-----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, HsDsrSg+OJDkNgSp5AE2w+pRDuvpld8MGhsyA/KHQfVfje1zY74crlqwH73t77u9 n4yEzAy1keL1J3AlpU4FFA== 0000950129-96-003352.txt : 19961217 0000950129-96-003352.hdr.sgml : 19961217 ACCESSION NUMBER: 0000950129-96-003352 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19961216 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: URANIUM RESOURCES INC /DE/ CENTRAL INDEX KEY: 0000839470 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS, MINERALS (NO PETROLEUM) [5050] IRS NUMBER: 752212772 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-17875 FILM NUMBER: 96680779 BUSINESS ADDRESS: STREET 1: 12750 MERIT DRIVE STREET 2: SUITE 1210 CITY: DALLAS STATE: TX ZIP: 75251 BUSINESS PHONE: 2143877777 MAIL ADDRESS: STREET 1: 12750 MERIT DRIVE STREET 2: SUITE 1210 CITY: DALLAS STATE: TX ZIP: 75251 S-3 1 FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 13, 1996 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- URANIUM RESOURCES, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or Other Jurisdiction of Incorporation or Organization) 1094 (Primary Standard Industrial Classification Code Number) 75-2212772 (I.R.S. Employer Identification No.) --------------------- 12750 MERIT DRIVE, SUITE 1020 DALLAS, TEXAS 75251 (972) 387-7777 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) PAUL K. WILLMOTT CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT 12750 MERIT DRIVE, SUITE 1020 DALLAS, TEXAS 75251 (972) 387-7777 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) Copies to: ALFRED C. CHIDESTER BAKER & HOSTETLER 303 EAST 17TH AVENUE, SUITE 1100 DENVER, COLORADO 80203 (303) 861-0600 MARK R. LEVY HOLLAND & HART LLP 555 17TH STREET, SUITE 3200 DENVER, COLORADO 80202 (303) 295-8000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
===================================================================================================== PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE - ----------------------------------------------------------------------------------------------------- Common Stock, par value $0.001 per share.............. 1,700,000 $8.3125 $14,131,250 $4,282.20 - ----------------------------------------------------------------------------------------------------- Total........................... 1,700,000 $8.3125 $14,131,250 $4,282.20 =====================================================================================================
(1) In accordance with Rule 457(c), the registration fee is calculated based on the average of the high and low prices reported on the Nasdaq National Market on December 9, 1996. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 *************************************************************************** * * * INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A * * REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED * * WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT * * BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE * * REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT * * CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY * * NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH * * SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO * * REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH * * STATE. * * * *************************************************************************** PROSPECTUS (SUBJECT TO COMPLETION) DECEMBER 13, 1996 1,400,000 TO 1,700,000 SHARES URANIUM RESOURCES, INC. COMMON STOCK Uranium Resources, Inc. (the "Company") is offering a minimum of 1,400,000 and a maximum of 1,700,000 shares of its Common Stock, par value $0.001 per share (the "Shares"). The Common Stock of the Company is traded on the Nasdaq National Market under the symbol "URIX." On December 9, 1996 the last sale price of the Common Stock, as reported on the Nasdaq National Market, was $8 3/8 per share. --------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==================================================================================================== PRICE TO COMMISSION(1) PROCEEDS TO PUBLIC COMPANY(2)(3) - ---------------------------------------------------------------------------------------------------- MINIMUM MAXIMUM MINIMUM MAXIMUM - ---------------------------------------------------------------------------------------------------- Per Share.............................. $ $ $ $ $ - ---------------------------------------------------------------------------------------------------- Total.................................. $ $ $ $ $ ====================================================================================================
(1) The Shares are being offered by the Company principally to selected institutional investors. EVEREN Securities, Inc. (the "Placement Agent") has been retained to act, on a best efforts basis, as Placement Agent for the Company in connection with the arrangement of this transaction. The Company has agreed (i) to pay the Placement Agent a fee in connection with the arrangement of this financing, (ii) to reimburse the Placement Agent for certain expenses, and (iii) to indemnify the Placement Agent against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Plan of Distribution." (2) The termination date of this offering of Shares is January 31, 1997 (the "Termination Date"). Prior to the Termination Date, all investor funds will promptly be placed in escrow with Norwest Bank Colorado, N.A., as escrow agent (the "Escrow Agent"), in an escrow account established for the benefit of the investors. Upon receipt of notice from the Escrow Agent that investors have affirmed purchase of at least the minimum number of Shares and deposited the requisite funds in the escrow account, the Company will deposit with the Depository Trust Company the Shares to be credited to the accounts of the investors and will collect the investor funds from the Escrow Agent. In the event that investor funds are not received in the amount necessary to satisfy the minimum requirements of this offering on or before the Termination Date, all funds deposited in the escrow account will promptly be returned to the investors, with interest. See "Plan of Distribution." (3) Before deducting expenses payable by the Company estimated at $450,000. EVEREN SECURITIES, INC. December , 1996 [URI LOGO] 3 IN CONNECTION WITH THIS OFFERING, THE PLACEMENT AGENT MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR BY THE PLACEMENT AGENT THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY AND THE PLACEMENT AGENT TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION OF THIS PROSPECTUS. IN THIS PROSPECTUS REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES DOLLARS, AND THE TERMS "UNITED STATES" AND "U.S." MEAN THE UNITED STATES OF AMERICA, ITS STATES, ITS TERRITORIES, ITS POSSESSIONS AND ALL AREAS SUBJECT TO ITS JURISDICTION. THE SHARES MAY NOT BE OFFERED OR SOLD IN THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES OR OTHERWISE IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO THE PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1995. THIS PROSPECTUS IS FOR DISTRIBUTION IN THE UNITED KINGDOM ONLY TO PERSONS WHO ARE OF A KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1996. IT MAY NOT BE COPIED OR DISTRIBUTED OR OTHERWISE MADE AVAILABLE BY ANY RECIPIENT IN THE UNITED KINGDOM WITHOUT THE EXPRESS CONSENT OF EVEREN SECURITIES, INC. LA DIFFUSION DE CE PROSPECTUS EST STRICTEMENT PERSONNELLE. CE PROSPECTUS NE PEUT ETRE UTILISE POUR LE PLACEMENT AUPRES D'AUTRES INVESTISSEURS. AUCUNE PUBLICITE N'A ETE FAITE SUR CE PRODUIT ET AUCUNE AUTORISATION N'A ETE DEMANDEE A LA COB. 2 4 INCORPORATION OF DOCUMENTS BY REFERENCE The following documents, which have been filed by the Company with the Commission, are hereby incorporated by reference into this Prospectus: (a) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, including the Company's Form 10-K/A dated May 21, 1996. (b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996. (c) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. (d) The Company's Form 8-K dated August 1, 1996. (e) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996, including the Company's Form 10-Q/A-1 dated December 13, 1996. (f) The Company's Form 8-K dated December 13, 1996. (g) The description of the Company's Common Stock contained in the Company's registration statement on Form 8-A (Registration No. 0-17171) filed with the Commission under the Exchange Act. All documents filed by the Company after the date of this Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the termination of the offering hereunder shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any or all of the documents incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents). Written requests for such copies should be directed to Thomas H. Ehrlich, Vice President and Chief Financial Officer, Uranium Resources, Inc., at the Company's principal executive offices located at 12750 Merit Drive, Suite #1020, Dallas, Texas 75251. Telephone requests may be directed to Mr. Ehrlich at (972) 387-7777. 3 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the financial statements and notes thereto incorporated herein by reference to the Company's reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Except for historical information contained in this Prospectus, the matters discussed herein contain forward-looking statements, including management's expectations regarding the Company's reserve base, timing of receipt of mining permits, production capacity of mining operations planned for properties in South Texas and New Mexico and planned dates for commencement of production at such properties. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from management's expectations. Key factors impacting current and future operations of the Company include the spot price of uranium, weather conditions, operating conditions at the Company's mining projects, government regulation of the mining industry and the nuclear power industry, the world-wide supply and demand of uranium, availability of capital, timely receipt of mining and other permits from regulatory agencies and other matters indicated in "Risk Factors." THE COMPANY The Company has been engaged since 1977 in the acquisition, exploration and development of properties for the mining of uranium (hereinafter sometimes referred to as "U(3) 0(8)") in the United States using the in situ leach ("ISL") mining process. The Company has two producing properties -- Kingsville Dome and Rosita -- both located in South Texas. The Company also has development properties in South Texas and New Mexico. The Company's strategy is to exploit its existing production base and technical expertise and to identify, acquire, permit and develop additional ISL amenable uranium properties that will allow the Company to be a significant uranium producer in the Western World. The Company is implementing its strategy through (i) resuming production at its existing production sites; (ii) making capital expenditures for property exploration, acquisition and development; (iii) permitting additional development sites, which are targeted to commence production during 1998; and (iv) reviewing opportunities to sell uranium outside the United States. After ceasing uranium production in the early 1990s because of depressed market prices, the Company resumed production at Rosita and Kingsville Dome in June 1995 and March 1996, respectively. During the period the Company was not producing uranium, it was able to purchase uranium to fulfill its existing contracts at a price lower than its costs of production. For the nine months ended September 30, 1996, the Company produced approximately 1.0 million pounds of uranium at an average cost of $11.37 per pound. This production enabled the Company to take advantage of the significant imbalance between the annual level of uranium production and consumption in the Western World and the recent rise in the spot market price for uranium which, at $14.90 per pound as of November 30, 1996, was up approximately 54% over the spot price of $9.65 per pound as of January 31, 1995. The Company estimates that for 1996 its uranium production will be approximately 20% of the total U.S. production and approximately 2% of the total Western World production. In June 1996, the Company acquired for $4 million (of which $1 million is recoverable against one-half of future royalties) a mineral lease on the Alta Mesa properties located in South Texas which is estimated by the Company to contain 6.2 million pounds in-place proven and probable uranium reserves (estimated 4.0 million pounds recoverable). In November 1996 the Company entered into a letter of intent with Santa Fe Pacific Gold Corporation ("Santa Fe") pursuant to which the Company would acquire for exploration and development potential certain uranium mineral interests covering approximately 500,000 acres in northwestern New Mexico in exchange for 1.2 million shares of the Company's Common Stock and a commitment to expend certain amounts on exploration. Approximately one-third of this acreage comprises uranium mineral rights and the remaining acreage comprises exploration rights with rights to purchase and develop any uranium mineral interests found. Included in the purchase is an existing royalty obligation from the Company to Santa Fe on certain properties currently under lease from Santa Fe. Consummation of the transaction is subject to approval of the Board of Directors of both companies, certain regulatory matters and the 4 6 preparation of definitive documentation. However, there can be no assurance that the parties will consummate this transaction. The Company has two development projects in South Texas, Vasquez and Alta Mesa, both targeted to commence production in 1998. The Company also has three development projects in two districts in New Mexico, the Churchrock district and the Crownpoint district. Churchrock is targeted to commence production in 1998. Permitting is in process at all such projects. Commencement of production at these properties is subject to timely permitting and the availability of capital. When Alta Mesa, Vasquez and Churchrock reach full production, the Company expects that, based on planned production rates, its total annual production capacity from these operations plus Kingsville Dome will approximate 4 million pounds. As of September 30, 1996, the Company had in-place proven and probable uranium reserves totaling approximately 74.0 million pounds (estimated 48.1 million pounds recoverable). The Company's estimates of reserves have been affirmed and verified by Douglas International, Inc. of Morrison, Colorado, independent geological consultants ("Douglas") who are experts in uranium mining, geology and ore reserve determination. The Company's present and potential customers are electric utilities that operate nuclear power plants. Currently all of the Company's customers are domestic utilities. Generally, the Company sells uranium to the utilities under long-term contracts. Most of these contracts provide for minimum prices with escalation clauses for inflation linked to various indices. The United States is the world's largest producer of nuclear-generated electricity. There are currently 109 nuclear units in the United States which generated approximately 22.5% of the country's total electricity in 1995. As of December 31, 1995, there were 363 nuclear power plants in the Western World, with 32 power plants being constructed in parts of the world other than the U.S. THE OFFERING
MINIMUM MAXIMUM --------------------- ---------------------------------- COMMON STOCK OFFERED............... 1,400,000 shares 1,700,000 shares COMMON STOCK OUTSTANDING AFTER THE OFFERING......................... 10,213,027 shares(1) 10,513,027 shares(1) The Company will use the net proceeds of the Offering for 1997 capital requirements related to the Company's uranium producing or development properties, the payment of certain USE OF PROCEEDS.................... obligations and working capital. See "Use of Proceeds." NASDAQ NATIONAL MARKET SYMBOL...... URIX
- --------------- (1) Based upon shares outstanding as of September 30, 1996. Does not include (i) 893,441 shares reserved for future issuance upon the exercise of currently outstanding options granted under the Company's Amended and Restated Employees' Stock Option Plan, Amended and Restated Directors Stock Option Plan and 1995 Stock Incentive Plan (collectively, the "Option Plans"), (ii) 350,000 shares reserved for future issuance upon the exercise of non-plan options (the "Non-Plan Options"), (iii) 1,052,000 shares reserved for future issuance upon the exercise of currently outstanding warrants, and (iv) 1,500,000 shares reserved for future issuance upon the conversion of the convertible debt. 5 7 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION The summary data presented below under the captions "Consolidated Statement of Operations Data" and "Consolidated Operating and Other Data" for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 are derived from the consolidated financial statements of the Company and its subsidiaries, which statements have been audited by Arthur Andersen LLP, independent public accountants. The summary data presented under the caption "Consolidated Balance Sheet Data" as of September 30, 1996 are derived from the unaudited financial statements of the Company and its subsidiaries. The summary data for the nine months ended September 30, 1996 and 1995 are derived from the unaudited quarterly financial statements and condensed notes thereto of the Company. This summary of historical financial information should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto incorporated herein by reference.
NINE MONTHS ENDED SEPTEMBER 30, ------------------- YEAR ENDED DECEMBER 31, (UNAUDITED) ------------------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 -------- ------- -------- -------- -------- -------- ------- (IN THOUSANDS, EXCEPT PER SHARE AND PER POUND AMOUNTS) CONSOLIDATED STATEMENT OF OPERATIONS DATA Uranium sales: Produced uranium.............. $ 13,361 $ 1,519 $ 7,195 $ 959 $ 1,341 $ 4,881 $10,234 Purchased uranium............. 5,479 11,504 14,634 16,375 11,881 12,943 7,421 Costs and expenses.............. (15,704) (9,652) (17,398) (13,466) (12,161) (12,334) (9,509) -------- ------- -------- -------- -------- -------- ------- Earnings from operations before corporate expenses............ 3,136 3,371 4,431 3,868 1,061 5,490 8,146 Corporate expenses.............. (2,259) (2,462) (3,496) (2,177) (1,903) (2,285) (2,694) -------- ------- -------- -------- -------- -------- ------- Earnings (loss) from operations........... 877 909 935 1,691 (842) 3,205 5,452 Other income (expense): Interest and other, net....... (256) (247) (324) 163 387 (394) (454) Loss on acceleration of uranium contract............ -- -- -- (349) -- -- -- Loss on termination of joint venture and transfer to shareholders................ -- (1,781) (1,781) -- -- -- -- -------- ------- -------- -------- -------- -------- ------- Income (loss) before income taxes......................... 621 (1,119) (1,170) 1,505 (455) 2,811 4,998 -------- ------- -------- -------- -------- -------- ------- Federal income tax (benefit).... 124 (224) (234) 300 (107) 408 929 -------- ------- -------- -------- -------- -------- ------- Net earnings (loss)............. $ 497 $ (895) $ (936) $ 1,205 $ (348) $ 2,403 $ 4,069 ========= ======== ========= ========= ========= ========= ======== Net earnings (loss) per common share: Primary....................... $ 0.05 $ (0.11) $ (0.12) $ 0.17 $ (0.05) $ 0.36 $ 0.59 ========= ======== ========= ========= ========= ========= ======== Fully diluted................. $ 0.05 $ (0.11) $ (0.12) $ 0.17 $ (0.05) $ 0.36 $ 0.59 ========= ======== ========= ========= ========= ========= ========
6 8
NINE MONTHS ENDED SEPTEMBER 30, ----------------- YEAR ENDED DECEMBER 31, (UNAUDITED) ---------------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ------- ------ ------ ------ ------ ------ ------ (IN THOUSANDS, EXCEPT PER SHARE AND PER POUND AMOUNTS) CONSOLIDATED OPERATING AND OTHER DATA Cash provided by operations............... $ 3,727 $1,690 $5,301 $5,080 $6,283 $9,186 $1,344 Cash provided by operations per share..... $ 0.37 $ 0.21 $ 0.65 $ 0.71 $ 0.95 $ 1.36 $ 0.18 Pounds of uranium produced................ 1,025 357 612 -- -- 80 757 Pounds of uranium purchased............... 439 370 660 1,329 510 750 614 Pounds of uranium delivered............... 1,358 906 1,633 1,081 753 1,070 919 Capital expenditures...................... $11,851 $2,113 $3,720 $3,234 $3,502 $2,769 $5,698 Average sales price per pound(1).......... $ 15.78 $16.57 $15.64 $16.03 $17.56 $16.66 $19.21 Average cost of produced pounds sold(2)... $ 10.93 $10.41 $10.28 $13.60 $12.96 $12.62 $ 8.61 Average cost of purchased pounds sold..... $ 9.46 $ 9.64 $ 9.41 $10.68 $10.88 $ 8.80 $ 9.66 Cash cost per produced pound(3)........... $ 7.82 $ 7.90 $ 7.11 N/A N/A $10.80 $ 8.19 Average cost per produced pound(2)........ $ 11.37 $10.68 $10.09 N/A N/A $13.68 $10.55 Average cost per purchased pound.......... $ 9.46 $10.12 $ 9.52 $10.07 $11.24 $ 9.35 $ 9.59
SEPTEMBER 30, 1996 -------------------------- (UNAUDITED) ACTUAL AS ADJUSTED(4) ------- -------------- (IN THOUSANDS) CONSOLIDATED BALANCE SHEET DATA Cash and cash equivalents................................................... $ 917 $ 6,522 Working capital............................................................. 1,560 7,165 Total assets................................................................ 57,811 63,416 Total liabilities........................................................... 26,809 21,959 Total debt(5)............................................................... 13,201 8,351 Total shareholders' equity.................................................. 31,002 41,456
- --------------- (1) Excludes sales of the Russian component of deliveries made subject to sales made under the matched sales amendment, as such deliveries are treated as "pass-through" sales. (2) Average cost per produced pound consists of all operating, depletion and depreciation and accrued restoration costs. (3) Cash cost per produced pound consists of all operating costs and wellfield development costs associated with the producing wellfields. (4) As adjusted to give effect to the minimum sale of 1,400,000 shares of Common Stock offered hereby at an assumed offering price of $8 3/8 per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds." (5) Includes current portion of long-term debt, long-term debt and notes payable. 7 9 RESERVES The following table sets forth the Company's total in-place proven and probable uranium reserves as of September 30, 1996. The reserves are based on an estimated 65% recovery factor, certain cut-off grades and a price of $16 per pound. These estimates of reserves have been affirmed and verified by Douglas International, Inc. of Morrison, Colorado, independent geological consultants ("Douglas"), who are experts in uranium mining, geology and ore reserve determination. See "Business -- Reserves" and "Experts."
