaser at its address above: Name: ______________________________ Contact Name _______________________________ Address _______________________________ (Street Address) _______________________________ (State) _______________________________ (Postal Code) Telephone No.: ________________________ 122 EXHIBIT I THE TORONTO STOCK EXCHANGE PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING To be completed by each proposed private placement purchaser of listed securities or securities which are convertible into listed securities. QUESTIONNAIRE 1. DESCRIPTION OF TRANSACTION (a) Name of Issuer of the Securities DAKOTA MINING CORPORATION (b) Number and Class of Securities to be Purchased __________ Special Warrants (c) Purchase Price Aggregate of U.S. $___________ 2. DETAILS OF PURCHASER (a) Name of Purchaser (b) Address (c) Names and addresses of persons having a greater than 10% beneficial interest in the Purchaser 3. RELATIONSHIP TO ISSUER (a) Is the Purchaser (or any person named in response to 2(c) above) an insider of the Issuer for the purposes of the Ontario Securities Act (before giving effect to this private placement)? If so, state the capacity in which the Purchaser (or person named in response to 2(c)) qualifies as an insider. (b) If the answer to (a) is "no", are the Purchaser and the Issuer controlled by the same person or company? If so, give details. 4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER Give details of all trading by the Purchaser, as principal, in the securities of the Issuer (other than debt securities which are not convertible into equity securities), directly or indirectly, within the 60 days preceding the date hereof. 123 UNDERTAKING TO: The Toronto Stock Exchange The undersigned has subscribed for and agreed to purchase, as principal, the securities described in Item 1 of this Private Placement Questionnaire and Undertaking. The undersigned undertakes not to sell or otherwise dispose of any of the said securities so purchased or any securities derived therefrom for the period that ends on the earlier of: (a) six months from the date of the closing of the transaction herein or for such period as is prescribed by applicable securities legislation, whichever is longer, and (b) the date that a receipt for a final prospectus relating to the said securities or securities derived therefrom has been issued by the Ontario Securities Commission, without the prior consent of The Toronto Stock Exchange and any other regulatory body having jurisdiction. Dated at ____________________, this _____ day of _____________, 1995. (Name of Purchaser - please print) (Authorized Signature) (Official Capacity - please print) (please print here name of individual whose signature appears above, if different from name of Purchaser printed above) 124 EXHIBIT II ACCREDITED INVESTOR CONFIRMATION The Purchaser hereby certifies that the Purchaser, or the investor on whose behalf it exercises sole investment discretion, qualifies as an accredited investor under Rule 501(a) by reason of its inclusion in one or more of the following categories (check one or more boxes, as appropriate): _______ any bank as defined in section 3(a)(2) of the Securities Act of 1933, as amended (the "Act"), or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $500,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; _______ any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; _______ any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered hereby, with total assets in excess of $5,000,000; _______ any director, executive officer or general partner of Dakota Mining Corporation; _______ any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000; _______ any natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectations of reaching that same income level in the current year; _______ any trust, with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring the securities offered hereby, whose purchase is directed by a sophisticated person as described in section 506(b)(2)(ii) of Regulation D promulgated under the Act; or _______ any entity in which all of the equity owners qualify as accredited investors under at least one of the foregoing categories. 