IN-PLACE RESERVES AS RECOVERABLE OF RESERVES AS SEPTEMBER 30, 1996 OF PRODUCING (P)/ --------------------- SEPTEMBER 30, PROPERTIES DEVELOPMENT (D) PROVEN PROBABLE 1996 - ------------------------------------------- --------------- ------ -------- ------------- (AMOUNTS IN THOUSANDS OF POUNDS OF U(3) 0(8)) Texas Kingsville Dome.......................... P 1,117 3,001 2,677 Rosita................................... P 1,865 -- 1,212 Vasquez.................................. D 2,248 1,439 2,397 Alta Mesa................................ D 4,346 1,863 4,036 New Mexico Churchrock Section 8.............................. D 6,529 -- 4,244 Section 17............................. D 3,451 4,992 5,488 Mancos................................. D 4,164 -- 2,707 Crownpoint............................... D 30,758 8,201 25,323 ------ ------ ------ TOTALS............................ 54,478 19,496 48,083 ====== ====== ======
Unless indicated otherwise or the context otherwise requires (i) the references in the Prospectus to the "Company" refer to Uranium Resources, Inc. and each of its subsidiaries; (ii) references to the "Common Stock" refer to the Common Stock, par value $0.001 per share, of the Company; and (iii) reference to the "Offering" refers to the Shares being offered hereby. Terms not defined in the Summary are defined elsewhere herein or in the "Glossary of Certain Terms" appearing at the end of this Prospectus. As used herein, "Western World" is a uranium industry term referring to the countries from which statistics are available for the purpose of compilation of data relating to the industry, and generally refers to those countries outside the Republics of the Commonwealth of Independent States (the "CIS"), Eastern Europe and the Peoples Republic of China. 8 10 RISK FACTORS Except for historical information contained in this Prospectus, the matters discussed herein contain forward-looking statements, including management's expectations regarding the Company's reserve base, timing of receipt of mining permits, production capacity of mining operations planned for properties in South Texas and New Mexico and planned dates for commencement of production at such properties. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from management's expectations. Key factors impacting current and future operations of the Company include the factors discussed below. Prospective investors should consider carefully the following factors in addition to the other information contained in this Prospectus before making an investment in the Common Stock offered hereby. CONTINUING SIGNIFICANT CAPITAL REQUIREMENTS An ISL mining operation requires a substantial amount of capital prior to the commencement of, and in connection with, production of uranium, including costs related to acquiring the rights to mine uranium, securing regulatory permits and licenses, exploration and definitional drilling to determine the underground configuration of the ore body, designing and constructing the uranium processing plant, drilling and developing in order to establish the infrastructure for the production wells for each wellfield and complying with financial surety requirements established by various regulatory agencies regarding the future restoration and reclamation activities for each property. Capital expenditures for the Company's two producing properties from October 1, 1996 through the end of 1997 are expected to be $13.3 million and $3.6 million during 1998. Capital expenditures (excluding bonding requirements) for the Company's development properties in South Texas are expected to be $7.3 million from October 1, 1996 through the end of 1997 and $10.2 million during 1998. Capital costs (excluding bonding requirements) for the Company's Churchrock property in New Mexico are expected to be $12.5 million from October 1, 1996 through the end of 1997 and $7.3 million during 1998. The Company expects to fund some of these capital requirements from cash flow from operations and the proceeds of this Offering. However, the majority of the capital requirements at these projects for 1997 and 1998 will require additional sources of capital. There can be no assurance that the Company will raise sufficient capital to fund these capital requirements. See "Business -- South Texas Producing Properties," "-- South Texas Development Properties" and "-- New Mexico Development Properties." POTENTIAL ADVERSE EFFECT OF FEDERAL AND STATE REGULATIONS The development and production of uranium is subject to extensive governmental regulations that materially affect the economics of the Company's operations and the timing of project development. To produce uranium, the Company must secure and maintain multiple permits, obtain adequate water rights and comply with extensive federal, state and potential tribal regulations for environmental protection, including regulations relating to air and water quality, the prevention of groundwater contamination, the reclamation and restoration of wellfield aquifers and the treatment, transportation and disposal of liquid and/or byproduct material and solid wastes generated by the Company's uranium mining and processing activities. To date, the Company's operations have not been materially and adversely affected by the inability to obtain or maintain required permits or water rights, or by any groundwater contamination or the disposal of waste or byproduct material. However, should the Company be unable to obtain or maintain permits or water rights for development of its properties or otherwise fail to adequately handle future environmental issues, the Company's operations could be materially and adversely affected by expenditures or delays in the Company's ability to initiate or continue production at its properties. The Company must obtain all necessary permits from the appropriate governmental agency before it can commence production at any of its development properties. The Company's future production is highly dependent on its ability to bring these development properties into production. Applications for permitting of certain of these properties have been filed. There can be no assurances that all the necessary permits will be obtained or that such permits will be obtained in a timely manner. Any significant delays in obtaining the 9 11 necessary permits could have a material adverse effect upon the Company and its developmental plans for these properties. See "Business -- The ISL Mining Process," "-- Environmental Considerations and Permitting; Water Rights," "-- South Texas Producing Properties," "-- South Texas Development Properties" and "-- New Mexico Development Properties." The Company has expended significant resources, both financial and managerial, to comply with environmental protection laws, regulations and permitting requirements and anticipates that it will be required to continue to do so in the future. Although the Company believes its producing properties comply in all material respects with all relevant permits, licenses and regulations pertaining to worker health and safety as well as those pertaining to the environment, the historical trend toward stricter environmental regulation may continue. The uranium industry is subject to not only the worker health and safety and environmental risks associated with all mining businesses, but also to additional risks uniquely associated with uranium mining and processing. The possibility of more stringent regulations exists in the areas of worker health and safety, the disposal of wastes and byproduct material, the decommissioning, decontamination and reclamation of mining, milling, refining and conversion sites, and other environmental matters, each of which could have a material adverse effect on the costs or the viability of a particular project. The Company is required to provide financial surety to state environmental agencies for plugging wells, groundwater restoration and site decommissioning, decontamination and reclamation. The Company estimates that its current decommissioning, decontamination and reclamation costs are approximately $3.7 million, which amount the Company has accrued as a liability on its financial statements. The Company satisfied its financial surety requirements imposed by environmental regulators with surety bonds totalling approximately $5.6 million at December 2, 1996, one-half of which is collateralized by the Company with cash. The Company anticipates that its future financial surety requirements will increase significantly as production from the Company's producing sites continues and as future development and production occurs at additional sites in Texas and New Mexico. The amount of the financial surety for each producing property is subject to annual review and revision by regulators. There can be no assurance that the Company will have sufficient capital to meet these future financial surety obligations. See "Business -- Reclamation Costs and Bonding Requirements." RESERVE ESTIMATES While the uranium reserve estimates of the Company have been affirmed and verified by Douglas, such uranium reserve estimates are necessarily imprecise and depend to some extent on statistical inferences drawn from limited drilling, which may prove unreliable; and there can be no assurance that the indicated level of recoveries will be realized. Should the Company encounter mineralization or formations at any of its mines or projects different from those predicted by drilling, sampling and similar examinations, uranium reserve estimates may have to be adjusted and mining plans may have to be altered in a way that could adversely affect the Company's operations. Moreover, short-term operating factors relating to the uranium reserves, such as the need for sequential development of ore bodies and the processing of new or different uranium grades, may adversely affect the Company's profitability in any particular accounting period. See "Business -- Reserves." NEED TO REPLACE RESERVES The Company's producing uranium mines are, in general, characterized by a series of individual wellfields that produce at differing declining production rates. Each wellfield's production decline rate depends on ore reserve characteristics, and, in the case of the Company, varies from a steep decline rate of six months, to a relatively slow production decline rate of eighteen months. The Company's future uranium reserves and production, and therefore cash flow and income, are highly dependent upon the Company's level of success in exploiting its current reserves and acquiring or developing additional reserves. Reserves at the Company's currently producing sites are expected to be depleted in 1999, although there is the potential for developing additional wellfields at Kingsville Dome. There can be no assurance that the Company's development properties will be placed into production or that the Company will be able to continue to find and develop or acquire additional reserves. 10 12 COMPETITION There is global competition in the uranium industry for mineral properties, capital, customers and the employment and retention of qualified personnel. In the production and marketing of uranium concentrates there are approximately 15 major uranium-producing entities, some of which are government controlled and some of which are significantly larger and better capitalized than the Company. The Company competes with larger producers in Canada, Australia and Africa, as well as with other U.S. ISL producers of uranium and other producers that recover uranium as a by-product of other mineral recovery processes. The Company also expects to compete with uranium recovered from the de-enrichment of highly enriched uranium obtained from the dismantlement of U.S. and Russian nuclear weapons and sold in the market by the United States Enrichment Corporation and/or the United States Department of Energy, as well as from imports to the United States of uranium from the CIS. See "Business -- Uranium Prices," "The Uranium Industry -- Competition," and "-- Supply and Demand." The amount of uranium produced by competitors or imported into the United States may have a material impact on uranium prices. URANIUM PRICE VOLATILITY The Company's earnings are dependent on the price of uranium, which is determined primarily by global supply and demand and by the relationship of that price to the Company's costs of production. Historically, uranium prices have been subject to fluctuation, and the price of uranium has been and will continue to be affected by numerous factors beyond the Company's control, including the demand for nuclear power, political and economic conditions, and governmental legislation in uranium producing and consuming countries and production levels and costs of production of other producing companies. Certain of the Company's current long- and medium-term contracts have pricing mechanisms related to spot market prices. In recent years, prior to 1996, imports of uranium, including imports of uranium from the CIS, have resulted in significant downward pressure on uranium prices. See "The Uranium Industry -- Supply and Demand." The spot market price for uranium has strengthened appreciably since January 1995. Prices have risen from $9.65 per pound as of January 31, 1995 to $16.50 per pound as of May 31, 1996. The spot price as of November 30, 1996 was $14.90 per pound. While the current spot prices of uranium have increased to levels which exceed the Company's cost of uranium production, there is no assurance that such price level will continue to rise or remain at the current level. See "The Uranium Industry -- Uranium Prices and Competition." URANIUM CONTRACTS PROFITABILITY As of September 30, 1996, the Company had contracts for delivery of an estimated 4.7 million pounds of uranium (exclusive of 270,000 pounds of Russian uranium sales made pursuant to the matched sales program) to domestic utilities from October 1, 1996 through 2002. Profitability to the Company on these deliveries will depend on the cost of producing uranium at the Company's mining properties, the Company's ability to produce uranium to meet its sales commitments and the spot market price of uranium. LIMITED MARKET; DEPENDENCE ON A FEW CUSTOMERS The Company's primary source of revenue is derived from its sale of uranium to U.S. nuclear power plants. Uranium's only current commercial use is as fuel for nuclear powered reactors. Accordingly, the Company's present and potential customers are electric utilities that operate nuclear power plants. The United States is the world's largest producer of nuclear-generated electricity. There are currently 109 nuclear units in the U.S. which generated approximately 22.5% of the country's total electricity in 1995. Currently, there are no new nuclear power plants under construction in the U.S. As of December 31, 1995, there were 363 nuclear power plants in the Western World, with 32 power plants being constructed in parts of the world other than the U.S. There can be no assurance that the Company can continue to compete successfully for such customers. 11 13 A significant portion of the Company's contracted sales of uranium from October 1, 1996 through December 31, 2002 are represented by nine long-term contracts with eight different customers, three of which represent 26%, 15% and 13% of sales for the nine months ended September 30, 1996 and four of which represented 23%, 14%, 10% and 10% of sales for the year ended December 31, 1995. The loss of any of these customers or curtailment of purchases by such customers could have a material adverse effect on the Company's financial condition and results of operations. COMPETITION FROM ALTERNATIVE ENERGY SOURCES AND PUBLIC ACCEPTANCE OF NUCLEAR ENERGY Nuclear energy competes with other sources of energy, including oil and gas, coal and hydro-electricity. These alternative energy sources are to some extent interchangeable with nuclear energy, particularly over the longer term. Lower prices of oil, gas, coal and hydro-electricity for an extended period of time, as well as the possibility of developing in the future other low cost sources for energy, have made and could continue to make nuclear power a less attractive fuel source for the generation of electricity, thus resulting in lower demand for uranium. Furthermore, the growth of the uranium and nuclear power industry beyond or maintenance at its current level will depend upon continued and increased acceptance of nuclear technology as a means of generating electricity. Because of unique political, technological and environmental factors that affect the nuclear industry, the industry is subject to public opinion risks which have and could continue to have an adverse impact on the demand for nuclear power and increase the regulation of the nuclear power industry. POTENTIAL CLAIMS ARISING FROM THE BENTON BANKRUPTCY During 1994, the Company encountered liquidity problems that resulted in the Company entering into certain transactions with companies controlled by Oren L. Benton (the "Benton Companies"). On February 23, 1995, Benton and various of the Benton Companies filed for protection under Chapter 11 of the Federal Bankruptcy Code (the "Benton Bankruptcy"). The Benton Bankruptcy could cause a review of certain transactions entered into by the Company with the Benton Companies. Such a review could potentially result in claims against the Company that could have a material adverse affect on the Company. The Company is unable to assess what adverse consequences, if any, might result from such review. QUARTERLY FLUCTUATIONS IN EARNINGS Revenues, earnings from operations and net income for the Company can fluctuate significantly on a quarter to quarter basis during the year because of the timing of deliveries requested by its utility customers. Accordingly, operating results for any quarter or year-to-date period are not necessarily comparable and may not be indicative of the results which may be expected for future quarters or the entire year. POTENTIAL ADVERSE IMPACT OF LOSS OF KEY PERSONNEL Certain of the Company's employees have significant experience in the uranium ISL mining industry. The number of individuals with ISL experience is small. The continued success of the Company is dependent upon the efforts of these key individuals, and the loss of any one or more of such persons' services could have a material adverse effect on the Company's business operations and prospects. The Company has not entered into employment contracts with or purchased key man life insurance for any of these individuals. MINING RISKS AND INSURANCE The business of uranium mining generally is subject to a number of risks and hazards, including environmental hazards, industrial accidents, flooding, interruptions due to weather conditions and other acts of nature. Such risks could result in damage to or destruction of the Company's wellfield infrastructure and production facilities, as well as to adjacent properties, personal injury, environmental damage and processing and production delays, causing the Company monetary losses and possible legal liability. While the Company maintains, and intends to continue to maintain, liability, property damage and other insurance consistent with 12 14 industry practice, no assurance can be given that such insurance will continue to be available, be available at economically acceptable premiums or be adequate to cover any resulting liability. LIMITED PUBLIC FLOAT AND TRADING VOLUME OF COMMON STOCK As of September 30, 1996, approximately 78.3% (6,899,518 shares) of the Company's outstanding Common Stock was freely transferable without restriction in the United States. For the nine months ended September 30, 1996, the average weekly volume of trading of the Common Stock on the Nasdaq National Market was 85,666 shares. The thinly traded nature of the Company's Common Stock could result in significant adverse fluctuations in the per share price if large blocks of Common Stock were offered for sale in the trading markets. CONTROL BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT Lindner Growth Fund, the Lindner Dividend Fund, and Lindner Investments (on behalf of Lindner Bulwark Fund ("Bulwark")) (collectively, the "Lindner Group") are separate series of Lindner Investments, a Massachusetts business trust that is a registered investment company, and may be deemed collectively to be a controlling stockholder and an affiliate of the Company. The Lindner Group is managed by Ryback Management Corporation ("Ryback"), an investment adviser. Ryback has discretionary authority over the shares owned beneficially by the Lindner Group, including the power to vote and dispose of such shares. Ryback also manages the accounts of third parties other than the Lindner Group who own beneficially 250,000 outstanding shares of the Company's common stock, over which Ryback has discretionary authority to vote and dispose of such shares. The Lindner Group owns an aggregate of 1,650,525 shares of the outstanding Common Stock or 18.7% of the outstanding Common Stock (16.2% after giving effect to the sale of the minimum number of Shares pursuant to this Offering) and has the right to acquire an additional 1,500,000 shares upon conversion of certain convertible debt and 1,000,000 shares upon the exercise of certain outstanding warrants. Assuming the convertible debt is fully converted and the warrants are fully exercised, the Lindner Group would own 4,150,525 shares or 36.7% of the outstanding Common Stock (32.6% after giving effect to the sale of the minimum number of Shares pursuant to this Offering). In addition, the Lindner Group has the right to nominate two individuals for election to the Company's Board of Directors. Executive officers and directors of the Company own approximately 5.5% of the outstanding Common Stock (4.8% after giving effect to the sale of the minimum number of Shares pursuant to this Offering). The Company's Option Plans provide for the acceleration of the vesting and exercisability of stock options thereunder under certain circumstances, including in the event of a change in control of the Company. In the event all such options were exercised by the Company's executive officers and directors, the Company's executive officers and directors would beneficially own approximately 16.2% of the Common Stock (14.2% after giving effect to the sale of the minimum number of Shares pursuant to this Offering). Assuming the conversion of the convertible debt and the exercise of all outstanding stock options and warrants, the Company's executive officers and directors, together with the Lindner Group, would beneficially own 46.3% of the Common Stock (41.6% after giving effect to the sale of the minimum number of Shares pursuant to this Offering) and, therefore, could exercise substantial influence over the Company's affairs, which may have an anti-takeover effect. If the acquisition of properties from Santa Fe is consummated, Santa Fe will own 1,200,000 shares of Common Stock or 10.5% of the outstanding Common Stock after giving effect to the sale of the minimum number of Shares pursuant to the Offering. Such ownership by the Company's principal shareholders, executive officers and directors may have the effect of delaying, deferring, preventing or facilitating a change in control of the Company. DELAWARE ANTI-TAKEOVER LAWS The Company is subject to Delaware statutes regulating business combinations and restricting voting rights of certain persons acquiring shares of the Company, which may hinder or delay a change of control in 13 15 the Company and may have an anti-takeover effect. Such statutes may have the effect of delaying or making a change of the control of the Company more difficult to effect. See "Description of Capital Stock." SHARES ELIGIBLE FOR FUTURE SALE The sale, or availability for sale, of substantial amounts of Common Stock in the public market subsequent to this Offering may adversely affect the prevailing market price of Common Stock and may impair the Company's ability to raise additional capital by the sale of its equity securities. The Company will have 10,213,027 shares of Common Stock outstanding immediately following the Offering (assuming the sale of the minimum number of Shares pursuant to the Offering), of which 486,850 shares will be held by executive officers and directors of the Company. Approximately 8,299,518 shares will be freely transferable without restriction in the United States. The Company believes that the balance of such shares (approximately 1,913,509 shares) will be freely transferable without restriction in the United States subject to compliance with the provisions of Rule 144 under the Securities Act. In addition, approximately 893,441 shares of Common Stock are reserved for issuance upon the exercise of outstanding options granted under the Company's Option Plans; 350,000 shares of Common Stock may be issued upon the exercise of the Non-Plan Options; 1,052,000 shares of Common Stock may be issued upon the exercise of currently outstanding warrants; and 1,500,000 shares of Common Stock may be issued upon the conversion of the convertible debt. The resale of all 3,795,441 of the foregoing shares are covered by current registration statements or are subject to the rights of the holders of the warrants or options to demand registration upon the exercise of such warrants or options. The holders of the convertible debt and of the warrants covering 1,000,000 shares also have piggyback registration rights. The Company's directors and executive officers, Ryback and the Lindner Group have agreed that for a period of 90 days from the date of this Prospectus they will not, without the prior written consent of EVEREN Securities, Inc., directly or indirectly offer for sale, sell, contract to sell or otherwise dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock. 14 16 USE OF PROCEEDS The net proceeds to the Company from the sale of the Shares offered hereby are estimated to be approximately $10.5 million assuming the sale of the minimum number of Shares in this Offering and $12.8 million assuming the sale of the maximum number of Shares in this Offering, based upon an assumed public offering price of $8 3/8 per Share, after deducting the Placement Agent's fee of 7% and estimated expenses of the Offering. The Company estimates that it will use the net proceeds from the Offering to:
MINIMUM MAXIMUM ------- ------- (IN THOUSANDS) Capital expenditures(1)..................................... $ 2,224 $ 4,561 Repay note.................................................. 4,000 4,000 Pay production payment obligation........................... 730 730 Working capital............................................. 3,500 3,500 ------- ------- Net proceeds...................................... $10,454 $12,791 ======= =======
(1) Amounts for capital expenditures will be allocated among the Company's producing and development properties based upon the timing of the issuance of regulatory permits, and are anticipated to be expended in 1997. Pending such uses, the Company will invest the net proceeds of the Offering in commercial paper, bankers' acceptances and other short-term, investment-grade securities. Although the estimates set forth above represent the Company's best estimate of the intended use of proceeds from the Offering, the timing and amount of funds required for specific uses by the Company cannot be precisely determined. The use of proceeds from the Offering is subject to change based on competitive conditions, unanticipated costs of expansion and unexpected requirements in developing and operating the Company's projects. The rate of the Company's progress in developing its projects, the timing of regulatory action, the availability of alternate methods of financing and other factors will affect the allocation and timing of the Company's use of proceeds from the Offering. 15 17 CAPITALIZATION The following table sets forth the actual consolidated capitalization of the Company at September 30, 1996 and as adjusted to give effect to the sale of the minimum number and the maximum number of Shares offered hereby and the anticipated application by the Company of the estimated net proceeds therefrom, based on an assumed public offering price of $8 3/8 per share. This table should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto and other financial information incorporated herein by reference.
SEPTEMBER 30, 1996 ----------------------------- AS ADJUSTED(1) ------------------ ACTUAL MINIMUM MAXIMUM ------- ------- ------- (IN THOUSANDS) Long-term debt (including current portion)............................ $ 7,257 $ 2,527 $ 2,527 Short-term notes...................................................... 5,944 1,944 1,944 Shareholders' equity: Common stock, $0.001 par value per share, 25,000,000 shares authorized 8,813,027 shares issued and outstanding, 10,213,027 and 10,513,027 shares issued and outstanding, as adjusted for the minimum and maximum respectively(2)............................... 9 10 11 Paid-in capital....................................................... 18,259 28,712 31,048 Retained earnings..................................................... 12,743 12,743 12,743 Less: Treasury stock (152,500 shares), at cost........................ (9) (9) (9) ------- ------- ------- Total shareholders' equity................................... 31,002 41,456 43,793 ------- ------- ------- Total capitalization..................................... $44,203 $45,927 $48,264 ======= ======= =======
- --------------- (1) Assumes net proceeds of $10.5 million if the minimum number of Shares are sold in this Offering and $12.8 million if the maximum number of Shares are sold in this Offering, after deducting the Placement Agent's fee of 7% and offering expenses estimated at $450,000. (2) Outstanding shares exclude (i) 893,441 shares reserved for future issuance upon the exercise of currently outstanding options granted under the Company's Option Plans, (ii) 350,000 shares reserved for future issuance upon the exercise of the Non-Plan Options, (iii) 1,052,000 shares reserved for future issuance upon the exercise of currently outstanding warrants, and (iv) 1,500,000 shares reserved for future issuance upon the conversion of the convertible debt. See "Description of Capital Stock" and "Risk Factors -- Shares Eligible for Future Sale." 16 18 THE URANIUM INDUSTRY GENERAL The only significant commercial use for uranium is to fuel nuclear power plants for the generation of electricity. According to the Uranium Institute ("UI"), nuclear plants generated approximately 17% of the world's electricity in 1995, up from less than 2% in 1970. According to the Uranium Institute, through the year 2000 nuclear generating capacity is expected to grow at 1% per annum, primarily as a result of new reactor construction outside the United States and increased efficiencies of existing reactors. As of December 31, 1995 there were 363 nuclear reactors operating in the Western World, 109 of which are in the United States, and another 32 under construction outside of the United States. Uranium consumption by Western World commercial reactors increased from about 60 million pounds in 1981 to approximately 129 million pounds in 1995. Western World consumption is estimated to reach approximately 135 to 150 million pounds by 2001. SUPPLY AND DEMAND 1995 was a transition year in the uranium market place, signaling the end of a ten year period of significantly depressed product prices. There is no single event that caused this long-anticipated correction. It is the result of numerous factors working in concert over a ten-year period that finally re-established the move toward market equilibrium. From the early 1970's through 1980, the Western World uranium industry was characterized by increasing uranium production fueled by overly optimistic projections of nuclear power growth. From 1970 to 1985, production exceeded consumption by approximately 500 million pounds. By the end of 1985 enough inventory had been amassed to fuel Western World reactor needs for over five years. In response, sales of excess inventory followed and prices plummeted from highs above $40 per pound in 1979 to below $8 per pound in 1992. As prices fell, Western World production declined dramatically from a high of 115 million pounds in 1980 to a low of 57 million pounds by 1994. Since 1985, consumption of uranium in the Western World has exceeded Western World production by over 400 million pounds. In 1995, consumption of uranium in the Western World was 129 million pounds, nearly double the production of 66 million pounds by Western World producers. Accordingly, by the end of 1995, excess inventory levels in the Western World (inventory in excess of preferred levels) had been reduced to less than two years of forward reactor requirements, and excess inventories in the U.S. had been reduced to less than one year of projected forward requirements. Countering the drawdown of Western World inventories and contributing directly to the downturn of market prices was the importation, starting in 1989, of uranium from the CIS, and to a lesser extent, from Eastern Europe and mainland China. As the result of an anti-dumping suit in 1991 by the U.S. ("CIS Anti-dumping Suit") against some republics of the CIS, suspension agreements were signed with six CIS republics (Russia, Ukraine, Kazakhstan, Uzbekistan, Kyrgzstan and Tajikistan) in October 1992, which applied price related volume quotas to CIS uranium permitted to be imported into the U.S. The Russian Suspension Agreement was amended in March 1994 allowing for up to 43 million pounds of Russian uranium to be imported into the U.S. over the 10 years beginning March 1994, but only if it is matched with an equal volume of new U.S. production. Based on U.S. consumption for the 1994-2003 period (as reported or projected by the Department of Energy), the matched volumes could account for up to 18% of the supply to the U.S. market during this period. In 1995 the Republics of Kazakhstan and Uzbekistan concluded negotiations to amend their respective suspension agreements. Both amendments lowered initial prices relating to their respective import quotas allowing imports to occur. Additionally, the amendments require that uranium mined in those Republics and enriched in another country for importation in the U.S. will count against their respective quotas. The Uzbekistan amendment replaces the price-tied quota system with one based upon U.S. production rates after October 1997. As U.S. rates increase, additional imports from Uzbekistan are allowed. 17 19 Although these amendments to the suspension agreements may increase the supply of uranium to the U.S. market, they provide increased predictability concerning CIS imports into the U.S. Due to declining production levels in the CIS republics, uranium from these sources has recently been difficult to obtain. Consequently, the market impact of CIS primary production may be diminishing. In January 1994, the U.S. and Russia entered into an agreement (the "Russian HEU Agreement") to convert highly enriched uranium ("HEU"), derived from dismantling nuclear weapons, into low enriched uranium ("LEU") suitable for use in nuclear power plants. At a projected maximum conversion rate for HEU and LEU, approximately 24 million pounds of uranium will be available to Western World markets, meeting up to 18% of annual requirements by 2001. In 1996 the U.S. Congress passed legislation in compliance with the suspension agreements which allows the converted HEU material to be sold in the U.S. marketplace at an annual rate not to exceed 2 million pounds in 1998, increasing gradually to 20 million pounds in 2009. At this maximum rate, HEU material could supply approximately 40% of annual U.S. reactor requirements projected for 2009. In addition, an uncertain amount of HEU material is allowed to be used in the U.S. for the overfeeding of enrichment facilities and as a source of Russian uranium for matching sales. Industry analysts expect annual Western World consumption to increase to between 135 and 150 million pounds by 2001. The Company estimates that between 30 and 40 million pounds of this demand could be filled by a combination of government stockpiles (including converted Russian and U.S. HEU) and imports from CIS republics and former East Bloc countries. To achieve market equilibrium by 2001 primary production in the Western World will need to supply between 95 and 120 million pounds on an annual basis subject to some adjustment for any remaining inventory drawdown and limited uranium reprocessing. Production from existing facilities in the Western World, however, is projected to decline from current levels to approximately 57 million pounds by 2001 as reserves are depleted. New production therefore will have to be brought online to fill a potential annual gap of between 38 and 63 million pounds. While current price levels may sustain 1995 production levels, the Company believes that higher prices will be needed to support the required investment in new higher cost production as lower cost production reserves are depleted. 18 20 The following table shows U.S. production and Western World production and consumption for the years presented. PRODUCTION AND CONSUMPTION OF U(3) O(8)(1) (WESTERN WORLD COUNTRIES) (AMOUNTS IN MILLIONS OF POUNDS OF U(3) 0(8))
TOTAL WESTERN TOTAL WESTERN TOTAL U.S. TOTAL U.S. WORLD WORLD YEAR PRODUCTION CONSUMPTION PRODUCTION CONSUMPTION - ------------------------------------------------ ---------- ----------- ---------- ------------- 1979............................................ 37.5 20.5 99.7 46.6 1980............................................ 43.7 18.8 115.0 41.0 1981............................................ 38.5 24.1 114.9 59.9 1982............................................ 26.9 24.3 107.8 69.8 1983............................................ 21.2 28.7 96.2 76.6 1984............................................ 14.9 27.0 101.0 78.4 1985............................................ 11.3 33.7 90.7 91.1 1986............................................ 13.5 34.9 96.7 97.9 1987............................................ 13.0 33.7 92.2 93.8 1988............................................ 13.1 39.9 95.5 108.2 1989............................................ 13.8 38.0 89.0 104.3 1990............................................ 8.9 44.2 73.8 114.0 1991............................................ 8.0 44.8 70.0 128.4 1992............................................ 5.6 45.2 60.9 123.3 1993............................................ 3.1 44.2 57.2 130.8 1994............................................ 3.4 40.4 57.8 135.7 1995............................................ 6.0 51.1 66.0 128.6 1996 (est.)..................................... 7.2 45.3 72.9 134.9-143.1
- --------------- (1) Source: Industry -- various publications of Department of Energy/Energy Information Administration ("DOE/EIA"), Trade Tech, UxCo and the Uranium Institute. URANIUM PRICES Spot prices reflect the price at which uranium may be purchased for delivery within one year. Historically, spot prices have been more volatile than long-term contract prices, increasing from $6.00 per pound in 1973 to $43.00 per pound in 1978, then declining to a low of $7.25 per pound in October 1991. The spot price per pound as of November 30, 1996 was $14.90. 19 21 The following graph shows spot prices per pound from 1978 to November 30, 1996, as reported by Trade Tech. AVERAGE ANNUAL SPOT PRICE PER POUND OF URANIUM
1996 SPOT PRICE REFLECTS THE AVERAGE THROUGH MEASUREMENT PERIOD NOVEMBER 30, (FISCAL YEAR COVERED) 1996 --------------------- ----------- 1978 43.23 1979 42.57 1980 31.79 1981 24.19 1982 19.90 1983 22.98 1984 17.27 1985 15.60 1986 17.00 1987 16.78 1988 14.55 1989 10.00 1990 9.76 1991 8.70 1992 8.53 1993 9.98 1994 9.33 1995 11.46 1996 15.66
- --------------- (1) All prices beginning in 1993 represent the nonrestricted origin U(3)O(8) deliveries available to U.S. utilities. Trade Tech began reporting a two-tier price structure soon after the United States and certain Republics of the CIS agreed to import restrictions on uranium produced. The foregoing prices reflect those prices available to U.S. utility consumers. COMPETITION The Company markets uranium to utilities in direct competition with supplies available from various sources worldwide. The Company competes primarily on the basis of price. The Company estimates that for 1996 its uranium production will be approximately 20% of the total U.S. production and approximately 2% of the total Western World production. According to the Uranium Institute, in 1995, six companies, Cameco Corporation, Compagnie Generales des Matieres Nucleaires, Energy Resources of Australia Ltd., the RTZ Corporation PLC, Uranerzbergbau-GmbH and WMC Limited, produced almost 70% of total Western World output. Virtually all of Western World production was from only eight nations: Canada, Niger, Australia, Namibia, South Africa, United States, France and Gabon. In 1989 the CIS and mainland China began to supply significant quantities of uranium annually into Western World markets. 20 22 BUSINESS GENERAL Uranium Resources, Inc., a Delaware corporation (the "Company"), was formed in 1977 to acquire, explore and develop properties for the mining of uranium in the United States using the ISL process. The Company is recognized as a leader in the field of ISL mining. In the ISL process, groundwater fortified with oxidizing agents is pumped into the ore body causing the uranium contained in the ore to dissolve. The resulting solution is pumped to the surface where it is further processed to a dried form of uranium which is shipped to conversion facilities for sale to the Company's customers. The ISL process is generally a more cost effective and environmentally benign mining method than conventional mining techniques. From March 1988 until September 1990 the Company produced a total of approximately 1.5 million pounds of uranium from its Kingsville Dome property in South Texas, and from October 1990 through March 1992 it produced a total of approximately 1.1 million pounds of uranium from its Rosita property also located in South Texas. The Kingsville Dome property was shut-in in September 1990 and the Rosita property in March 1992 due to the decline in the uranium spot market price to below the Company's production costs. Generally, the Company sells uranium to electric utilities under long-term contracts that provide for minimum prices which escalate with inflation. See "-- Marketing Strategy/Uranium Sales Contracts." From 1988 through March 1992 the Company's production of uranium from the Kingsville Dome and Rosita facilities provided a portion of the uranium inventory required for such sales while these sites were producing. The Company has also purchased a significant amount of uranium through a combination of long-term and spot contracts to satisfy its obligations under such contracts. From 1993 through June 1995 such uranium purchases comprised the major source for the Company's uranium deliveries. In anticipation of the firming and increase in the spot price of uranium, in mid 1994 the Company began plans for the resumption of production at its Rosita and Kingsville Dome properties. The spot price of uranium increased from $9.25 per pound as of July 31, 1994, to $11.80 per pound as of May 31, 1995. In June 1995 production was recommenced at the Rosita property and preproduction activities were begun at the Kingsville Dome property with production established in March 1996. Since the reestablishment of production and through September 1996 the Company has produced approximately 1.0 million pounds from Rosita and 590,000 pounds from Kingsville Dome at average production costs of $10.40 and $11.80 per pound, respectively. These production and cost levels establish the Company as the largest and one of the lowest cost producers of uranium concentrates in the United States. It is the only publicly-owned uranium production company in the United States whose activities exclusively involve the commercial ISL production of uranium. As of September 30, 1996, the Company had 157 employees, including its professional staff consisting of ten geologists, six engineers, one chemist, two landmen and two certified public accountants. To support its production, exploration and permitting activities, the Company maintains regional offices in Corpus Christi, Texas and in Albuquerque, New Mexico, and field offices at the Kingsville Dome site, the Rosita site and in Crownpoint, New Mexico. BUSINESS STRATEGY During 1995, the Company developed and began the implementation of a multi-phase strategy to exploit its existing production base and technical expertise and to identify, acquire, permit and develop additional ISL amenable uranium properties that will allow the Company to be a significant uranium producer in the Western World. The Company is implementing its strategy through (i) resuming production at its existing production sites; (ii) making capital expenditures for property exploration, acquisition and development; (iii) permitting additional development sites, which are targeted to commence production during 1998; and (iv) reviewing opportunities to sell uranium outside the United States. 21 23 After ceasing uranium production in the early 1990s because of depressed market prices, the Company resumed production at Rosita and Kingsville Dome in June 1995 and March 1996, respectively. During the period the Company was not producing uranium, it was able to purchase uranium to fulfill its existing contracts at a price lower than its cost of production. For the nine months ended September 30, 1996, the Company produced approximately 1.0 million pounds of uranium at an average cost of $11.37 per pound. This production enabled the Company to take advantage of the significant imbalance between the annual level of uranium production and consumption in the Western World and the recent rise in the spot market price for uranium which at $14.90 per pound as of November 30, 1996 was up approximately 54% over the spot price of $9.65 per pound as of January 31, 1995. The Company estimates that for 1996, its uranium production will be approximately 20% of the total U.S. production and approximately 2% of the total Western World production. In June 1996, the Company acquired for $4 million (of which $1 million is recoverable against one-half of future royalties) a mineral lease on the Alta Mesa properties located in South Texas which are estimated by the Company to contain 6.2 million pounds of in-place proven and probable uranium reserves (estimated 4.0 million pounds recoverable). In November 1996 the Company entered into a letter of intent with Santa Fe Pacific Gold Corporation ("Santa Fe") pursuant to which the Company would acquire for exploration and development potential certain uranium mineral interests covering approximately 500,000 acres in northwestern New Mexico in exchange for 1.2 million shares of the Company's Common Stock and a commitment to expend certain amounts on exploration. Approximately one-third of this acreage comprises uranium mineral rights and the remaining acreage comprises exploration rights with rights to purchase and develop any uranium mineral interests found. Included in the purchase is an existing royalty obligation from the Company to Santa Fe on certain properties currently under lease from Santa Fe. Consummation of the transaction is subject to approval of the Board of Directors of both companies, certain regulatory matters and the preparation of definitive documentation. However, there can be no assurance that the parties will consummate this transaction. The Company has two development projects in South Texas, Vasquez and Alta Mesa, both targeted to commence production in 1998. The Company also has three development projects in two districts in New Mexico, the Churchrock district and the Crownpoint district. Churchrock is targeted to commence production in 1998. Permitting is in process at all such projects. Commencement of production at these properties is subject to timely permitting and the availability of capital. When Alta Mesa, Vasquez and Churchrock reach full production, the Company expects that, based on planned production rates, its total annual production capacity from these operations plus Kingsville Dome will approximate 4.0 million pounds. MARKETING STRATEGY/URANIUM SALES CONTRACTS The Company is aggressively developing a portfolio of sales contracts in support of its production expansion goals. Long term contracts are a primary focus of the Company. Spot sales will be utilized to manage inventories and optimize revenues. The Company intends to use matched sales in amounts equal to its available quotas through 2003 to maximize profitability. All contracts together will result in a portfolio that is targeted to provide upside market price participation while limiting down-side price risk. As of September 30, 1996, based on prices escalated in accordance with the contract terms through that date, the Company had long-term contracts for approximately $73,778,000 of future sales for deliveries through 2002, as compared with contracts for approximately $37,824,000 as of December 31, 1995, based on prices escalated in accordance with contract terms through that date, in each case excluding the revenue related to the sale of Russian uranium under the matched sale program. The Company has contracts that have a market-related price, with a price ceiling and price floor subject to escalation for between 80%-100% of future inflation. The Company also has contracts with fixed prices which are also subject to escalation for between 80%-100% of future inflation. One other contract is based upon 99% of market price without a floor or a ceiling. 22 24 The following table provides information concerning the Company's long term sales contracts from October 1, 1996 through 2002 (excluding the delivery of Russian uranium) with prices escalated through September 30, 1996 and using the September 30, 1996 spot price of uranium of $15.90 per pound for the market price related contracts:
OCT 1996 THRU 1997 1998 1999 2000 2001 2002 TOTAL --------- ------- ------- ------ ------ ------ ------- Number of customers......................... 8 7 4 3 2 1 N/A Total long-term contracted deliveries (thousands of pounds)..................... 1,450 1,375 684 565 465 150 4,689 Total sales (thousands)..................... $23,112 $21,678 $10,799 $8,789 $7,200 $2,200 $73,778 Average minimum sales price per pound................................. $ 15.94 $ 15.77 $ 15.78 $15.57 $15.50 $14.67 $ 15.74
For deliveries in periods subsequent to 1997, certain buyers have the option to adjust deliveries between 10% to 20%. In general, except for the options of the buyers to decrease deliveries by a specified percentage, and except for force majeure events, the buyers either must take delivery and pay for the entire amount contracted for or, if delivery is refused on any portion of the contract, pay to the Company the difference between the minimum contract price and the amount received by the Company upon the sale of the uranium to a third party. Certain of the contracts also provide the buyer with options to renew beyond the periods reflected in the table. Should any of the Company's customers be unable to perform its obligations to purchase and pay for the uranium because of force majeure or otherwise, this could have a material adverse effect on the Company's results of operations if the Company would not be able to sell such material under another long-term contract or in a spot market sale. A significant portion of the Company's contracted sales of uranium from October 1, 1996 through December 31, 2002 are represented by nine long-term contracts with eight different customers, three of which represent 26%, 15% and 13% of sales for the nine months ended September 30, 1996 and four of which represented 23%, 14%, 10% and 10% of sales for the year ended December 31, 1995. As of September 30, 1996, the Company had two outstanding long-term purchase contracts for Russian origin uranium totalling 270,000 pounds with deliveries from October 1996 through 1998. These contracts have a price escalation factor related to future inflation. 23 25 RESERVES The following table sets forth the Company's total in-place proven and probable uranium reserves as of September 30, 1996. The reserves are based on an estimated 65% recovery factor, certain cut-off grades and a price of $16 per pound. The Company's estimates of reserves have been affirmed and verified by Douglas, who are experts in uranium mining, geology and ore reserve determination and are included herein in reliance on such firm as experts in such matters. See "Experts."