125 EXHIBIT III MUTUAL LIMITED RELEASE ---------------------- For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Dakota Mining Corporation, a Canadian corporation ("Dakota") and Atlas Corporation, a Delaware corporation ("Atlas"), on behalf of themselves and their respective successors, assigns, affiliates, subsidiaries, officers, directors, employees, agents, and anyone acting on behalf of, by, or through them, release the other, their respective successors, assigns, affiliates, subsidiaries, officers, directors, employees, agents, and anyone acting on behalf of, by, or through them, of and from any and all actions, causes of actions, liability, debts, obligations, claims or demands arising out of, or relating to, directly or indirectly, that certain agreement or agreement in principle, dated May 31, 1994, between the parties hereto, including without limitation their respective performance thereof and any breach or claimed breach of said agreement previously asserted by either of them. It is expressly agreed that nothing herein contained shall be construed or deemed to be an admission of liability on the part of either party to this Mutual Limited Release. IN WITNESS WHEREOF, this Mutual Limited Release has been executed on the dates written below. DAKOTA MINING CORPORATION, a Canadian corporation Date: ___________________________ By: __________________________________ Name: Title: ATLAS CORPORATION, a Delaware corporation Date: ___________________________ By: __________________________________ Name: Title: (seal) 126 EX-10.27 6 AMD 9-15-95 EXHIBIT 10.27 127 August 15, 1995 Mr. Richard E. Blubaugh Vice President, Environmental and Governmental Affairs Atlas Corporation Republic Plaza 370 Seventeenth Street, Suite 3150 Denver, Colorado 80202 Dear Mr. Blubaugh: It is proposed that certain revisions be made to the Employment Agreement (the "Agreement") made as of February 17, 1995 between yourself and Atlas Corporation (the "Company") in order to conform the Agreement, where appropriate, to the terms of the Long Term Incentive Plan of the Company, to correct a typographical error in Section 6.1(g) of the Agreement and to provide for look-back provisions with regard to Section 6.2 of the Agreement. Such revisions shall be as follows: 1. Section 6.1(c) shall be revised to add the following underlined language (other than the defined term): "Change of Control Event" means any one of the following: (i) ----------------------- Continuing Directors no longer constitute at lease two thirds of the Directors constituting the Board; (ii) any person or group (as defined in Rule 13d-5 under the Securities Exchange Act of 1934), together with its affiliates, other than Phoenix Financial Holdings Inc., MacKenzie Financial --------------------------------------------------------------- Corporation or M.I.M. Holdings Limited (in each case, together with its ----------------------------------------------------------------------- affiliates), becomes the beneficial owner, directly or indirectly, of 15% ---------- or more of Employer's then outstanding Common Stock or 15% or more of the voting power of Employer's then outstanding securities entitled generally to vote for the election of Directors, provided that the foregoing circumstances shall not constitute a Change of Control Event if such beneficial owner is Employer, any subsidiary of Employer, any employee benefit plan or employee stock plan of Employer or of any subsidiary of Employer, and provided further that, notwithstanding the foregoing, ---------------------------------------------------------------- a -- 128 August 15, 1995 Page 2 Change of Control Event shall be deemed to occur if Mackenzie Financial ----------------------------------------------------------------------- Corporation, and its affiliates, or M.I.M. Holdings Limited, and its -------------------------------------------------------------------- affiliates, shall acquire 25% or more of the Employer's then outstanding ------------------------------------------------------------------------ Common Stock or the voting power of the Employer's then outstanding ------------------------------------------------------------------- securities entitled generally to vote for the election of Directors; (iii) ------------------------------------------------------------------- the approval by Employer's stockholders of the merger or consolidation of Employer with any other corporation, the sale of substantially all of Employer's assets or the liquidation or dissolution of Employer, unless, in the case of a merger or consolidation, the Continuing Directors in office immediately prior to such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation; or (iv) at least two thirds of the Continuing Directors in office immediately prior to any other action taken or proposed to be taken by Employer's stockholders or by the Board determines that such action constitutes, or that such proposed action, if taken, would constitute, a Change of Control of Employer and such action is taken. 2. Section 6.1(g)(i)(A)\(2) shall be revised to add the following underlined word: any removal of Executive from, or any failure to reelect Executive to, any of Executive's positions with Employer except for Cause or as a result of ------ the death or Disability of Executive... 