IN-PLACE RESERVES RECOVERABLE AS OF RESERVES AS SEPTEMBER 30, 1996 OF SEPTEMBER PRODUCING(P)/ -------------------- 30, PROPERTIES DEVELOPMENT(D) PROVEN PROBABLE 1996 --------------------------------------- -------------- ------ -------- ------------- (AMOUNTS IN THOUSANDS OF POUNDS OF U(3) O(8)) Texas Kingsville Dome...................... P 1,117 3,001 2,677 Rosita............................... P 1,865 -- 1,212 Vasquez.............................. D 2,248 1,439 2,397 Alta Mesa............................ D 4,346 1,863 4,036 New Mexico Churchrock Section 8.......................... D 6,529 -- 4,244 Section 17......................... D 3,451 4,992 5,488 Mancos............................. D 4,164 -- 2,707 Crownpoint........................... D 30,758 8,201 25,323 ------ -------- ------------- TOTALS........................ 54,478 19,496 48,083 ======= ======== =============
THE ISL MINING PROCESS The ISL mining process, a form of solution mining, differs dramatically from conventional mining techniques. The ISL technique avoids the movement and milling of significant quantities of rock and ore as well as mill tailings waste associated with more traditional mining methods and generally results in a more cost-effective and more environmentally-benign extraction operation in comparison to conventional uranium mining. Historically, the majority of U.S. uranium production resulted from either open pit surface mines or underground shaft operations. These conventional mining methods are, in many cases, capital and labor intensive and are not cost competitive with the majority of non-U.S. conventional producers. To the Company's knowledge, there are no conventional U.S. producers today. The ISL process was first tested for the production of uranium in the mid-1960's and was first applied to a commercial-scale project in 1975 in South Texas. The ISL process had become well established in the South Texas uranium district by the late 1970's, where it was employed in connection with approximately twenty commercial projects, including two operated by the Company. In the ISL process, groundwater fortified with oxygen and other solubilizing agents is pumped into a permeable ore body causing the uranium contained in the ore to dissolve. The resulting solution is pumped to the surface where the uranium is removed from the solution and processed to a dried form of uranium which is shipped to conversion facilities for sale to the Company's customers. An ISL project involves several major components: ORE BODY EVALUATION Ore bodies which are currently being mined by the ISL process are associated with groundwater saturated permeable sandstone formations located between 100 and 2,000 feet below the surface. The uranium ore is deposited in a roll front configuration where the groundwater passing through the sandstone passes from a natural environment which is oxidizing to a naturally occurring reducing environment. This change causes the dissolved uranium in the groundwater to become insoluble, and it then attaches to the grains of the 24 26 sandstone. Some important factors in evaluating an ore body for the ISL process are permeability, the thickness of the ore zone, depth, size, grade of ore, shape of the ore body, nature of uranium mineralization, host rock mineralogy, and the hydrology. These factors are important in determining the design of the wellfield, the type and flow of the leaching solution, and the nature of the surface ISL facilities. WELLFIELD DESIGN The wellfield is the mechanism by which the leaching solution, or lixiviant, is circulated through the ore body. The wellfield consists of a series of injection, production (extraction) and monitoring wells drilled in specified patterns. These patterns will vary primarily with the configuration of the ore and the hydrologic characteristics of each deposit. Determining the wellfield pattern is crucial to minimizing costs and maximizing efficiencies of production. Injection and production wells vary in diameter from four to six inches. Generally, these wells are drilled down to the bottom of the ore zone (through which the lixiviant must be circulated to achieve production). Injection and production wells are cased with polyvinyl chloride ("PVC") or fiberglass casings which are cemented in place from the bottom of the ore zone to the surface. The wells are then completed into the ore zone. LIXIVIANT CHEMISTRY The lixiviant, consisting of native groundwater fortified with an oxidant and an anionic complexing agent, is introduced via the injection wells to the ore bearing aquifer. The oxidant (gaseous oxygen) changes the uranium valence state making the uranium soluble in the lixiviant. The lixiviant (sodium bicarbonate) complexes the original uranium to a soluble ion, uranyl dicarbonate, which dissolves the uranium. The dissolved uranium then flows to the surface with the lixiviant fluid which is circulated through the ore body until economic recovery is achieved. URANIUM RECOVERY PROCESS The uranium recovery process consists of a lixiviant circuit, an elution/precipitation circuit and a drying and packaging process. The lixiviant circuit flows from the ore body, where the uranium is dissolved. The lixiviant stream is then circulated to an ion exchange column on the surface where uranium is extracted from the lixiviant by absorption onto the resin beads of the ion exchange columns. The lixiviant is then refortified and reinjected into the ore body. When the ion exchange column's resin beads are loaded with uranium, the column is removed and placed into the elution circuit where the uranium is flushed with a salt water solution which precipitates the uranium from the beads. This leaves the uranium in a slurry, which is then dried and packaged for shipment as uranium powder. WELLFIELD RESTORATION At the conclusion of mining, the mine site is decommissioned and decontaminated and the well field is restored and reclaimed. Wellfield restoration involves returning the aquifer to a condition consistent with its pre-mining use and removing evidences of surface disturbance. The restoration of the wellfield can be accomplished by flushing the ore zone for a time with native ground water and/or using reverse osmosis to remove ions, minerals and salts to provide clean water for reinjection to flush the ore zone. Decommissioning and decontamination entail decontamination, dismantling and removal for disposal or reuse of the structures, equipment and materials used at the site during the mining or restoration activities. ENVIRONMENTAL CONSIDERATIONS AND PERMITTING; WATER RIGHTS The production of uranium is subject to extensive regulations, including federal and state (and potentially tribal) environmental regulations, that have a material effect on the economics of the Company's operations and the timing of project development. The Company's primary regulatory costs have been related to obtaining and complying with the regulatory licenses and permits that must be obtained from federal and state agencies prior to the commencement of uranium mining activities. 25 27 Environmental considerations include the prevention of groundwater contamination (through proper design and operation of the wellfield and monitoring wells to prevent the vertical or horizontal escape of leaching solution from the mining area) and the treatment and disposal of liquid and/or solid discrete surface waste or by-product materials (so-called "11e.(2) by-product material" under federal law). The majority of by-product material that is generated is liquid and generally is disposed of through underground injection wells, by a combination of reverse osmosis, brine concentration and evaporation or, after treatment, by surface deposition or discharge. Any such disposal must be approved by the governing authority having jurisdiction over that aspect of the Company's activities. Once mining is completed, the Company is required to reclaim the surface areas and restore underground water quality to the level of quality mandated by applicable regulations or license requirements. A small amount of solid discrete surface waste materials generated by the ISL process is disposed of by delivery to a licensed by-product material disposal site or to a licensed conventional uranium mill tailings pile. While such sites may not be readily available in the future, the Company believes that any increase in the cost of such disposal will continue to be insignificant relative to total costs of production and will not be a material portion of restoration/reclamation costs. In both Texas and New Mexico there are two primary regulatory authorizations required prior to operations: a radioactive material license and underground injection control ("UIC") permits which relate both to the injection of water for production purposes and to the disposal of by-product material through underground injection wells. Uranium mining is subject to regulation by the U.S. Nuclear Regulatory Commission ("NRC") under the federal Atomic Energy Act ("AEA"); however, the AEA also allows for states with regulatory programs deemed satisfactory by the NRC to take primary responsibility for licensing and regulating certain activities, such as uranium recovery operations. When a state seeks this responsibility, it enters into an agreement with the NRC whereby the NRC agrees to recede from the exercise of most of its counterpart jurisdiction, leaving the matters to be administered by the state. Texas has entered into such an agreement; however, New Mexico is not a party to such an agreement. The federal Safe Drinking Water Act ("SDWA") creates a nationwide regulatory program protecting groundwater which is administered by the U.S. Environmental Protection Agency ("EPA"). To avoid the burden of dual federal and state (or Indian tribal) regulation, the SDWA allows for the permits issued by the UIC regulatory programs of states and Indian tribes determined eligible for treatment as states to suffice in place of a UIC permit required under the SDWA. A state whose UIC program has been determined sufficient for this purpose is said to have been granted "Primary enforcement responsibility" or "primacy," and a UIC permit from a state with primacy suffices in lieu of an EPA-issued permit, provided the EPA grants, upon request by the permitting state, an "aquifer exemption" or "temporary aquifer designation" modifying the permitting state's UIC program to recognize the temporary placement of mining fluids into the intended mining zone within the horizontal confines of the proposed mining area. Although the EPA's consent to aquifer exemptions or temporary aquifer designations for certain mineral deposits is often issued almost automatically, the EPA may delay or decline to process the state's application if the EPA questions the state's jurisdiction over the mine site. Both Texas and New Mexico have been granted "primacy" for their UIC programs, and the Navajo Nation has been determined eligible for treatment as a state but is not due to submit its program for EPA approval for several years. Until such time as the Navajo Nation has been granted "primacy," ISL uranium mining activities within Navajo Nation jurisdiction will require a UIC permit from the EPA. Despite some procedural differences, the substantive requirements of the Texas, New Mexico and EPA UIC programs are very similar. In addition to its radioactive materials licenses and UIC permit, the Company is also required to obtain from appropriate governmental authorities a number of other permits or exemptions, such as for waste water discharge, land application of treated waste water, or for air emissions. The current environmental regulatory program for the ISL industry is well established. Many ISL mines have gone full cycle through the permit-operating-restoration cycle without any significant environmental impact. However, the public anti-nuclear lobby can make environmental permitting difficult and permit timing less than predictable. 26 28 In Texas, both the radioactive materials license and the UIC permits required for ISL uranium mining are granted by the Texas Natural Resource Conservation Commission ("TNRCC"), with the concurrence of the NRC required for the licensee's final release from further radioactive materials license obligations after mining and all required decommissioning, decontamination, restoration and reclamation have been completed at a site. The TNRCC also regulates air quality and surface deposition or discharge of treated waste water associated with the ISL mining process. In New Mexico, radioactive materials licensing is handled directly by the NRC, rather than by the State of New Mexico. Furthermore, depending upon whether a site located within New Mexico falls under state or Navajo Nation jurisdiction, the licensure of the UIC aspects of ISL mining may be conducted by either the New Mexico Environmental Department ("NMED") or the EPA or possibly both in case of jurisdictional conflict. The jurisdictional issue when raised as to any development property, could result in litigation between the state and the EPA, with the possibility of delays in the issuance of affected UIC permits. Water is essential to the ISL process. It is readily available in South Texas for the Company's operations and obtaining water rights is not required because water is subject to capture. In New Mexico the use of water rights is administered through the New Mexico State Engineer subject to Indian tribal jurisdictional claims as discussed below. Obtaining new water rights, and the transfer or change in use of existing water rights are carefully and strictly regulated by the State Engineer. The State Engineer may also grant an application for a "temporary water right" which will not establish a vested right but may provide sufficient acre feet per day to fulfill the applicant's water needs. The State Engineer exercises jurisdiction over underground water basins with "reasonably ascertainable boundaries." Accordingly, new appropriations or changes in purpose or place of use or points of diversion of existing water rights, such as those in the San Juan and Gallup Basins where the Company's properties are located, must be obtained by permit from the State Engineer. Applications are required to be published and are subject to hearing if protested. There are three criteria for decision, that the application: (1) not impair existing water rights, (2) not be contrary to the conservation of water within New Mexico, and (3) not be detrimental to the public welfare. Applications may be approved subject to conditions which govern exercise of the water rights. Appeals from decisions of the State Engineer are to the district court of the county in which the work or point of desired appropriation is situated and from there to the New Mexico Court of Appeals. Finally, jurisdiction over water rights may become an issue in New Mexico when an Indian nation, such as the Navajo Nation, objects to the State Engineer's authority to grant or transfer a water right or to award a temporary water right, claiming tribal jurisdiction over Indian country. This issue could result in litigation between the Indian nation and the state which may delay action on water right applications, and, depending on who prevails as to any particular property, could result in a requirement to make applications to the appropriate Indian nation and continuing jurisdiction by the Indian nation over use of the water. All of the foregoing issues arise to a greater or lesser extent in connection with the Company's New Mexico properties, as further described below. There can be no assurance that the regulatory permits or licenses in Texas or New Mexico, or the applications for water rights in New Mexico, required for any project of the Company will be approved by the necessary governing authority in the form contemplated by management, or in any other form, or within the time periods necessary to commence timely production. Additionally, regulations and permit requirements are subject to revisions and changes which may materially affect the Company's operations. Any delay or failure in obtaining such permits or water rights could materially and adversely affect the business and operations of the Company. In addition to the costs and responsibilities associated with obtaining and maintaining permits, and the regulation of production activities, the Company is subject to those environmental laws and regulations applicable to the ownership and operation of real property in general, including but not limited to the potential responsibility for the activities of prior owners and operators. SOUTH TEXAS PRODUCING PROPERTIES The Company currently has two producing properties which are located in South Texas, Rosita and Kingsville Dome. The following is a description of those properties. 27 29 KINGSVILLE DOME. The Property. The Kingsville Dome property consists of mineral leases from private landowners (and a small portion owned in fee) on 3,720 gross (3,573 net) acres located in central Kleberg County, Texas. The leases provide for royalties based upon uranium sales. The leases have expiration dates ranging from February 1998 to 2004. With a few minor exceptions, all the leases contain shut-in royalty clauses which permit the Company to extend the leases not held by production by payment of a royalty. The Company was obligated to pay a production payment royalty of $1.00 per pound on the first three million pounds of uranium produced and sold from either Kingsville Dome or Rosita. The Company has produced three million pounds of uranium from these properties and has not paid the full amount due. As of the date of this Prospectus, there is a remaining balance due of approximately $730,000. Pursuant to an informal understanding, the Company is paying the balance in installments through the end of 1997 without interest. The Company plans to pay the remaining balance out of the proceeds of this Offering. Reserves. As of September 30, 1996, the property contained approximately 4.1 million pounds of in-place proven and probable uranium reserves (estimated 2.7 million pounds recoverable). Production History. Production commenced in May 1988. In May 1989, due to the continuing decline in the spot price of uranium, the Company deferred development of the next wellfield, and the plant was shut-in in September 1990. Total production from May 1988 through September 1990 was approximately 1.5 million pounds. Wellfield development activities resumed in December 1995, and production commenced in March 1996. Annualized production levels at Kingsville Dome are approximately 1 million pounds; and production has been approximately 590,000 pounds from commencement of production in April 1996 through September 30, 1996 and is expected to be approximately 280,000 pounds in the fourth quarter of 1996. Further Development Potential. As part of the Company's ongoing production activities, it is engaged in significant development and exploration efforts at Kingsville Dome. Exploration is planned northwest of the current production area beginning in January 1997. The Company anticipates spending approximately $8.5 million in 1997 and $3.4 million in 1998 for plant capital, permitting, development and land holding costs. Permitting Status. Radioactive material licensing and UIC permit hearings for currently producing areas have been completed, and the necessary permits have been issued. Some minor amendments to the license and permit for further production within the permit area will be required as development proceeds. The term of the license and UIC permit is effectively open-ended. The UIC disposal permit will require renewal in mid-1998, and the Company is in the process of applying for that renewal. Restoration and Reclamation. Restoration of ground waters is planned to commence January 1997. The Company anticipates spending approximately $750,000 in 1997 and $600,000 in 1998 on such restoration activities. ROSITA. The Property. The Rosita property consists of mineral leases on 3,377 gross and net acres located in northeastern Duval County, Texas. All the leases, except minor leases, are held by production. The leases provide for royalties based upon uranium sales. The Company was obligated to pay a production payment royalty of $1.00 per pound on the first three million pounds of uranium produced and sold from either Kingsville Dome or Rosita. As of September 30, 1996 there is a balance due of approximately $730,000. See the above discussion of Kingsville Dome. Reserves. As of September 30, 1996, the property contained approximately 1.9 million pounds of in-place proven and probable uranium reserves (estimated 1.2 million pounds recoverable). Production History. The Company began production in October 1990. Total production from Rosita for the eighteen months through March 31, 1992 was approximately 1,073,000 pounds. In March 1992, due to depressed uranium prices, the Company shut-in production. 28 30 Development and production activity resumed at Rosita in March 1995, and production recommenced in June 1995. From that date through year-end 1995 approximately 610,000 pounds were produced. Production from this site has been 432,000 pounds for the nine months ended September 30, 1996 and is expected to be an additional 70,000 pounds for the fourth quarter of 1996. Further Development Potential. The Company estimates that there are approximately 450,000 pounds of uranium remaining to be produced from existing operating wellfields at Rosita. In addition, the Company believes that an additional 770,000 pounds of uranium may be recovered from future wellfields at Rosita. Preproduction activities for the new wellfields will commence immediately, with production to commence in the first quarter of 1997. Given the present proven reserves at Rosita, the Company expects reserves to be depleted at the property by early 1998. The Company anticipates spending approximately $2.4 million for development activities, permitting and land holding costs in 1997 and $238,000 in 1998. Permitting Status. Radioactive materials licensing and UIC permit hearings for currently producing areas have been completed, and the necessary permits have been issued. Some minor amendments for further production within the permit area will be required as development proceeds. The term of the license and UIC permit is effectively open-ended. The UIC disposal permit will require renewal in mid-1997, and the Company is in the process of applying for such renewal. Restoration and Reclamation. The Company will commence initial groundwater restoration in January 1997 and expects to expend approximately $300,000 in 1997 and $345,000 in 1998 on such activities. SOUTH TEXAS DEVELOPMENT PROPERTIES VASQUEZ. The Property. The property consists of two mineral leases on 842 gross and net acres located in southwestern Duval County, Texas. One lease expires in January 1998, subject to extension for permitting delays, and the other lease expires in February 2000. The leases provide for royalties based on uranium sales. A potential conflict with respect to the mineral rights has arisen on the Vasquez property. The Company's lease is with the owner of both the surface of the land and 50% of the minerals. The Company believes the minable reserves on this property are within 200 feet of the surface and are, therefore, under Texas law owned by the surface estate. As a result of the surface lease alone, the Company believes it has the right to mine 100% of the minerals under Texas law. Another party, however, owns 50% of the mineral estate and may challenge the Company's ownership of 50% of the minerals. The Company expects to file a quiet title action to resolve this matter. Reserves. As of September 30, 1996, the property contained approximately 3.7 million pounds of in-place proven and probable uranium reserves (estimated 2.4 million pounds recoverable). Development Plan. Production is targeted to commence in 1998. The Company anticipates spending approximately $1.1 million in 1997 and $5.3 million in 1998 for plant construction, permitting, development and land holding costs. The Company anticipates having to demonstrate financial surety in connection with these activities of approximately $3.0 million which it expects to meet by posting a bond collaterized by cash in an amount equal to 50% of the bond. Permitting Status. All of the required permit applications have been completed and submitted to the TNRCC. The TNRCC is currently reviewing the applications. The Company expects the permits to be in place in 1997. ALTA MESA. The Property. The Alta Mesa property consists of 4,575 gross and net acres located in Brooks County, Texas. The Company has a single mineral lease from the private mineral owner. The lease provides for a royalty based upon uranium sales and requires payment of minimum royalties if production does not begin by certain specified times. The Company paid $4 million for the lease of which $1 million is recoverable against 29 31 one-half of future royalties. The lease term ends in December 1999 unless production from the property commences by that date (subject to extension for permitting delays). Reserves. As of September 30, 1996, the property contained approximately 6.2 million pounds of in-place proven and probable reserves (estimated 4.0 million pounds recoverable). Development Plan. Construction of the plant and wellfields is projected to take eight months and is scheduled to begin as the various licenses are issued by the TNRCC. Construction of the plant and wellfields is anticipated to begin in the third or fourth quarter of 1997 depending on the progress in licensing with the TNRCC. The Company anticipates spending approximately $6.0 million in 1997 and $4.8 million in 1998 for plant construction, permitting, development and land holding costs. The Company anticipates having to demonstrate financial surety in connection with these activities of approximately $3.0 million which it expects to meet by posting a bond collaterized by cash in an amount equal to 50% of the bond. Permitting Status. The Company filed license applications in the fourth quarter of 1996 and anticipates having the final permits in place in 1998. NEW MEXICO DEVELOPMENT PROPERTIES GENERAL. The Company has various interests in properties located in the Churchrock and Crownpoint districts in New Mexico. As to these properties, the Company holds both patented and unpatented mining claims, mineral leases and some surface leases from private parties, the Navajo Nation and Navajo allottees. In addition, the Company has signed a letter of intent to acquire from Santa Fe certain uranium mineral interests and exploration rights for uranium on significant acreage in New Mexico, a small portion of which falls within the Churchrock district. In keeping with its overall corporate strategy, the Company's development plan for New Mexico will proceed incrementally, subject to timely permitting, the availability of water rights and the availability of capital. The Company plans to develop the Churchrock district first, with production targeted for 1998, and the Crownpoint district next, with production targeted for 1999. REGULATORY FRAMEWORK. NRC License. In New Mexico, uranium production requires a radioactive materials license issued by the NRC. The Company has applied for one NRC license covering all properties located in both the Churchrock and Crownpoint districts (except the Mancos property) and has included the properties in both districts (except the Mancos leases) under one Final Environmental Impact Statement (FEIS) which is a prerequisite for the NRC license. The NRC has advised the Company that it anticipates finalizing and publishing the FEIS, or at least publishing notice of its completion by the end of 1996. Once the FEIS is completed, it is subject to review and comment by the EPA and any cooperating agencies and is available to the public. Upon publication, and in the absence of any litigation concerning the FEIS, the NRC may issue the NRC license. However, the NRC has published notice of an opportunity for a hearing on the license which is currently planned for early 1997. Although the NRC may defer a hearing on licensure until after a license is issued, it is unclear whether the NRC will do so. There can be no assurance that the license will be issued or, if issued, that it will allow for the Company's planned operations, or that, if issued, the license would be issued on a timely basis to permit the Company to meet its targeted production schedule for the Churchrock district. UIC Permit. NMED has jurisdiction under the New Mexico Water Quality Act to regulate UIC activities within the State of New Mexico, and the New Mexico UIC program has received "primary enforcement responsibility" from the EPA under the federal SDWA. However, by the terms of regulations issued by the EPA and the primacy determination made for the State of New Mexico, New Mexico's UIC primacy does not extend to New Mexico's exercise of UIC regulation or permitting over facilities located on "Indian lands," a term whose geographic reach the EPA has defined as coextensive with that of Indian 30 32 country. Because even a permit issued by a state holding UIC primacy cannot suffice in lieu of a federal UIC permit issued under the SDWA unless the EPA issues a corresponding aquifer exemption or temporary aquifer designation, the EPA's opinion that a site lies within Indian country virtually compels a state UIC applicant to secure an EPA UIC permit for UIC activities to be conducted on such a site. The EPA has announced it may assert that all of the Company's New Mexico development properties lie within Indian country and thus require UIC permits issued by the EPA. In addition to the EPA's assertions, the Navajo Nation claims regulatory jurisdiction over all of the Company's New Mexico development properties. These claims subject the development of the property to further uncertainties, including a potential for delays in UIC permitting until and unless a Navajo regulatory program is promulgated and accepted by the EPA for a determination of primacy. Though a Navajo UIC program may adopt unique application, permitting, and enforcement procedures, it would, nonetheless, be required to impose virtually the same substantive requirements as the Company is prepared to satisfy under existing New Mexico and EPA UIC programs. This dispute over UIC jurisdiction is currently focused on a portion of the Churchrock and Crownpoint properties. Despite this current jurisdictional dispute among the EPA, the State of New Mexico, and the Navajo Nation, the Company maintains good relations with the state of New Mexico, the Navajo Nation, and the EPA. However, there can be no assurance that the jurisdictional dispute will not have a material adverse effect on the Company's development plans in New Mexico. Water Rights. For general information on water rights in New Mexico, see "Business -- Environmental Considerations and Permitting; Water Rights." CHURCHROCK DISTRICT. The Property. The Churchrock properties encompass 2,225 gross and net acres and include mineral leases, patented mining claims and unpatented mining claims. The properties are located in McKinley County, New Mexico, and consist of three parcels, known as Section 8, Section 17 and Mancos. None of these parcels lies within the area generally recognized as constituting the Navajo Reservation. The Company owns mineral leases for both Sections 17 and the Mancos properties. The surface estate on Section 17 is owned by the Navajo Nation. The Company owns patented and unpatented mining claims on Section 8. The Company is obligated to pay certain royalties based on uranium sales. The unpatented claims currently require an annual payment of $100 per claim payable to the Bureau of Land Management to remain in full force and effect and are subject to certain overrides. The Mancos leases can be held indefinitely by paying certain annual royalties after the primary term, which expired in 1994. The Section 17 leases expire in 1998. Production at any time will hold the leases until production ceases. If the Company consummates the transaction with Santa Fe, the Company will acquire the fee mineral interests in Section 17 and Mancos and certain of the royalty obligations will be extinguished. Reserves. As of September 30, 1996, Section 8 contained approximately 6.5 million pounds of in-place proven and probable uranium reserves (estimated 4.2 million pounds recoverable), Section 17 contained approximately 8.4 million pounds of in-place proven and probable uranium reserves (estimated 5.5 million pounds recoverable), and the Mancos property contained approximately 4.2 million pounds of in-place proven and probable uranium reserves (estimated 2.7 million pounds recoverable). Development Plan. All the New Mexico properties will be developed in accordance with the licenses issued by the NRC. It is anticipated that the first property to be licensed will be Churchrock. Costs related to permitting activities and land holding costs have been $390,000 for the nine months ended September 30, 1996 and are expected to be an additional $200,000 through December 31, 1996. The Company anticipates spending approximately $12.3 million in 1997 and $7.3 million in 1998 for plant construction, permitting, development and land holding costs. The Company anticipates having to demonstrate financial surety in connection with these activities of approximately $10.0 million which it expects to meet by posting a bond collaterized by cash in an amount equal to 50% of the bond. 31 33 Exploration Potential. The measured in-place reserves in Sections 8 and 17 and Mancos encompass only a small portion of the properties owned by the Company. The Company believes that substantial additional mineralization exists on these properties. Because of greater depths, this mineralization is estimated to be recoverable at a higher cost and accordingly require higher uranium prices to make them economical to produce. Water Rights. The Company originally acquired mineral leases on Sections 8 and 17 from United Nuclear Corporation ("UNC") and, in connection therewith, acquired certain rights to use water from UNC. An application to use one of these rights has been the subject of extensive administrative proceedings and litigation with the New Mexico State Engineer and the Navajo Nation over the nature and extent of UNC's water rights. The State Engineer determined that the consumptive use and diversion amount UNC originally sought to transfer for use by the Company were in excess of the rights held by UNC and denied the application on the grounds that the UNC rights were insufficient to support the Company's mining operations. The Company has since revised its water budget to be consistent with the rights of UNC as determined by the State Engineer. The State Engineer has agreed to hear a revised application for the transfer of the water rights within 180 days after the application is submitted. The Company anticipates filing a revised application or applications for new temporary appropriation of water. A claim by the Navajo Nation to jurisdiction over these water rights was denied by the State Engineer and the state district court. These decisions do not preclude such a claim from being made in federal court. Permitting Status. On June 21, 1989 the EPA issued its aquifer exemption covering that portion of the Churchrock site known as Section 8, and on November 1, 1989, NMED issued its permit, covering UIC activities on Section 8. On October 7, 1994, NMED issued an amended permit covering UIC activities on both Section 8 and Section 17. The permit for Section 17 was contested by the Navajo Nation which claimed UIC regulatory jurisdiction over the site, based on the fact that the surface estate is owned by the Navajo Nation. The EPA, acting as an advocate for the Navajo Nation, has asserted the Navajo Nation's claim and has refused to amend its previously issued aquifer exemption covering Section 8 to add the portion of the Churchrock facility on Section 17. The EPA has subsequently announced it may reconsider its issuance of an aquifer exemption covering the Section 8 portion of the Churchrock site. The Company does not plan to pursue permits for Mancos until uranium prices rise. In June 1996 the Company filed with the NMED two applications to renew the permit in two distinct parts, one covering the Section 8 portion and the other the Section 17 portion of Churchrock. This was to assure that the Company maintained a "clear" UIC authorization on the Section 8 portion of the site. The surface estate on Section 8 is not owned by the Navajo Nation or Navajo allottees. Because the renewal application was timely filed, the permit covering the Section 8 property has remained continuously in effect pending final determination on the renewal application by the NMED. The Navajo Nation has recently asserted jurisdiction over the UIC for Section 8, claiming that the land lies within a "dependent Indian community." The EPA has not yet taken a position on this issue. This situation could potentially delay or obstruct development of Section 8. The renewal application pertaining to the Section 17 property will be subject to a new administrative review which will ultimately require EPA to re-examine the jurisdictional status. If the EPA does not find the site within NMED jurisdiction, the Company believes the state will file suit for a declaration of UIC jurisdiction over the site. The outcome of this suit may ultimately affect UIC jurisdiction on all Indian lands. CROWNPOINT DISTRICT. The Property. The Crownpoint properties are located in the San Juan Basin, 22 miles northeast of the Company's Churchrock deposits and 35 miles northeast of Gallup, New Mexico, adjacent to the town of Crownpoint. The Properties consist of 1,578 gross and net acres, as follows: (a) 162 gross and net acres on Section 24. The Company has 100% of the mineral estate on this acreage pursuant to a combination of a 40% fee interest, a mineral lease on the other 60% of the mineral estate (expiring in April 1997 unless the parties agree to an extension) and unpatented mining claims. 32 34 This acreage is subject to an obligation of the Company to pay a production payment on the first 50,000 pounds of uranium produced and an override based on uranium sales; (b) 959 gross and net acres on Sections 19 and 29 pursuant to a lease from private mineral owners (expiring August 2007) which provides for royalties and an override based on uranium sales; and (c) 457 gross and net acres of unpatented mining claims in Sections 9, 24 and 25. In addition to the foregoing, the Company has 1,440 gross and net acres of mineral leases (hereinafter referred to as "Unit 1") from Navajo allottees who are the beneficial owners of the surface and mineral rights. The leases are subject to approval by the Bureau of Indian Affairs (the "BIA"). The BIA Area Director is expected to approve the leases after completion of the FEIS. Although not assured, this approval is expected in the first quarter of 1997. These leases expire 10 years after the approval by the BIA. Reserves. With respect to all the Crownpoint acreage except Unit 1, as of September 30, 1996, the property contained approximately 39.0 million pounds of in-place proven and probable reserves (estimated 25.3 million pounds recoverable). The Company estimates that Unit 1 contains approximately 27.0 million pounds of in-place proven and probable reserves (estimated 17.6 million pounds recoverable). The Unit 1 reserves are not included as part of the Company's reserve base and have not been affirmed and verified by Douglas. Development Plan. All the New Mexico properties will be developed according to the licenses issued by the NRC. It is anticipated that the first property to be licensed will be Churchrock followed by Unit 1 and Crownpoint after 1998. Costs relating to permitting activities and land holding costs have been $180,000 for the nine months ended September 30, 1996 and are expected to be an additional $80,000 through December 31, 1996, $200,000 in 1997 and $200,000 in 1998. Water Rights. With respect to Crownpoint, the Company has acquired three applications for appropriations of water which give the Company the first three "positions in line" on the hearings list for the San Juan Basin. Certain aspects of all three applications were protested and are subject to hearings. Water rights relating to Crownpoint's Unit 1 involve the issue of the jurisdiction of the Navajo Nation, and this jurisdictional issue might also be present for other parts of Crownpoint. The Company plans to proceed with water rights for Crownpoint at a future date. Permitting Status. The application for the NRC license is part of the overall application for both the Churchrock and Crownpoint districts discussed above. The Company had previously submitted UIC permit applications for Sections 19 and 24; however, because of Section 19's proximity to the town of Crownpoint, the Company withdrew these previous applications. The Company has recently submitted a revised UIC permit application for Section 24. There can be no assurance that the UIC permit will be granted. The surface estate on Section 19 and 29 is owned by the Navajo Nation and may be subject to the same jurisdictional dispute as for Section 17 in Churchrock. RECLAIMED PROPERTIES The Company has completed production and groundwater restoration on its Benavides and Longoria projects in South Texas. The Company is currently completing the final stages of surface reclamation on these projects which the Company believes will not involve material expenditures. On August 28, 1995, Manuel T. Longoria, as owner of the ranch containing the site of the Company's Longoria mine, brought suit against the Company in state district court in Duval County, Texas, asserting claims said to have arisen at various times over the last eighteen years. See "Business -- Legal Proceedings." The Company acquired the Section 17 leases in the New Mexico Churchrock district from United Nuclear Corporation ("UNC"). UNC had conducted underground mining for uranium on Section 17 and had reclaimed these properties. In connection with the acquisition, the Company assumed any liability of UNC for any remaining remediation work that might be required. NMED has not determined what, if any, additional remediation will be required under the New Mexico Mining Act. If more remediation work is required, the Company believes it will not involve material expenditures. 33 35 RECLAMATION AND RESTORATION COSTS AND BONDING REQUIREMENTS Upon completion of production from a wellfield, the Company is obligated under state and federal law to restore the aquifer to a condition consistent with its pre-mining use. This involves restoration of the aquifer, plugging and abandoning the injection and production wells and reclaiming the surface. With respect to operations at Kingsville Dome and Rosita, as well as reclamation and restoration of the Benavides and Longoria projects, the TNRCC requires the Company to provide financial surety to cover the costs of such restoration and reclamation. The current surety bond requirement is approximately $5.6 million. The Company fulfills this requirement through the issuance of surety bonds from the United States Fidelity and Guaranty Company ("USF&G") and has deposited as collateral for such bonds cash of approximately $2.8 million. The Company is obligated to fund the cash collateral account with an additional $0.50 for each pound of uranium production until the account accumulates an additional $1.0 million. The Company estimates that its future reclamation liabilities with respect to current operations as of September 30, 1996 approximates $3.7 million, which has been charged to earnings. These financial surety obligations are reviewed and revised annually by the TNRCC. The Company anticipates that it will be required to provide financial surety of approximately $3.0 million as a condition to receipt of the requisite permits for the mining of each of the Alta Mesa and Vasquez projects. The Company anticipates that USF&G or other bonding entities will provide the requisite bond under arrangements similar to those in place for Rosita and Kingsville Dome. In New Mexico surety bonding will be required prior to development of the properties. The Company anticipates that it will be required to provide financial surety of approximately $10.0 million as a condition to receipt of the requisite permits of the Churchrock project which it anticipates will be provided by USF&G, or other bonding entities under arrangements similar to those in place for Rosita and Kingsville Dome. The amount of the surety bond is subject to annual review and revision by the NRC and State of New Mexico. LEGAL PROCEEDINGS On August 28, 1995, Manuel T. Longoria, as owner of the ranch containing the site of the Company's Longoria mine near Bruni in Duval County, Texas, brought suit against the Company in state district court in Duval County, Texas asserting claims said to have arisen at various times over the last 18 years. In the action styled Longoria v. Uranium Resources, Inc., et al., Longoria claims the Company has leased the site knowing that the proposed mining would contaminate the site; that the Company had knowingly or negligently conducted mining operations in a manner which contaminated the Longoria property with toxic and hazardous material which present a serious health hazard. The suit asks for remediation of the Longoria property and for unspecified actual and punitive damages. With regard to the claim for remediation, the Company, upon the conclusion of mining at the Longoria site and the nearby sites, began reclamation in the manner required by its permits and by state and federal regulations. Such reclamation is nearing completion. The Company has made provisions for the costs of site reclamation and does not believe the settlement of this lawsuit will result in damages that are materially different than the costs already in the financial statements. On July 12, 1995, the Company filed a lawsuit in the federal district court in Colorado against Professional Bank, a Colorado chartered bank ("ProBank"). The Company believes that ProBank is owned or controlled by Oren L. Benton, the former Chairman of the Company's Board of Directors. In the action styled Uranium Resources, Inc. v. Professional Bank, the Company alleges that ProBank transferred $1,080,000, without the Company's authorization, from the Company's account at ProBank to the accounts maintained at ProBank of various entities and an individual affiliated with Mr. Benton. The Company has recovered $300,000 of the total and is seeking to recover the balance from ProBank. The Company is subject to periodic inspection by the TNRCC for the purpose of determining compliance by the Company with the conditions of its licenses. In the ordinary course of business, minor violations may occur; however, these are not expected to cause material expenditures. 34 36 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information with respect to each of the directors and executive officers of the Company:
POSITIONS AND OFFICES NAME AGE WITH THE COMPANY - ------------------------------- --- ----------------------------------------------------------- Paul K. Willmott............... 56 Chairman, Chief Executive Officer, President, and Director Leland O. Erdahl............... 68 Director George R. Ireland.............. 40 Director James B. Tompkins.............. 39 Director William M. McKnight, Jr........ 60 Senior Vice President -- Operations Joe H. Card.................... 43 Senior Vice President -- Marketing Richard F. Clement, Jr......... 53 Senior Vice President -- Exploration/President -- Hydro Resources, Inc. Thomas H. Ehrlich.............. 36 Vice President and Chief Financial Officer Harry L. Anthony, IV........... 48 Vice President -- Engineering Mark S. Pelizza................ 44 Vice President -- Health, Safety and Environmental Affairs Craig S. Bartels............... 48 Vice President -- Hydro Resources, Inc.