3. Section 6.2(b)(i) shall be revised to add the following underlined language: Executive shall be entitled to compensation as specified in Section 6.2(b)(ii) and (iii) if (A) Employer terminates Executive's employment hereunder without Cause either prior to 3 months before a Change of Control ----------------- Event or more than two years after the last Change of Control Event, or (B) Executive voluntarily terminates his employment hereunder with Good Reason either prior to 3 months before a Change of Control Event or more than two ----------------- years after the last Change of Control Event. 4. Section 6.2(c)(i) shall be revised to add the following underlined language: Executive shall be entitled to compensation as specified in Section 6.2(c)(ii) and (iii) if (A) Employer terminates Executive's employment hereunder without Cause either (1) within 3 months prior to a Change of ----------------------------------------------- Control Event or (2) upon or after a Change of Control Event but within two ------------------- years after the date of that Change of Control Event, or (B) Executive voluntarily terminates his employment hereunder with Good Reason either (1) ---------- within 3 months prior to a Change of Control Event or (2) upon or after a -------------------------------------------------------- Change of Control Event but within two years after the date of that Change of Control Event. 129 August 15, 1995 Page 3 Please sign and date this letter in the space indicated below in order to affirm your acceptance of and agreement to the proposed revisions to the Agreement, as above set forth. Very truly yours, ATLAS CORPORATION ____________________________________ (Name) (Title) Accepted and agreed to this ______ day of _______________, 1995: By: _______________________________ Richard E. Blubaugh 130 EX-10.28 7 EMP. AGREE DAVIS EXHIBIT 10.28 131 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of June 1, 1995 between ATLAS CORPORATION, a Delaware corporation ("Employer"), and Gerald E. Davis, Executive Vice President of Employer ("Executive"). Employer and Executive agree as follows: 1. EMPLOYMENT. In accordance with the terms and conditions of this ---------- Agreement, Employer agrees to employ Executive as an officer of Employer commencing June 1, 1995, and continuing until that employment is terminated (a) by either Employer or Executive or (b) by reason of Executive's normal retirement in accordance with Employer's retirement programs applicable to Executive at the time of his retirement ("Executive's Retirement"). Executive accepts that employment and agrees to perform the duties associated therewith. Subject to the terms and conditions of this Agreement, Executive's employment by Employer may be terminated at any time by either Executive or Employer by 10 days prior written notice to that effect. 2. DUTIES. As long as Executive is employed by Employer hereunder, ------ Executive shall be subject to the direction of and be responsible to the Chief Executive Officer of Employer or his designee with respect to the performance of his duties hereunder, shall report to the Chief Executive Officer of Employer in that connection at such times and in such detail as the Chief Executive Officer of Employer may require and shall devote his full business time, attention, skill and efforts to the business and affairs of Employer. 3. SALARY. As compensation for the services to be furnished by Executive ------ to Employer hereunder, as long as Executive is employed by Employer hereunder, Employer shall pay Executive a salary at a minimum annual rate of $150,000 payable in accordance with Employer's standard payroll policies applicable to officers. 4. BASIC EMPLOYEE BENEFIT PLANS AND PROGRAMS. As long as Executive is ----------------------------------------- employed by employer hereunder, Executive shall be entitled to participate in all regular and key employee benefit plans and programs which are or may be made available by Employer for its officers. 5. EXPENSES. Employer shall provide for the payment of, or reimbursement -------- of Executive for, all travel and other out-of-pocket expenses reasonably incurred by Executive in the performance of his duties hereunder. 132 6. TERMINATION. ----------- 6.1 Certain Definitions. As used in this Section 6: ------------------- (a) "Board" means the Board of Directors of Employer. ----- (b) "Cause" means, and is limited to, (i) action by Executive ----- involving willful malfeasance, (ii) failure to act by Executive involving material nonfeasance or (iii) Executive being convicted of a felony. (c) "Change of Control Event" means any one of the following: (i) ----------------------- Continuing Directors no longer constitute at least two thirds of the Directors constituting the Board; (ii) any person or group (as defined in Rule 13d-5 under the Securities Exchange Act of 1934), together with its affiliates, other than Phoenix Financial Holdings Inc., Mackenzie Financial Corporation or M.I.M. Holdings Limited (in each case, together with its affiliates), becomes the beneficial owner, directly or indirectly, of 15% or more of Employer's then outstanding Common Stock or 15% or more of the voting power of Employer's then outstanding securities entitled generally to vote for the election of Directors, provided that the foregoing circumstances shall not constitute a Change of Control Event if such beneficial owner is Employer, any subsidiary of Employer, any employee benefit plan or employee stock plan of Employer or of any subsidiary of Employer; and provided further that, notwithstanding the foregoing, a Change of Control Event shall be deemed to occur if Mackenzie Financial Corporation, and its affiliates, or M.I.M. Holdings Limited, and its affiliates, shall acquire 25% or more of the Employer's then outstanding Common Stock or the voting power of the Employer's then outstanding securities entitled generally to vote for the election of Directors; (iii) the approval by Employer's stockholders of the merger or consolidation of Employer with any other corporation, the sale of substantially all of Employer's assets or the liquidation or dissolution of Employer, unless, in the case of a merger or consolidation, the Continuing Directors in office immediately prior to such merger or consolidation constitute at least two thirds of the directors constituting the board of directors of the surviving corporation of such merger or consolidation and any parent (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of such corporation; or (iv) at least two thirds of the Continuing Directors in office immediately prior to any other action taken or proposed to be taken by Employer's stockholders or by the Board determines that such action constitutes, or that such proposed action, if taken, would constitute, a change of control of Employer and such action is taken. (d) "Continuing Director" means any person who (i) is a Director on ------------------- the date of this Agreement; (ii) was designated before such person's initial election as a Director as a Continuing Director by a majority of the Continuing Directors; or (iii) has been a Director for at least two years after the occurrence of one or more Change of Control Events. (e) "Director" means a member of the Board. -------- (f) "Disability" means, as applied to Executive, that (i) he has been ---------- so incapacitated by bodily injury or disease as to be unable to perform the duties contemplated to be performed by him hereunder, (ii) the incapacity shall have continued for a period of three consecutive 133 months and (iii) the incapacity will, in the opinion of a qualified physician acceptable to Employer, be permanent and continuous for a period of at least one year. (g) "Good Reason" means (i) without Executive's written consent (A) ----------- (1) the assignment to Executive of any duties and responsibilities, or any limitation of Executive's duties and responsibilities, if such assignment or limitation is materially inconsistent with Executive's positions, duties, responsibilities and status as an executive of Employer or (2) any removal of Executive from, or any failure to reelect Executive to, any of Executive's positions with Employer except for Cause or as a result of the death or Disability of Executive, and (B) the continuance thereof for a period of 20 days after written notice thereof to Employer from Executive; (ii) any failure by Employer to pay, or any reduction by Employer of, the salary payable to Executive under Section 3 of this Agreement; (iii) any failure by Employer (A) to continue to provide Executive with the opportunity to participate, on terms no less favorable than those in effect immediately prior to a Change of Control Event, in any benefit plan or program in which Executive was participating immediately prior to the Change of Control Event, or their equivalent, or (B) to provide Executive with all other fringe benefits, or their equivalent, from time to time in effect for the benefit of any of Employer's salaried employees; (iv) the failure by Employer to obtain the specific assumption of this Agreement by a successor or assign of Employer or by any person acquiring substantially all of Employer's assets; or (v) any material breach by Employer of any provision of this Agreement. 