PAUL K. WILLMOTT has served as a director of the Company since August 1994, as President of the Company since February 1995, as Chief Financial and Accounting Officer from April 12, 1995 through September 25, 1995 and as Chairman of the Board and Chief Executive Officer since July 31, 1995. Mr. Willmott retired from Union Carbide Corporation ("Union Carbide") where he was involved for 25 years in the finance and operation of Union Carbide's world-wide mining and metals business. Most recently, Mr. Willmott was President of UMETCO Minerals Corporation, a wholly-owned subsidiary of Union Carbide, from 1987 to 1991, where he was responsible for Union Carbide's uranium and vanadium businesses. From January 1993 until February 1995, Mr. Willmott was engaged by the Concord Mining Unit as a senior vice president where he was primarily involved in the acquisition of UMETCO Minerals Corporation's uranium and vanadium operating assets. Mr. Willmott graduated from Michigan Technological University with a Bachelor of Science degree in Mining in 1964 and a Bachelor of Science Degree in Engineering Administration in 1967. He has been an active member of the American Institute of Mining Engineers, the Canadian Institute of Mining Engineers and a number of state professional organizations. LELAND O. ERDAHL has served as a director of the Company since July 11, 1994. Mr. Erdahl previously served as President and Chief Executive Officer for Stolar, Inc. from 1986 to 1991. Stolar was a high-tech company involved in the radio wave imaging of geologic media and underground radio transmission for voice and data. He was also President and CEO of Albuquerque Uranium Corporation, a uranium mining company, from 1987 to 1991. He is a Certified Public Accountant and is a graduate of the College of Santa Fe. He is currently a director of Hecla Mining Company, Freeport McMoRan Copper and Gold Inc., Canyon Resources Corporation, Original Sixteen to One Mine, Inc., and a trustee for a group of John Hancock Mutual Funds. He is also a director of Santa Fe Ingredients Company of California, Inc. and Santa Fe Ingredients Company, Inc., both private food processing companies. GEORGE R. IRELAND has served as a director since May 26, 1995. Mr. Ireland is a financial analyst for and a partner in the D.M. Knott Limited Partnership, a private investment partnership. Mr. Ireland specializes in investing in securities of natural resource and other basic industrial companies, both domestically and abroad. From 1987 to 1991, he was a Vice President of Fulcrum Management, Inc., which was the manager of the VenturesTrident Limited Partnerships, (venture capital funds dedicated to investing in the mining industry), 35 37 and Senior Vice President and Chief Financial Officer of MinVen Gold Corporation, a company in which the VenturesTrident funds had a significant investment. Mr. Ireland graduated from the University of Michigan with degrees in Geology and Resource Economics. He also attended the Graduate School of Business Administration of New York University. Mr. Ireland is a director of Merrill & Ring, Inc., a private land and timber holding company in the state of Washington. Mr. Ireland acted as a consultant to Ryback Management Corporation and performed due diligence on the Company in connection with Ryback's loan of $6 million to the Company on behalf of members of the Lindner Group in 1995. Mr. Ireland is not otherwise affiliated with the Lindner Group or Ryback. JAMES B. TOMPKINS has served as a director since May 25, 1995. Mr. Tompkins is a registered investment advisor and provides independent research to institutional investors through Tompkins & Company. From 1988 until 1990, Mr. Tompkins acted as a sole proprietor of Tompkins & Company, advising creditors of companies in bankruptcy as to the value of claims and realizing proceeds on those claims. In that capacity, Mr. Tompkins acted as a registered investment advisor. Between October 1990 and April 1993, Mr. Tompkins was employed by Columbia Savings as a bond manager where he was responsible for real estate loan workouts and asset disposition. He is an attorney and a Chartered Financial Analyst. Mr. Tompkins graduated from the University of Alabama in 1979 and received his Juris Doctor from the University of Alabama School of Law in 1983. Mr. Tompkins acted as a consultant to Ryback and performed due diligence on the Company in connection with Ryback's loan of $6 million to the Company on behalf of members of the Lindner Group in 1995. Mr. Tompkins is not otherwise affiliated with the Lindner Group or Ryback. WILLIAM M. MCKNIGHT, JR. joined the Company on September 1, 1977 and served as the Company's Executive Vice President, Chief Operating Officer and Director until August 1994. From August 1994 to February 1995, he directed the Company's operations in South Texas and New Mexico and on February 24, 1995, he was appointed Vice President of Operations for the Company. In February 1996 he was appointed Senior Vice President of Operations. Mr. McKnight received a B.S. in Geology from Centenary College in 1959 and a M.S. in Sedimentary Geology from Florida State University in 1961. Mr. McKnight has indicated that he may elect to retire in 1997 but has indicated that he would act as a consultant to the Company. JOE H. CARD joined the Company as Vice President -- Marketing in March 1989. In February 1993 he was promoted to Senior Vice President -- Marketing. Previously, he spent four years with UG U.S.A., Inc., a U.S. marketing subsidiary of a major German mining company, most recently as Marketing Manager. His responsibilities were related to the entire Uranium fuel cycle, primarily in dealing with U.S. nuclear utilities customers. Prior to his work at UG U.S.A., Inc., Mr. Card spent five years with Mitsubishi International Corporation as marketing manager. He earned a B.B.A. degree in Finance from the University of Georgia in 1975 and an M.B.A. from Georgia State University in 1978. THOMAS H. EHRLICH, a certified public accountant, rejoined the Company in September 1995 as Vice President and Chief Financial Officer. Immediately prior to that, Mr. Ehrlich spent nine months as a Division Controller with Affiliated Computer Services, Inc., an information technology services provider in Dallas, Texas. Prior to that, he joined the Company in November 1987 as Controller-Public Reporting and was promoted to Controller and Chief Accounting Officer in February 1990. In February 1993, Mr. Ehrlich assumed the additional duties of Vice President and Secretary of the Company. Prior to joining the Company, he spent four years with Deloitte Haskins & Sells and worked primarily with clients that were publicly held companies. Prior to his work at Deloitte Haskins & Sells, he spent three years in various accounting duties at Enserch Exploration, Inc., an oil and gas company in Dallas, Texas. Mr. Ehrlich received his B.S. B.A. degree in Accounting from Bryant College in 1981. RICHARD F. CLEMENT, JR. joined the Company as Vice President Exploration in 1983. In April 1990, he was appointed Senior Vice President -- Exploration. Mr. Clement was a director of the Company from February 1985 to July 1994 at which time he resigned his positions as director and officer of the Company. During the period from July 1994 to February 1996, Mr. Clement remained with the Company as Exploration Manager. In February 1996, he was again appointed Senior Vice President -- Exploration of the Company as well as the President and a Director of Hydro Resources, Inc., a wholly owned subsidiary of the Company. Prior to joining the Company, he spent 16 years with Mobil Oil Corporation, most recently as vice president 36 38 and exploration manager for Mobil Energy Minerals-Australia, where he initiated and managed Mobil's Australian coal, uranium and other minerals exploration and acquisition programs. Mr. Clement received his B.S. degree in Geology from Boston College in 1965 and his M.S. degree in Geology from the University of Vermont in 1967. HARRY L. ANTHONY, IV has headed the Company's engineering team since 1978. From April 1978 until April 1990, Mr. Anthony was Vice President -- Engineering of the Company, and in April 1990, he was appointed Senior Vice President -- Engineering. Mr. Anthony was a director of the Company from February 1985 to July 1994 at which time he resigned his positions as director and officer of the Company. During the period from July 1994 to February 1996, Mr. Anthony remained with the Company as Engineering Manager. In February 1996, he was appointed Vice President -- Engineering of the Company. Prior to joining the Company he was employed for eight years by Union Carbide, six of such years as a hydrometallurgist and the last two years as plant superintendent for Union Carbide's Palangana solution mining plant in South Texas. Mr. Anthony received a B.S. degree and a M.S. degree in Engineering Mechanics from Pennsylvania State University in 1969 and 1973, respectively. MARK S. PELIZZA has served as the Company's Environmental Manager since 1980, and as such, he has been responsible for all environmental regulatory activities. In February 1996, he was appointed Vice President -- Health, Safety and Environmental Affairs of the Company. Prior to joining the Company, he was employed for two years by Union Carbide as an Environmental Planning Engineer at Union Carbide's Palangana solution mining plant in South Texas. Mr. Pelizza received a M.S. Degree in Engineering Geology from Colorado School of Mines in 1978 and a B.S. Degree in Geology from Fort Lewis College in 1974. CRAIG S. BARTELS, a Registered Professional Engineer, rejoined the Company as Vice President -- Technology of Hydro Resources, Inc., a wholly owned subsidiary of the Company in July 1996. From January 1995 to July 1996, he was Manager of Wellfield Operations for Crow Butte Resources, Inc., a uranium ISL mining company. Mr. Bartels originally joined the Company in early 1981 and held varied positions with the Company as Reservoir Engineer, Plant Manager, and Manager of Wellfield Operations through October 1994. Earlier, he was with Union Carbide, eventually becoming Technical and Plant Superintendent for their solution mining operation. Mr. Bartels also spent six years with Natural Gas Pipeline Company of America, a major gas transmission company, as drilling and reservoir engineer for their gas storage operations. Mr. Bartels received a B.S. Degree in Petroleum Engineering from Montana School of Mines in 1972. The officers of the Company hold office until their successors are appointed by the Board of Directors. All officers of the Company are employed on a full-time basis. There is no family relationship between any director and executive officer of the Company. COMMITTEES OF THE BOARD The Company has three standing committees of the Board of Directors. Leland O. Erdahl, George R. Ireland and James B. Tompkins are the current members of the Audit, the Employees' Stock Option, and Compensation Committees. The Audit Committee's principal functions are to meet with the Company's independent auditors to review the financial statements contained in the Annual Report, to review the Company's systems of internal controls and to report to the Board of Directors thereon. The Employees' Stock Option Committee's principal function is the administration of the employees' stock option plans of the Company. The Compensation Committee's function is to determine the compensation of executive officers and to set guidelines for compensation for the employees of the Company. At present, the Company has no nominating, executive, or similar committees. ARRANGEMENTS REGARDING ELECTION OF DIRECTORS On May 25, 1995, George R. Ireland and James B. Tompkins were appointed to the Board of Directors. By agreement dated May 25, 1995, the Company has agreed to nominate two individuals designated by the Lindner Group for election to the Board. Messrs. Ireland and Tompkins are the current designees. 37 39 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of December 9, 1996, certain information regarding persons known by the Company to be the beneficial owner of more than 5% of the outstanding shares of the Company's Common Stock and all directors and executive officers as a group.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF AS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2) ADJUSTED* - ------------------------------------------------------- ----------------------- ---------- --------- Barry R. Feirstein..................................... 750,000 8.51% 7.34% Feirstein Capital Management Corp. 767 Third Avenue, 28th Floor New York, NY 10017 Lindner Growth Fund.................................... 811,525(3) 9.21% 7.95% 7711 Carondelet Avenue, Suite 700 Clayton, MO 63105 Lindner Dividend Fund.................................. 2,589,000(3)(4) 24.51% 21.64% 7711 Carondelet Avenue, Suite 700 Clayton, MO 63105 Lindner Bulwark Fund................................... 750,000(3)(5) 7.84% 6.84% 7711 Carondelet Avenue, Suite 700 Clayton, MO 63105 Ryback Management Corporation.......................... 250,000(6) 2.84% 2.45% 7711 Carondelet Avenue, Suite 700 Clayton, MO 63105 Zesiger Capital Group L.L.C............................ 708,600(7) 8.04% 6.94% 320 Park Avenue, 30th Floor New York, NY 10022 All directors and executive officers as a group (11 persons)............................................. 1,029,664(8) 11.01% 9.57%
- --------------- * As adjusted to give effect to the minimum sale of 1,400,000 shares of Common Stock offered hereby. (1) Each person has sole voting and investment power with respect to the shares listed, unless otherwise indicated. Beneficial ownership includes shares over which the indicated beneficial owner exercises voting and/or investment power. (2) The shares owned by each person, and the shares included in the total number of shares outstanding, have been adjusted, and the percentages owned have been computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934. Shares subject to options or warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for computing the percentage ownership of any other person. (3) The Lindner Group may be deemed collectively as a controlling stockholder of the Company. The Lindner Group is managed by Ryback, an investment adviser. Ryback has discretionary authority over the shares owned beneficially by the Lindner Group, including the power to vote and dispose of such shares. (4) Includes 839,000 outstanding shares owned beneficially by Lindner Dividend Fund, 1,125,000 shares issuable upon conversion of certain notes and 625,000 shares issuable upon exercise of certain warrants. (5) Includes 375,000 shares issuable upon conversion of certain notes and 375,000 shares issuable upon exercise of warrants. (6) Ryback manages the accounts of third parties that are not affiliated with the Lindner Group. Such parties own beneficially 250,000 outstanding shares over which Ryback has discretionary authority to vote and dispose of such shares. (7) Zesiger Capital Group LLC ("Zesiger") is an investment adviser with dispositive power over 708,600 shares of the Company's Common Stock pursuant to authority granted by its investment clients and disclaims beneficial ownership of these shares. Legal and beneficial ownership of these shares are held by Zesiger's clients. (8) Includes 542,814 shares that may be obtained through exercise of outstanding stock options that are exercisable within 60 days of December 9, 1996. Does not include 577,391 shares that may be obtained through the exercise of outstanding stock options exercisable more than 60 days from December 9, 1996. 38 40 DESCRIPTION OF CAPITAL STOCK COMMON STOCK The Company's authorized capital stock consists of 25,000,000 shares, par value $0.001 per share, in the case of Common Stock. As of December 9, 1996, 8,813,027 shares of Common Stock were issued and outstanding, all of which are fully paid and non-assessable. There are not preemptive, subscription, conversion or redemption rights pertaining to the Company's Common Stock. The absence of preemptive rights could result in a dilution of the interest of existing stockholders should additional shares of Common Stock be issued. Holders of the Company's Common Stock are entitled to receive such dividends as may be declared by the Board of Directors out of assets legally available therefore and to share ratably in the assets of the Company available upon liquidation. Each share of Common Stock is entitled to one vote for all purposes and cumulative voting is not permitted in the election of directors. Accordingly, the holders of more than fifty percent of all of the outstanding shares of Common Stock can elect all of the directors. Matters to be voted upon by the holders of Common Stock require the affirmative vote of a majority of the shares present at the stockholders meeting. TRANSFER AGENT AND REGISTRAR Montreal Trust Company, Vancouver, British Columbia is the transfer agent and registrar for the Common Stock. PLAN OF DISTRIBUTION The Shares are being offered for sale by the Company on a best efforts, minimum/maximum, basis principally to selected institutional investors. The Placement Agent has been retained to act as the exclusive agent for the Company in connection with the arrangement of such offers and sales on a best efforts basis. The closing of the Offering is conditional on the sale of the minimum amount of Shares prior to the Termination Date. The Placement Agent is not obligated to and does not intend to itself take (or purchase) any of the Shares. It is anticipated that the Placement Agent will obtain indications of interest from potential investors for the amount of the Offering and that effectiveness of the Registration Statement will not be requested and no investor funds will be accepted until indications of interest have been received for at least the minimum number of Shares. Confirmation and definitive prospectuses will be distributed to all investors at the time of pricing, informing investors of the closing date which will be scheduled for three business days after pricing. No investor funds will be accepted prior to effectiveness of the Registration Statement. On or prior to the closing date, all investor funds will promptly be placed in escrow with Norwest Bank Colorado, N.A., as escrow agent (the "Escrow Agent"), in an escrow account established for the benefit of the investors. The Escrow Agent will invest such funds in accordance with Rule 15c2-4 promulgated under the Securities Exchange Act of 1934, as amended. Prior to the closing date, the Escrow Agent will advise the Company whether the investors have deposited the requisite funds in the escrow account at the Escrow Agent. If the requisite funds have been deposited, the Company will deposit with the Depository Trust Company the Shares to be credited to the respective accounts of the investors. Investor funds, together with interest thereon, if any, will be collected by the Company through the facilities of the Escrow Agent on the scheduled closing date. The Offering will not continue after the closing date. In the event that investor funds are not received for the minimum number of Shares prior to the Termination Date, all funds deposited in the escrow account will promptly be returned. The Company has agreed (i) to pay the Placement Agent 7% of the proceeds of this Offering as the selling commission, (ii) to indemnify the Placement Agent against certain liabilities, including liabilities under the Securities Act, and (iii) to reimburse the Placement Agent for certain of its out-of-pocket expenses in connection with the Offering. Certain officers, directors and affiliates of the Company have agreed that they will not, directly or indirectly, offer, sell or otherwise dispose of any shares of Common Stock or any securities convertible into or exercisable for, or any rights to purchase or acquire, Common Stock for a period of ninety (90) days after the date of this Prospectus, without the prior written consent of the Placement Agent. 39 41 The Company has agreed that, during the period ending two years after the effectiveness of this Registration Statement, the Placement Agent shall have a right of first refusal to act as exclusive financial advisor, investment banker or agent in connection with any proposed financial advisory, investment banking or related service engagement by the Company or by any affiliates of the Company. If the Placement Agent agrees to render its assistance for any such transaction, it shall be for fees and expenses competitive with those which would likely be charged by a comparable financial advisor, investment banker or similar agent. LEGAL MATTERS Certain legal matters in connection with this Offering will be passed upon for the Company by Baker & Hostetler, Denver, Colorado. Certain legal matters will be passed upon for the Placement Agent by Holland & Hart LLP, Denver, Colorado. EXPERTS The consolidated financial statements of the Company as of December 31, 1995 and 1994 and for each of the years in the three-year period ended December 31, 1995 incorporated by reference into this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. The Company's uranium reserves have been affirmed and verified by the independent geological consulting firm of Douglas International, Inc. and are included herein in reliance upon the authority of said firm as experts in such matters. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files reports, proxy and information statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of the Commission: Northwest Atrium Center, 400 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material may be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act of 1933 (the "Securities Act"), of which this Prospectus constitutes a part, with respect to the shares of Common Stock offered hereby. The Registration Statement, including exhibits and schedules thereto, may be obtained from the Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20459, upon payment of the fees prescribed by the Commission. Statements contained in this Prospectus as to the contents of any document referred to are not necessarily complete and in each instance reference is made to the copy of the appropriate document filed as an exhibit to, or incorporated by reference into, the Registration Statement, each statement being qualified in all respects by such reference. In addition, the Commission maintains a web site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the Commission. The Company is such a filer. The Commission web site address is (http://www.sec.gov). 40 42 GLOSSARY OF CERTAIN TERMS CLAIM:................. A claim is a tract of land, the right to mine of which is held under the federal General Mining Law of 1872 and applicable local laws. CONCENTRATES:.......... A product from a uranium mining and milling facility, which is commonly referred to as uranium concentrate or U(3)O(8). CONVERSION:............ A process whereby uranium concentrates are converted into forms suitable for use as fuel in commercial nuclear reactors. CUT-OFF GRADE:......... Cut-off grade is determined by the following formula parameters: estimates over the relevant period of mining costs, ore treatment costs, general and administrative costs, refining costs, royalty expenses, process and refining recovery rates and uranium prices. GROSS ACRES:........... Total acres under which the Company has mineral rights and can mine for uranium. INDIAN COUNTRY:........ A term derived from jurisdictional determinations in criminal law enforcement proceedings under 18 U.S.C. sec. 1151 and understood to encompass territory situated within Indian reservations, land owned by Indian allottees and land within dependent Indian community. LIXIVIANT:............. When used in connection with uranium in situ leach mining, a solution that is pumped into a permeable uranium ore body to dissolve uranium in order that a uranium solution can be pumped from production wells. NET ACRES:............. Actual acres under lease which may differ from gross acres when fractional mineral interests are not leased. ORE:................... Naturally occurring material from which a mineral or minerals of economic value can be extracted at a reasonable profit. OVERFEEDING:........... Operating enrichment plants in a manner that reduces plant operating costs but increases the amount of uranium required to produce a given quantity of enriched uranium. PROBABLE RESERVES:..... Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation. PROVEN RESERVES:....... Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. RECLAMATION:........... Reclamation involves the returning of the surface area of the mining and wellfield operating areas to a condition similar to pre-mining. RECOVERABLE RESERVES:............ Reserves that are either proven or probable, are physically mineable, and can be profitably recovered under conditions specified at the time of the appraisal, based on a positive feasibility study. The calculation of mineable reserves is adjusted for potential mining recovery and dilution. RESERVE:............... That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
41 43 RESTORATION:........... Restoration involves returning an aquifer to a condition consistent with its pre- mining use and removing evidences of surface disturbance. The restoration of the wellfield can be accomplished by flushing the ore zone with native ground water and/or using reverse osmosis to remove ions to provide clean water for reinjection to flush the ore zone. RESOURCES:............. A resource is a concentration of naturally occurring minerals in such a form that economic extraction is currently or potentially feasible. ROLL FRONT:............ The configuration of sedimentary uranium ore bodies as they appear within the host sand. A term that depicts an elongate uranium ore mass that is "C" shaped. SPOT PRICE:............ The price at which uranium may be purchased for delivery within one year. SURETY OBLIGATIONS:.... A bond, letter of credit, or financial guarantee posted by a party in favor of a beneficiary to ensure the performance of its or another party's obligations, e.g., reclamation bonds, worker's compensation bond, or guarantees of debt instruments. TAILINGS:.............. Waste material from a mineral processing mill after the metals and minerals of a commercial nature have been extracted; or that portion of the ore which remains after the valuable minerals have been extracted. TAILINGS IMPOUNDMENT:......... A tailings impoundment is a containment area constructed to hold tailings. TRADE TECH:............ A Denver-based publisher of information for the nuclear fuel industry; the successor to the information services business of Nuexco. URANIUM OR URANIUM CONCENTRATES:.......... U(3)O(8), or triuranium octoxide. U(3)O(8):.............. Triuranium octoxide equivalent contained in uranium concentrates, referred to as uranium concentrate. WASTE:................. Barren rock in a mine, or mineralized material that is too low in grade to be mined and milled at a profit.
42 44 ================================================================================ NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE PLACEMENT AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE REGISTERED SECURITIES TO WHICH THIS PROSPECTUS RELATES OR ANY OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. --------------------- TABLE OF CONTENTS
PAGE ---- Incorporation of Documents by Reference..... 3 Prospectus Summary.......................... 4 Risk Factors................................ 9 Use of Proceeds............................. 15 Capitalization.............................. 16 The Uranium Industry........................ 17 Business.................................... 21 Management.................................. 35 Security Ownership of Certain Beneficial Owners and Management.......... 38 Description of Capital Stock................ 39 Plan of Distribution........................ 39 Legal Matters............................... 40 Experts..................................... 40 Available Information....................... 40
================================================================================ ================================================================================ 1,400,000 TO 1,700,000 SHARES [URI LOGO] URANIUM RESOURCES, INC. COMMON STOCK ------------------------------ PROSPECTUS ------------------------------ EVEREN SECURITIES, INC. December , 1996 ================================================================================ 45 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Capitalized terms used but not defined in Part II have the meanings ascribed to them in the Prospectus contained in this Registration Statement. ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the expenses expected to be incurred in connection with the issuance and distribution of Common Stock registered hereby, all of which expenses, except for the Commission registration fee and the NASD filing fee, are estimates:
DESCRIPTION AMOUNT -------------------------------------------------------------------------- -------- Accounting fees and expenses.............................................. $ 10,000 Printing and engraving fees and expenses.................................. $ 50,000 Legal fees and expenses................................................... $310,000 Securities and Exchange Commission registration fee....................... $ 4,300 National Association of Securities Dealers, Inc. filing fee............... $ 2,000 Nasdaq Listing Application fee............................................ $ 17,500 Transfer Agent fees and expenses.......................................... $ 5,000 Blue Sky fees and expenses................................................ $ 10,000 Miscellaneous expenses.................................................... $ 41,200 -------- Total........................................................... $450,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under Delaware law, a corporation may indemnify any person who was or is a party or is threatened to be made a party to an action (other than an action by or in the right of the corporation) by reason of his service as a director or officer of the corporation, or his service, at the corporation's request, as a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys' fees) that are actually and reasonably incurred by him ("Expenses"), and judgments, fines and amounts paid in settlement that are actually and reasonably incurred by him, in connection with the defense or settlement of such action, provided that he acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests, and, with respect to any criminal action or proceeding, had not reasonable cause to believe that his conduct was unlawful. Although Delaware law permits a corporation to indemnify any person referred to above against expenses in connection with the defense or settlement of an action by or in the right of the corporation, provided that he acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interest, if such person has been judged liable to the corporation, indemnification is only permitted to the extent that the Court of Chancery (or the court in which the action was brought) determines that, despite the adjudication of liability, such person is entitled to indemnity for such Expenses as the court deems proper. The General Corporation Law of the State of Delaware also provides for mandatory indemnification of any director, officer, employee or agent against Expenses to the extent such person has been successful in any proceeding covered by the statute. In addition, the General Corporation Law of the State of Delaware provides the general authorization of advancement of a director's or officer's litigation expenses in lieu of requiring the authorization of such advancement by the board of directors in specific cases, and that indemnification and advancement of expenses provided by the statute shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement or otherwise. The Bylaws of the Company provide for the broad indemnification by the directors and officers of the Company and for advancement of litigation expenses to the fullest extent permitted by current Delaware law. The Company also has entered into indemnification contracts with its directors and officers. II-1 46 The Company maintains a policy of directors and officers liability insurance which reimburses the Company for expenses which it may incur in connection with the foregoing indemnity provisions and which may provide direct indemnification to directors and officers where the Company is unable to do so. ITEM 16. EXHIBITS. The following exhibits are filed pursuant to Item 601 of Regulation S-K.
EXHIBIT NUMBER DESCRIPTION - ---------- ---------------------------------------------------------------------------------- 1.1 -- Form Placement Agreement 1.2 -- Form of Escrow Agreement 4.1* -- Restated Certificate of Incorporation of the Company (filed with the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1990) 4.2 -- Restated Bylaws of the Company 5.1 -- Opinion of Baker & Hostetler as to legality 23.1 -- Consent of Independent Public Accountants 23.2 -- Consent of Douglas International, Inc. 23.3 -- Consent of Baker & Hostetler, included in Item 5.1 24.1 -- Power of Attorney, included on page II-3
- --------------- * Incorporated by reference pursuant to Rule 411(c) under the Securities Act of 1933, as amended. ITEM 17. UNDERTAKINGS. (a) 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 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be a part of this Registration Statement as of the time it was declared effective. (2) For purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 47 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, as of this 13th day of December, 1996. URANIUM RESOURCES, INC. By: /s/ PAUL K. WILLMOTT ---------------------------------- POWER OF ATTORNEY Each of the undersigned officers and directors of Uranium Resources, Inc. hereby appoints Paul K. Willmott, as attorney and agent for the undersigned, with full power of substitution, for and in the name, place, and stead of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Act of 1933 any and all amendments (including post-effective amendments) and exhibits to this Registration Statement and any and all applications, instruments or documents to be filed with the Securities and Exchange Commission pertaining to the registration of the securities covered hereby, with full power and authority to do and perform any and all acts and things whatsoever requisite and necessary or desirable. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ----------------- /s/ PAUL K. WILLMOTT Chief Executive Officer, December 13, 1996 - --------------------------------------------- President and Director Paul K. Willmott (Principal Executive Officer) /s/ THOMAS H. EHRLICH Chief Financial Officer December 13, 1996 - --------------------------------------------- Financial and Accounting Thomas H. Ehrlich Officer) /s/ LELAND O. ERDAHL Director December 13, 1996 - --------------------------------------------- Leland O. Erdahl /s/ GEORGE R. IRELAND Director December 13, 1996 - --------------------------------------------- George R. Ireland /s/ JAMES B. TOMPKINS Director December 13, 1996 - --------------------------------------------- James B. Tompkins
II-3 48 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ---------- ----------------------------------------------------------------------------------- 1.1 -- Form Placement Agreement 1.2 -- Form of Escrow Agreement 4.1* -- Restated Certificate of Incorporation of the Company (filed with the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1990) 4.2 -- Restated Bylaws of the Company 5.1 -- Opinion of Baker & Hostetler as to legality 23.1 -- Consent of Independent Public Accountants 23.2 -- Consent of Douglas International, Inc. 23.3 -- Consent of Baker & Hostetler, included in Item 5.1 24.1 -- Power of Attorney, included on page II-3
- --------------- * Incorporated by reference pursuant to Rule 411(c) under the Securities Act of 1933, as amended. EX-1.1 2 FORM OF PLACEMENT AGREEMENT 1 EXHIBIT 1.1 12/12/96 URANIUM RESOURCES, INC. 1,400,000 SHARES OF COMMON STOCK MINIMUM 1,700,000 SHARES OF COMMON STOCK MAXIMUM PLACEMENT AGREEMENT December ___, 1996 EVEREN SECURITIES, INC. 77 West Wacker Drive 31st Floor Chicago, Illinois 60601 Dear Sirs: Uranium Resources, Inc., a Delaware corporation (the "Company"), proposes to offer and sell (the "Offering") an aggregate minimum 1,400,000 and up to an aggregate maximum 1,700,000 shares of its common stock, $0.001 par value (the "Common Stock"), to certain purchasers. The Company hereby engages EVEREN Securities, Inc. to act as the Company's exclusive placement agent (the "Placement Agent") in connection with the Offering. The minimum 1,400,000 shares of Common Stock (the "Minimum Shares") and the maximum up to 1,700,000 shares of Common Stock (the "Maximum Shares") are herein collectively referred to as the "Shares." The Company understands that the Placement Agent is acting on a "best efforts" basis in connection with the Offering and that the Minimum Shares will be sold on an "all or none" basis, such that no Shares will be sold unless all the Minimum Shares are sold. The Shares and the Offering are more fully described in the Registration Statement and Prospectus referred to below. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Registration Statement and Prospectus. 1. Registration Statement and Prospectus. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form S-3 (No. 333-____), including a preliminary prospectus, relating to the Shares, which may be 2 amended. The registration statement as amended at the time when it becomes effective, including information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Act, is hereinafter referred to as the "Registration Statement." The form of prospectus first filed by the Company with the Commission pursuant to Rule 424(b) and Rule 430A under the Act is hereinafter referred to as the "Prospectus." Each preliminary prospectus included in the Registration Statement prior to the time it becomes effective or filed with the Commission pursuant to Rule 424(a) under the Act is hereinafter referred to as a "Preliminary Prospectus." As used herein, "Registration Statement" and "Prospectus" shall include, in each case, the material incorporated therein by reference filed pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or prior to the date of this Agreement, and "amended," "amendment" or "supplement" with respect to the Registration Statement or the Prospectus shall be deemed to include the filing by the Company of any document pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof. 2. Agreement to Act as Placement Agent: Sale and Delivery of the Shares; Closing. (a) (i) On the basis of representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company hereby appoints the Placement Agent its agent and grants the Placement Agent the exclusive right to offer and sell the Shares, on a best efforts basis, for the account and risk of the Company. The Placement Agent accepts such appointment and agrees to use its best efforts as Placement Agent to offer and sell the number of Shares contemplated by this Agreement at the price stated in the Prospectus; and (ii) the Company hereby agrees to pay to the Placement Agent on the Closing Date a fee equal to 7% of the aggregate offering price (as set forth on the cover page of the Prospectus) of the Shares sold pursuant to the Offering. (b) The closing of the Offering is conditioned on the sale of the Minimum Shares prior to December __, 1996 (the "Termination Date"), and on the conditions precedent to closing provided for in this Agreement. The Placement Agent shall not be obligated to and does not intend itself to take (or purchase) any of the Shares. The Placement Agent shall obtain indications of interest from potential investors for the amount of the Offering. The Company shall not request effectiveness of the Registration Statement, and the Placement Agent shall not accept on behalf of the Company any investor funds, until indications of interest have been received for at least the Minimum Shares. The Placement Agent will accept subscriptions from investors on behalf of the Company unless the investor is a resident of a jurisdiction in which the Offering is not registered, qualified, or exempt from such registration or qualification. (c) Confirmations and definitive prospectuses shall be distributed to all investors by the Placement Agent at the time of pricing, informing investors of the closing date, which will be scheduled for three business days after pricing (the "Closing Date"). No investor funds shall be accepted by the Placement Agent on behalf of the Company prior to effectiveness of the Registration Statement. 2 3 (d) On or before the Closing Date, all investor funds shall be wired directly by the investors into an escrow account established for the benefit of the investors with Norwest Bank Colorado, N.A. (the "Escrow Agent"). The Escrow Agent will invest such funds in accordance with Rule 15c2-4 promulgated under the Exchange Act. On or before the Closing Date, the Escrow Agent shall advise the Company whether the investors have deposited the requisite funds in the escrow account. If the requisite funds have been deposited, the Company shall deposit with the Depository Trust Company the Shares to be credited to the respective accounts of the investors. Investor funds, together with interest thereon, if any, shall be collected by the Company through the facilities of the Escrow Agent on the Closing Date. The Offering shall not continue after the Closing Date. In the event that investor funds are not received for the Minimum Shares prior to the Termination Date, all funds deposited in the escrow account shall promptly be returned. (e) If investor funds for more than the Maximum Shares are received, the Placement Agent, in its sole and absolute discretion, may allocate the Shares among all the investors in such manner as it shall see fit. (f) The Company shall, concurrently with the execution of this Agreement, deliver an agreement executed by each of the directors and executive officers of the Company and each stockholder who is the beneficial owner (as defined in Rule 13d-3 of the Securities and Exchange Commission promulgated under the Exchange Act) of 875,000 or more shares of the Company's Common Stock pursuant to which each such person agrees, not to offer, sell, contract to sell, grant any option to purchase, or otherwise dispose of any Common Stock of the Company or any securities convertible into or exercisable or exchangeable for such Common Stock or in any other manner transfer all or a portion of the economic consequences associated with the ownership of any such Common Stock (except by gift to a donee who agrees to be bound by the terms thereof and except for the bona fide pledge of such securities to a pledgee who agrees to be bound by the terms thereof) for a period of 90 days after the date of the Prospectus without the prior written consent of EVEREN Securities, Inc. In any event, each Lindner mutual fund owning any shares of the Company's Common Stock and Ryback Management Corporation shall be treated as such a beneficial owner, and the Company shall deliver an agreement of those parties as required by the preceding sentence. Further, the Company shall, concurrently with the execution of this Agreement, deliver to EVEREN Securities, Inc. a manually signed waiver of each right which may entitle the holder of the right to require registration under the Act of shares of Common Stock or any other security of the Company as part of the Registration Statement. In addition, concurrently with the execution of this Agreement, the Company shall deliver to EVEREN Securities, Inc. a manually signed waiver of the anti-dilution provisions that could be triggered by the Offering in the Note and Warrant Agreement dated May 25, 1995 among the Company, Lindner Investments (on behalf of Lindner Bulwark Fund) and Lindner Dividend Fund, Inc. The waivers shall be in form and substance satisfactory to EVEREN Securities, Inc. 3 4 3. Agreements of the Company. The Company agrees with you: (a) To use its best efforts to cause the Registration Statement to become effective at the earliest possible time and, if the Company elects to rely upon Rule 430A, to comply with the requirements of Rule 430A. (b) To advise you promptly and, if requested by you, to confirm such advice in writing, (i) when the Registration Statement has become effective and when any post-effective amendment to it becomes effective, (ii) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information, (iii) of the receipt of any comments from the Commission or the Blue Sky or other securities authority of any jurisdiction regarding the Registration Statement, any post- effective amendment thereto, the Prospectus, or any amendment or supplement thereto, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for such purposes, and (v) of the happening of any event during the period referred to in paragraph (e) below which makes any statement of a material fact made in the Registration Statement or the Prospectus untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal or lifting of such order at the earliest possible time. If the Registration Statement has become or becomes effective with a form of prospectus omitting certain information pursuant to Rule 430A under the Act, or filing of the Prospectus is otherwise required under Rule 424(b) under the Act, the Company will file the Prospectus, properly completed, pursuant to Rule 424(b) within the time period prescribed and will provide evidence satisfactory to you of such timely filing. (c) To furnish to you, without charge, four signed copies of the Registration Statement as first filed with the Commission and of each amendment to it, including all exhibits, and to furnish to you such number of conformed copies of the Registration Statement as so filed and of each amendment to it, without exhibits, as you may reasonably request. (d) Not to file any amendment or supplement to the Registration Statement, whether before or after the time when it becomes effective, or to make any amendment or supplement to the Prospectus of which you shall not previously have been advised or to which you shall reasonably object; and to prepare and file with the Commission, promptly upon your reasonable request, any amendment to the Registration Statement or supplement to the Prospectus which may be necessary or advisable in connection with the distribution of the Shares by you, and to use its best efforts to cause the same to become promptly effective. (e) Promptly after the Registration Statement becomes effective, and from time to time thereafter for such period as in the opinion of your counsel, a prospectus is required by law to be delivered in connection with sales of, or dealings in, the Shares, to furnish to you as many copies of the Prospectus (and of any amendment or supplement to the Prospectus) as you may 4 5 reasonably request and during such period to comply with all requirements imposed upon it by the Act, as now existing and as hereafter amended, so far as necessary to permit the continuance of sales of or dealings in the Shares in accordance with the provisions hereof and the Prospectus. (f) If during the period specified in paragraph (e) any event shall occur as a result of which, in the opinion of your counsel, it becomes necessary to amend or supplement the Prospectus in order to have no untrue statement of a material fact therein and to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Prospectus to comply with any law, forthwith to prepare and file with the Commission at the Company's expense an appropriate amendment or supplement to the Prospectus so that the statements in the Prospectus, as so amended or supplemented, will not be untrue and will not in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with law, and to furnish to you such number of copies thereof as you may reasonably request. (g) During the period specified in paragraph (e), to file all documents required to be filed with the commission pursuant to Sections 13, 14 or 15 of the Exchange Act within the time periods required by the Exchange Act and the Exchange Act Regulations. (h) Prior to any public offering of the Shares, in cooperation with you and your counsel, to use its best efforts to register or qualify the Shares for offer and sale by you under the securities or Blue Sky laws of such states and other jurisdictions as you may request, to continue such qualification in effect so long as required for distribution of the Shares and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification. (i) To make generally available to its security holders as soon as reasonably practicable an earnings statement covering a period of at least twelve months after the effective date of the Registration Statement (but in no event commencing later than 90 days after such date) which shall satisfy the provisions of Section 11(a) of the Act, and to advise you in writing when such statement has been so made available. (j) During the period of five years after the date of this Agreement, (i) to mail as soon as reasonably practicable after the end of each fiscal year to the record holders of its Common Stock a financial report of the Company and its subsidiaries on a consolidated basis (and a similar financial report of all unconsolidated subsidiaries, if any), all such financial reports to include a consolidated balance sheet, a consolidated statement of operations, a consolidated statement of cash flows and a consolidated statement of shareholders' equity as of the end of and for such fiscal year, together with comparable information as of the end of and for the preceding year, certified by independent certified public accountants, and (ii) to make generally available as soon as practicable after the end of each quarterly period (except for the last quarterly period of each fiscal year) to such holders, a consolidated balance sheet, a consolidated statement of operations and a consolidated statement of cash flows (and similar financial reports of all unconsolidated subsidiaries, if any) as of the end of and for such period, and for the period from 5 6 the beginning of such year to the close of such quarterly period, together with comparable information for the corresponding periods of the preceding year. (k) During the period of five years after the date of the Agreement, to furnish to you as soon as available a copy of each report or other publicly available information of the Company mailed to the security holders of the Company or filed with the Commission, the National Association of Securities Dealers, Inc. (the "NASD") or any securities exchange, and such other publicly available information concerning the Company and its subsidiaries as you may reasonably request. (l) Whether or not the transactions contemplated hereunder are consummated or this Agreement becomes effective or is terminated (whether by you in accordance with the provisions of Section 9 or otherwise) to pay all reasonable costs, expenses, fees and taxes incident to (i) the preparation, printing, filing and distribution under the Act of the Registration Statement (including financial statements and exhibits), each preliminary prospectus and all amendments and supplements to any of them prior to or during the period specified in paragraph (e), (ii) the preparation, printing and delivery of the Prospectus and all amendments or supplements to it during the period specified in paragraph (e), (iii) the preparation, printing and delivery of this Agreement, the Preliminary and Supplemental Blue Sky Memoranda, the certificates for the Shares and all other agreements, memoranda, correspondence and other documents printed and delivered in connection with the offering of the Shares (including in each case any disbursements of your counsel, (iv) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the several states and other jurisdictions (including in each case the fees and disbursements of your counsel relating to such registration or qualification and memoranda relating thereto), (v) filings and clearance with the NASD in connection with the offering of the Shares, (vi) the listing of the Shares on the Nasdaq National Market and (vii) furnishing such copies of the Registration Statement, the Prospectus and all amendments and supplements thereto as you may request for use in connection with the offering or sale of the Shares. (m) To use its best efforts to maintain the inclusion of the Common Stock on the Nasdaq National Market (or on a national securities exchange) for a period of five years after the effective date of the Registration Statement. (n) Prior to the Closing Date, not to issue any press release or other communication relating to the offering of the Shares or hold any press conference with respect to the Company, any subsidiary, the financial conditions, results of operations, business, properties, assets, or liabilities of any of them, or this offering, without your prior written consent which shall not be unreasonably withheld. (o) To apply the proceeds from the sale of the Shares as set forth under "Use of Proceeds" in the Prospectus. (p) To use its best efforts to do and perform all things required or necessary to be done and performed under this Agreement by the Company prior to the Closing Date, and to satisfy all conditions precedent to the delivery of the Shares. 6 7 (q) Not to take, at any time, directly or indirectly, any action intended or which might reasonably be expected, to cause or result in, or which will constitute, stabilization of the price of the Shares to facilitate the sale or resale of the Shares. (r) From the date of the Agreement through the Closing Date, not to engage any other party to act as placement agent, underwriter, investment advisor or in any other capacity in connection with any issuance or sale whether in a private placement or public offering pursuant to the Act, of any securities of the Company. 4. Representations and Warranties of the Company. The Company represents and warrants to you that: (a) The Company meets the requirements for use of Form S-3 under the Act and has filed with the Commission the Registration Statement, including the Prospectus relating to the Shares. (b) The Registration Statement has become effective under the Act, no stop order suspending the effectiveness of the Registration Statement is in effect and, to the best of the Company's knowledge, after due inquiry, no proceedings for such purpose are pending before or contemplated by the Commission. (c) (i) Each part of the Registration Statement, when such part became effective under the Act, did not contain and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Act and the Exchange Act and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph (c) do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to the Placement Agent furnished to the Company in writing by you expressly for use therein. (d) Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the requirements of the Act and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (e) The documents incorporated by reference into the Prospectus, at the time they were filed with the Commission, complied in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, and, as of the date of this Agreement and the Closing Date, when read together with the Prospectus and any supplement thereto will not contain an untrue statement of a material fact or omit to state a material fact required to be stated 7 8 therein or necessary to make the statement therein, in the light of the circumstances under which they were made, not misleading, and any documents filed after the date of this Agreement and so incorporated by reference in the Prospectus will, when they are filed with the Commission, comply in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, and when read together with the Prospectus and any supplement thereto will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (f) The Company does not own or control, directly or indirectly, any corporation, association or other entity other than URI, Inc., Hydro Resources, Inc., URI Minerals, Inc., Beltline Resources, Inc. or Hydro Restoration Corporation. Each of the Company and its subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to carry on its business as it is currently being conducted and to own, lease and operate its properties, and each is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the condition (financial or otherwise), earnings, assets, results of operations, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise (a "Material Adverse Effect"), and no proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. (g) The Company has authorized and outstanding capital stock as set forth under the heading "Capitalization" in the Prospectus and all of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in substantial compliance with all federal and state securities laws and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities. (h) All of the issued and outstanding shares of capital stock of, or other ownership interests in, each of the Company's subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature. (i) Except as disclosed in the Prospectus and the financial statements of the Company and the related notes thereto included in the Prospectus, neither the Company nor any of its subsidiaries has outstanding any options to purchase, registration rights, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations. (j) The Shares to be issued and sold by the Company hereunder have been duly authorized and, when issued and delivered to the Depository Trust Company for the benefit of 8 9 the purchasers of the Shares against payment therefor as provided in this Agreement, will be validly issued, fully paid and non-assessable, free and clear of all liens and restrictions on transfer, and the issuance of such Shares will not be subject to any preemptive or similar rights. (k) The Company has the requisite corporate power and authority to enter into, execute and deliver this Agreement and perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company enforceable in accordance with its terms, except as enforceability may be limited by general equitable principles, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether such enforceability is considered in a proceeding in equity or at law), bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting creditors' rights generally and except no representation or warranty is given us to the enforceability of those provisions relating to indemnity or contribution for liabilities arising under the Act. (l) The Company 's Common Stock, including the Shares, is eligible for trading on the Nasdaq National Market. (m) Neither the Company nor any of its subsidiaries is in violation of its respective charter or by-laws or in default in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any other agreement, indenture or instrument to which the Company or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective property is bound, except as disclosed in the Prospectus or except where any such violations or defaults would not result in a Material Adverse Effect. (n) Except as disclosed in the Prospectus, (i) each of the Company and its subsidiaries is in possession of and is operating in compliance with all authorizations, licenses, permits, consents, approvals, certificates, orders and other rights (including, without limitation those required by the Nuclear Regulatory Commission) of or with any court, regulatory, administrative or other governmental body reasonably necessary or required to conduct its businesses as now conducted or to own, lease or operate its properties, all of which are valid and in full force and effect, except where the failure to have possession thereof or to comply therewith would not have a Material Adverse Effect, and (ii) the Company and its subsidiaries are in compliance with all laws, rules, regulations, judgments, decrees, orders and statutes of any court or jurisdiction to which they are subject, except where noncompliance would not have a Material Adverse Effect. (o) No consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any federal, state or local governmental authority or any court or other tribunal is required by the Company or any of its subsidiaries for the execution or delivery of, or the performance of the Company's obligations under, this Agreement (except filings under the Act, and filings under Blue Sky or securities laws of states or other jurisdictions or as may be required under the rules of the NASD). 