6.2 Compensation of Executive in the Event of Termination of -------------------------------------------------------- Executive's Employment Hereunder. - -------------------------------- (a) In the event of Executive's Disability, Executive's employment by Employer hereunder may be terminated by Employer upon written notice from Employer to Executive which shall specify a date not less than 30 days from the date of such notice as the date on which such termination shall become effective. If Executive's employment by Employer hereunder is terminated because of Executive's Disability or death, Executive, or his heirs, executors or administrators if termination is because of Executive's death, shall be entitled to receive the salary payable to Executive under Section 3 until the date on which the termination occurs. (b) (i) Executive shall be entitled to compensation as specified in Section 6.2(b)(ii) and (iii) if (A) Employer terminates Executive's employment hereunder without Cause either prior to 3 months before a Change of Control Event or more than two years after the last Change of Control Event, or (B) Executive voluntarily terminates his employment hereunder with Good Reason either prior to 3 months before a Change of Control Event or more than two years after the last Change of Control Event. (ii) Prior to the 30th day following the date of such termination Employer shall pay Executive (A) the amount which equals Executive's annual rate of base salary that is in effect on the date of termination, and (B) all amounts which had accrued but were not paid prior to such termination for personal services actually rendered before the termination. (iii) As soon as practicable following the date of such termination, or at such later date as Executive may validly elect, Employer shall pay Executive all amounts payable under then existing employee benefit plans and programs. Notwithstanding the foregoing, if the sum of all of the payments to Executive whether under this Agreement or otherwise (but excluding any payments which need not be included in determining if a "parachute payment" has been made within the meaning of Internal Revenue Code (the "Code") (Section) 280G(b)(2)) exceeds the product of 134 multiplying the Base Amount times 2.99, then such payments hereunder shall be reduced by the amount of such excess. For purposes of this Agreement, the term Base Amount is defined in Code (Section) 280G(b)(3) and the Treasury Regulations promulgated thereunder, calculated as of the date required under the Code. (c) (i) Executive shall be entitled to compensation as specified in Section 6.2(c)(ii) and (iii) if (A) Employer terminates Executive's employment hereunder without Cause either (1) within 3 months prior to a Change of Control Event or (2) upon or after a Change of Control Event but within two years after the date of that Change of Control Event, or (B) Executive voluntarily terminates his employment hereunder with Good Reason either (1) within 3 months prior to a Change of Control Event or (2) upon or after a Change of Control Event but within two years after the date of that Change of Control Event. (ii) Prior to the 30th day following the date of such termination Employer shall pay Executive (A) the amount which equals the product of multiplying Executive's annual rate of base salary that is in effect on the date of termination times two, and (B) all amounts which had accrued but were not paid prior to such termination for personal services actually rendered before the termination. (iii) As soon as practicable following the date of such termination, or at such later date as Executive may validly elect, Employer shall pay Executive all amounts payable under then existing employee benefit plans and programs. Notwithstanding the foregoing, if the sum of all of the payments to Executive whether under this Agreement or otherwise (but excluding any payments which need not be included in determining if a "parachute payment" has been made within the meaning of Code (S) 280G(b)(2)) exceeds the Base Amount times 2.99, then such payments hereunder shall be reduced by the amount of such excess. (d) If Executive's employment hereunder is terminated by Employer or by Executive under any circumstances other than as set forth in Section 6.2(a), 6.2(b), or 6.2(c), all payments required by this Agreement shall cease and the termination shall relieve Employer of its obligations to make any further payments under this Agreement except payments under the employee benefit plans and programs and payments of amounts which had accrued but were not yet paid prior to the termination. 7. CONFIDENTIAL INFORMATION AND TRADE SECRETS. Executive acknowledges ------------------------------------------ that all information possessed by him relating to activities of Employer that is of a secret or confidential nature, including without limitation financial information, exploration, mining and milling information, lists of customers, technical and production know-how, developments, inventions, processes and administrative procedures, is the property of Employer, and as long as Executive is employed by Employer hereunder, and for a period of two years thereafter, Executive shall not use any such information for the benefit of anyone other than Employer or disclose any such information to others except in the course of Employer's business. 8. PAYMENT TO ESTATE OR BENEFICIARY. If Executive dies before any -------------------------------- payments required to be paid by Employer to Executive hereunder have been paid, Employer shall make all such payments to the beneficiary or beneficiaries designated by Executive in a written notice previously delivered by Executive or Employer or, in the absence of such a notice, to Executive's estate. 135 9. ARBITRATION. Any and all disputes arising under or relating to this ----------- Agreement shall be subject to mandatory binding arbitration in Denver, Colorado, before the American Arbitration Association in accordance with its Commercial Arbitration Rules. Discovery shall be allowed but subject to the limits and procedures set forth in Rule 26.1 of the Colorado Rules of Civil Procedure. The prevailing party in any such arbitration proceeding shall be entitled to an award of his or its reasonable costs and attorney fees. 10. BINDING EFFECT; SUCCESSORS, ASSIGNMENT. Subject to the provisions of -------------------------------------- this Section 10, this Agreement shall be binding upon, inure to the benefit of and be enforceable by Employer and Executive and their respective heirs, legal representatives, successors and assigns. If Employer shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. 11. GOVERNING LAW. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of Colorado applicable to contracts made and to be performed therein. 12. NOTICE. Any notice required to be given hereunder shall be in writing ------ and delivered by certified mail, return receipt requested, addressed: To Employer at: Republic Plaza 370 Seventeenth Street Suite 3150 Denver, Colorado 80202 To Executive at: Republic Plaza 370 Seventeenth Street Suite 3150 Denver, Colorado 80202 or in either case to such other address as may be specified in a written notice given as provided above. 13. ENTIRE AGREEMENT; AMENDMENT. This Agreement represents the entire --------------------------- agreement of Employer and Executive with respect to the subject matter hereof and shall supersede any and all previous agreements, arrangements and understandings between Employer and Executive in that regard. This Agreement may be amended only by the written agreement of Employer and Executive. ATLAS CORPORATION 136 By___________________________________ Chief Executive Officer EXECUTIVE By___________________________________ Gerald E. Davis 137 EX-10.29 8 AMD 9-20-95 DAVIS AGREE EXHIBIT 10.29 138 August 10, 1995 Mr. Gerald E. Davis President Atlas Corporation Republic Plaza 370 Seventeenth Street Suite 3150 Denver, Colorado 80202 Dear Mr. Davis: This is to confirm that the Employment Agreement (the "Agreement") made as of June 1, 1995 between yourself and Atlas Corporation (the "Company") is hereby revised to reflect your position as President of the Company. All other terms and conditions of your employment with the Company as set forth in the Agreement remain in effect. Very truly yours, ATLAS CORPORATION /s/ David J. Birkenshaw ----------------------------------------- [Name] [Title] Chief Executive Officer Accepted and agreed to this 20th day of September, 1995: By: /s/ Gerald E. Davis ------------------------------------------------ Gerald E. Davis 139 EX-21 9 SUBSIDIARIES EXHIBIT 21 140 EXHIBIT 21. SUBSIDIARIES OF THE COMPANY --------------------------- The following table lists the subsidiaries of the Company and their jurisdictions of organization.
Percentage of Voting Securities and Jurisdiction of Other Interests Organization Owned by the Company Atlas Precious Metals Inc. Nevada 100% Atlas Gold Mining Inc. Nevada 100% Atlas Perlite Inc. Oregon 100% Granges Inc. Canada 27.7%
141 EX-24 10 AUDITORS CONSENT EXHIBIT 24 142 CONSENT OF INDEPENDENT AUDITORS We consent to the addition of the financial statement schedule, listed in the accompanying index to the financial statements, to the financial statements covered by our report dated September 6, 1995, included herein. We also consent to the incorporation by reference in Post Effective Amendment Number 19 to Registration Statement Number 2-8439 on Form S-3 dated November 10, 1993, Post Effective Amendment Number 1 to Registration Statement Number 33- 18316 on Form S-8 dated December 14, 1987 and Registration Statement Number 33- 87992 on Form S-3 dated January 13, 1995 and the Related Prospectuses of our report on the finical statements and schedule included in this Annual Report on Form 10-K of Atlas Corporation for the year ended June 30, 1995 Ernst & Young LLP Denver, Colorado September 26, 1995 143 EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ATLAS CORPORATION JUNE 30, 1995 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR JUN-30-1995 JUL-01-1994 JUN-30-1995 4,453 0 131 0 250 9,115 0 44,661 43,497 3,504 3,500 18,578 0 0 6,255 43,497 2,328 2,328 4,516 4,516 1,911 0 316 (20,397) 0 (20,397) 621 0 0 (19,776) (1.19) (1.19)
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