9 10 (p) No consent of any party to any contract, agreement, instrument, lease, license, arrangement, or understanding to which the Company or any of its subsidiaries is a party, or to which any of their respective properties or assets are subject, is required for the execution or delivery of, or the performance of the Company's obligations under, this Agreement. (q) Neither the execution and delivery of, nor the performance of the Company's obligations under, this Agreement, nor the issuance and sale of the Shares as contemplated hereby, nor the consummation of any other of the transactions herein contemplated, nor the fulfillment of the terms hereof, will violate, result in a breach of, conflict with, nor (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any contract, agreement, instrument, lease, license, arrangement, or understanding, to which the Company or any of its subsidiaries is a party, or to which any of their respective properties or assets are subject, nor violate or result in a breach of any term of the respective charter or by-laws of the Company or any of its subsidiaries nor violate, result in a breach of, or conflict with any law, rule, or regulation, or any order, judgment, or decree binding on the Company or any of its subsidiaries or to which any of their respective operations, businesses, properties, or assets are subject, except where such violation, breach or conflict would not, individually or in the aggregate, have a Material Adverse Effect and would not impair materially the ability of the Company to perform its obligations hereunder or thereunder. (r) Neither the Company nor any of its subsidiaries nor any of its executive officers, directors, or affiliates (as defined pursuant to the Act), has taken or will take, directly or indirectly, prior to the termination of this Agreement, any action designed to stabilize or manipulate the price of the Common Stock or which has caused or resulted in, or which might in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company or any of its subsidiaries to facilitate the sale or resale of any of the Shares. (s) There is no legal or governmental proceeding pending, or to the best of the Company's knowledge threatened, to which the Company or any of its subsidiaries is a party or to which any of their respective property is subject which is required to be described in the Registration Statement or the Prospectus and is not so described or, or of any contract or other document which is required to be described in the Registration Statement or the Prospectus or is required to be filed as an exhibit to the Registration Statement which is not described or filed as required. (t) The operations of the Company and its subsidiaries, and all of the real property owned by the Company or any of its subsidiaries (the "Owned Real Property") or leased by the Company or any of its subsidiaries (the "Leased Real Property"), comply in all respects with all applicable environmental, health or safety Legal Requirements(1) and all Legal Requirements - --------------- (1) For purposes of this Agreement, "Legal Requirements" means applicable common law and any statute, ordinance, code or other law, rule, regulation, order, technical or other standard, requirement or procedure enacted, adopted, promulgated, applied or followed by any Governmental Authority, including Judgments. "Judgment" means any judgment, writ, order, injunction, award or decree of any court, judge, justice or magistrate, including any bankruptcy court or judge, and any order of or by any Governmental Authority. 10 11 administered or imposed by the Nuclear Regulatory Commission, except where a failure to so comply would not have a Material Adverse Effect; and none of the Company's operations thereon are subject to any judicial or administrative proceeding alleging a violation of any such Legal Requirements, except for any violation which would not have a Material Adverse Effect. Neither the Company nor any of its subsidiaries are the subject of any "Superfund" evaluation or investigation or any investigation or proceeding of any Governmental Authority(2) evaluating whether any remedial action is necessary to respond to any release of Hazardous Substances(3). Except as disclosed in the Prospectus, the Company and its subsidiaries have no contingent liability in connection with any release of any Hazardous Substance into the environment, whether the release was with respect to the Owned or Leased Real Property by the Company or by any operations of any predecessor with respect to the Owned or Leased Real Property; and, except as disclosed in the Prospectus, no such release which could require remediation has occurred. (u) Except for permits or licenses for which applications have been made or will be made for future operations as disclosed in the Prospectus, all permits, licenses, permissions, and other authorizations relating to the Owned or Leased Real Property which are necessary under applicable Legal Requirements with respect to pollution or protection of the environment have been obtained, including Legal Requirements relating to actual or threatened emissions, discharges, or releases of pollutants, contaminants, or Hazardous Substances into ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or Hazardous Substances. The Company and each of its subsidiaries is in compliance in all - --------------- (2) For purposes of this Agreement, "Governmental Authority" means (i) the United States of America, any state, commonwealth, territory or possession thereof and any political subdivision or quasi-governmental authority of any of the same, including but not limited to courts, tribunals, departments, commissions, boards, bureaus, agencies, counties, municipalities, provinces, parishes, and other instrumentalities, and (ii) any foreign (as to the United States of America) sovereign entity, including but not limited to nations, states, republics, kingdoms and principalities, any state, province, commonwealth, territory or possession thereof, and any political subdivision, quasi-governmental authority or instrumentality of any of the same. (3) For purposes of this Agreement, "Hazardous Substances" means any pollutant, contaminant, chemical, industrial, toxic, hazardous, or noxious substance or waste which is regulated by any Governmental Authority, including (i) any "hazardous waste" as defined by the Resource Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C. '6901 et seq.), as amended, and rules and regulations promulgated thereunder, (ii) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) (42 U.S.C. '9601 et seq.), as amended, and rules and regulations promulgated thereunder, (iii) any substance regulated by the Toxic Substances Control Act (TSCA) (42 U.S.C. '2601 et seq.), as amended, and rules and regulations promulgated thereunder, (iv) asbestos, (v) polychlorinated biphenyls, (vi) any substances regulated under the underground storage tanks provisions of Subtitle I of RCRA (42 U.S.C. '6991 et seq.), as amended, and rules and regulations promulgated thereunder, (vii) any "economic poison" as defined in the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ' 135, et seq.); (viii) any petroleum or petroleum compounds (refined or crude) flammable substances, explosives, radioactive materials, or any other materials or pollutants which pose a hazard or potential hazard to the Owned or Leased Real Property or to persons thereon; (ix) any substance the presence, use, treatment, storage or disposal of which on the Owned or Leased Real Property is prohibited by any Legal Requirements, and (x) any other substance which by any Legal Requirement requires special handling, reporting, or notification of any Governmental Authority in its collection, storage, use, treatment or disposal. 11 12 respects with all terms and conditions of such permits, and is in compliance in all respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and time-tables contained in such Legal Requirements or contained in any other environmental, health or safety Legal Requirements relating to the Owned or Leased Real Property except where noncompliance would not have a Material Adverse Effect. The Company and each of its subsidiaries have not received any notice of, nor does the Company or any of its subsidiaries have any knowledge of circumstances relating to, any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans, including but not limited to the presence, use, generation, manufacture, disposal, release or threatened release of any Hazardous Substances from the Owned or Leased Real Property, which could interfere with or prevent continued compliance, or which could give rise to any liability except as disclosed in the Prospectus, based upon or related to the processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, or Hazardous Substances from or attributable to the Owned or Leased Real Property. The Company and each of its subsidiaries have provided to EVEREN Securities, Inc. complete and correct copies of (i) all studies, reports, surveys and other materials in their possession relating to the presence or alleged presence of Hazardous Substances at, on or affecting the Owned or Leased Real Property, and (ii) all materials in the Company's or any of its subsidiaries' possession relating to any claim, allegation or action by any private party under any environmental, health or safety Legal Requirement with respect to the Owned or Leased Real Property. To the best knowledge of the Company and each of its subsidiaries, (i) no underground storage tanks are currently or have been located on any Owned or Leased Real Property and (ii) no building or other structure on any Owned or Leased Real Property contains asbestos. (v) The Company has no reason to believe that, except as disclosed in the Prospectus, it will not obtain all permits, licenses, permissions and other authorizations relating to the properties referenced in the Prospectus as Vasquez and Alta Mesa in Texas and Churchrock and Crownpoint in New Mexico that are or will be necessary under applicable Legal Requirements to explore, develop and produce uranium from such properties, using the in situ leach mining process. (w) All of the improvements (including leasehold improvements) and premises of each parcel of the Owned Real Property and Leased Real Property are in good condition and repair, ordinary wear excepted, and are suitable for the purposes for which are currently used or proposed to be used by the Company or any of its subsidiaries. The current use and occupancy of each parcel of the Owned Real Property and Leased Real Property and the improvements thereon by the Company or any of its subsidiaries are in compliance with all applicable Legal Requirements and private covenants and restrictions and do not constitute nonconforming uses under any applicable zoning requirement. Each parcel of Owned Real Property and each parcel of Leased Real Property (i) has access to and over public streets or highways, or private streets or highways for which the Company or any of its subsidiaries has a valid right of ingress and egress, (ii) conforms in its current use to all material zoning requirements without reliance on a variance issued by a Governmental authority or a classification of the parcel in question as a 12 13 nonconforming use, and (iii) conforms in its current use to all material restrictive covenants, if any, or other material encumbrances affecting all or part of such parcel. (x) The Company or any of its subsidiaries have good, indefeasible and marketable title to the Owned Real Property and all of their other tangible and intangible assets and properties, subject only to liens for taxes not yet due and payable, except as otherwise described in the Prospectus or where failure to so have would not result in a Material Adverse Effect. The tangible and intangible assets and properties owned or leased by the Company or any of its subsidiaries include all properties, assets, and rights necessary to conduct the business of the Company and each of its subsidiaries as currently conducted. All tangible assets and properties owned or leased by the Company and each of its subsidiaries are in good condition and repair, ordinary wear excepted. (y) All leases to which the Company or any of its subsidiaries is a party are valid and binding obligations and no default has occurred or is continuing thereunder, except where such invalidity, unenforceability or default would not result in a Material Adverse Effect; and the Company and its subsidiaries enjoy peaceful and undisturbed possession under all such leases to which any of them is a party as lessee with such exceptions as do not materially interfere with the use made by the Company or such subsidiary. (z) Arthur Andersen LLP are independent public accountants with respect to the Company and its subsidiaries as required by the Act. (aa) The consolidated financial statements and schedules of the Company, and the related notes thereto, included in the Registration Statement and the Prospectus (and any amendment or supplement thereto) present fairly the consolidated financial position, results of operations and changes in financial position of the Company and its subsidiaries on the basis stated in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements, schedules and related notes have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved as certified by the independent accountants named in the preceding paragraph of this section, except as disclosed therein; and the other financial and statistical information and data set forth in the Registration Statement and the Prospectus (and any amendment or supplement thereto) is, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. (ab) Since the respective dates as of which information is given in the Registration Statement and Prospectus, and except as described therein: (i) there has not been any material adverse change, or any development involving a prospective material adverse change, in or affecting the condition, financial or otherwise, of the Company and its subsidiaries, taken as a whole, or the business affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, whether or not occurring in the ordinary course of business; (ii) the Company and its subsidiaries have not incurred any material liabilities or obligations, indirect, direct or contingent, or entered into any material verbal or written agreement or other transaction which is not in the ordinary course of business or which 13 14 could result in a material reduction in the future earnings of the Company and its subsidiaries; (iii) the Company and its subsidiaries have not sustained any material loss or interference with their respective businesses or properties from fire, flood, windstorm, accident or other calamity, whether or not covered by insurance; (iv) the Company has not paid or declared any dividends or other distributions with respect to its capital stock and the Company and its subsidiaries are not in default in the payment of principal or interest on any outstanding debt obligations; (v) there has not been any change in the capital stock or indebtedness material to the Company and its subsidiaries (other than in the ordinary course of business); and (vi) there has not been any issuance of warrants, options, convertible securities or other rights to purchase or acquire capital stock of the Company. (ac) Each of the Company and its subsidiaries has sufficient trademarks, trade names, patent rights, mask works, copyrights, licenses, approvals and governmental authorizations reasonably necessary to conduct their businesses as now conducted; the expiration of any trademarks, trade names, patent rights, mask works, copyrights, licenses, approvals or governmental authorizations would not have a Material Adverse Effect; the Company has no knowledge of any material infringement by it or its subsidiaries of trademark, trade name rights, patent rights, mask works, copyrights, licenses, trade secret or other similar propriety rights (collectively, "Proprietary Rights") of others, and there is no claim being made against the Company or its subsidiaries regarding infringement of any Proprietary Right which could have a Material Adverse Effect; and except as disclosed in the Prospectus, neither the Company nor its subsidiaries is obligated or under any liability whatsoever to pay any royalty, fee or other similar payment in respect of any Proprietary Rights. (ad) The Company and its subsidiaries have filed all necessary federal, state and foreign income and franchise tax returns and have paid all taxes shown as due thereon; and the Company has no knowledge of any tax deficiency which has been or might reasonably be asserted or which has been threatened against the Company or its subsidiaries which could have a Material Adverse Effect. (ae) Except as disclosed in the Prospectus, the Company owns and has the unrestricted right to use all trade secrets, including know-how, customer lists, inventions, designs, processes, computer programs and technical data necessary to manufacture, operate and sell all products and services sold or developed and proposed to be sold by it as described in the Prospectus, free and clear of any rights, liens and claims of others. The Company is not using any material confidential information or trade secrets of any former employer of any of its past or present employees. (af) Except as described in the Prospectus, neither the Company nor any of its subsidiaries has any reason to believe that any governmental body or agency is considering limiting, suspending, revoking or refusing to grant or renew any license, certificate, permit, authorization, approval, order, franchise or right in any material respect reasonably necessary to the conduct of their respective businesses as now conducted or as proposed to be conducted as disclosed in the Prospectus. 14 15 (ag) Except as described in the Prospectus, no holder of any security of the Company has any right to require registration of shares of Common Stock or any other security of the Company. (ah) Neither the Company nor any of its subsidiaries is an "investment Company" or a Company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as mended. (ai) The Company and each of its subsidiaries has complied with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida) relating to doing business with the Government of Cuba or with any person or any affiliate located in Cuba. (aj) The Company has not distributed and will not distribute any prospectus or other offering material in connection with the offering and sale of the Shares other than any Preliminary Prospectus or the Prospectus or other materials permitted by the Act to be distributed by the Company. (ak) Except for the employee benefit plans described in the Prospectus, the Company and each of its subsidiaries have not had any employee benefit plan, profit sharing plan, employee pension benefit plan or employee welfare benefit plan or deferred compensation arrangements ("Plans") that is subject to the provisions of the Employee Retirement income Security Act of 1974, as amended, or the rules and regulations thereunder ("ERISA"). All Plans that are subject to ERISA are, and have been at all times since their establishment, in compliance with ERISA, in all material respects, and, to the extent required by the Internal Revenue Code of 1986, as amended (the "Code"), in compliance with the Code in all material respects. The Company has not had any employee pension benefit plan that is subject to Part 3 of Subtitle B of Title I of ERISA or any defined benefit plan or multiemployer plan. The Company has not maintained retired life and retired health insurance plans that are employee welfare benefit plans providing for continuing benefit or coverage for any employee or any beneficiary of any employee after such employee's termination of employment, except as required by Section 4980B of the Code. To the knowledge of the Company and each of its subsidiaries, no fiduciary or other party in interest with respect to any of the Plans has caused any of such Plans to engage in a prohibited action as defined in Section 406 of ERISA. As used in this subsection, the terms "defined benefit plan," "employee benefit plan," "employee pension benefit plan," "employee welfare benefit plan," "fiduciary" and "multiemployee plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA. The Company and each of its subsidiaries do not have or expect to have any liability for any prohibited transaction or funding deficiency or any complete or partial withdrawal ability with respect to any pension, profit sharing or other plan which is subject to ERISA, to which the Company or any of its subsidiaries is or has ever been a participant. With respect to such plans, the Company and each of its subsidiaries are in compliance in all material respects with all applicable provisions of ERISA. (al) No labor dispute exists with the employees of the Company or any of its subsidiaries, and to the knowledge of the Company and each of its subsidiaries, no such labor dispute is imminent. The Company and each of its subsidiaries are not aware of any existing or 15 16 imminent labor disturbance by the employees of any of its principal suppliers, contractors or customers that would have a Material Adverse Effect. (am) All transactions between and among the Company or any of its subsidiaries and the officers, directors, promoters and principal stockholders of the Company or any of its subsidiaries, which transactions are required to be disclosed in the Prospectus (whether directly in the Prospectus or through incorporation by reference) by the Act or the applicable rules, regulations, releases and instructions of the Commission under the Act, have been accurately disclosed in the Prospectus; and the terms of each such transaction are fair to the Company or its subsidiaries and no less favorable to the Company or its subsidiaries than the terms that could have been obtained form unrelated parties. Except as set forth in the Prospectus, there are no transactions with affiliated entities that are required to be disclosed by the Act or the applicable rules, regulations, releases and instructions of the Commission under the Act. (an) The Company and each of its subsidiaries are not aware that (i ) any executive, key employee or significant group of employees of the Company or any of its subsidiaries plans to terminate employment with the Company or such subsidiary or (ii) any such executive or key employee is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreement that would be violated by the present or proposed business activities of the Company or any of its subsidiaries. (ao) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to records is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Other than as contemplated by this Agreement, the Company and its subsidiaries have not incurred any liability for any finder's or broker's fee or agent's commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. 5. Indemnification. (a) The Company agrees to indemnify and hold harmless the Placement Agent and each person, if any, who controls the Placement Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and judgments caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stored therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Placement Agent furnished in writing to the Company by you through you expressly for use 16 17 therein. The Company acknowledges that the only information relating to the Placement Agent furnished in writing to the Company by you expressly for use in the Registration Statement or Prospectus are the statements set forth in Note 1 to the table on the cover page and under the caption "Plan of Distribution" in the Prospectus. (b) In case any action shall be brought against the Placement Agent or any person controlling the Placement Agent, based upon any Preliminary Prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto and with respect to which indemnity may be sought against the Company, the Placement Agent shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such indemnified party and payment of all reasonable fees and expenses. The Placement Agent or any such controlling person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Placement Agent or such controlling person unless (i) the employment of such counsel has been specifically authorized in writing by the Company, (ii) the Company shall have failed to assume the defense and employ counsel or (iii) the named parties to any such action (including any impleaded parties) include both the Placement Agent or such controlling person and the Company, as the case may be, and counsel for the Placement Agent or such controlling person has reasonably concluded that there may be one or more legal defenses available to the Placement Agent or such controlling person which are different from or additional to those available to the Company (in which case the Company shall not have the right to assume the defense of such action on behalf of the Placement Agent or such controlling person, it being understood, however, that the Company shall not, in connection with any one such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all the Placement Agents and controlling persons, which firm shall be designated in writing by EVEREN Securities, Inc. and that all such reasonable fees and expenses shall be reimbursed as they are incurred). The Company shall not be liable for any settlement of any such action effected without the written consent of the Company, whose consent shall not be unreasonably withheld, but if settled with the written consent of the Company, the Company agrees to indemnify and hold harmless the Placement Agent and any such controlling person from and against any loss or liability by reason of such settlement. If at any time the indemnified party shall have requested the indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than fifteen business days after receipt by such indemnifying party of the aforesaid request and (ii) the indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 17 18 (c) The Placement Agent agrees to indemnify and hold harmless the Company and its directors, its officers who sign the Registration Statement, any person controlling the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to the Placement Agent but only with reference to information relating to the Placement Agent furnished in writing by or on behalf of the Placement Agent through you expressly for use in the Registration Statement, the Prospectus or any Preliminary Prospectus. In case any action shall be brought against the Company or any of its directors, any such officer or any person controlling the Company based on the Registration Statement, the Prospectus or any Preliminary Prospectus and in respect of which indemnity may be sought against the Placement Agent, the Placement Agent shall have the rights and duties given to the Company (except that if the Company shall have assumed the defense thereof, the Placement Agent shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of the Placement Agent), and the Company and its directors, any such officers and any person controlling the Company shall have the rights and duties given to the Placement Agent, by Section 5(b) hereof. (d) If the indemnification provided for in this Section 5 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Placement Agent on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Placement Agent in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Placement Agent shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company, and the total fees received by the Placement Agent under this Agreement, bear to the total price to the public of the Shares, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Placement Agent shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or the Placement Agent and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Placement Agent agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses 18 19 reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5, the Placement Agent shall not be required to contribute any amount in excess of the amount by which the total purchase price for the Shares exceeds the amount of any damages which the Placement Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 6. Conditions of Placement Agent's Obligations. The Placement Agent's obligations hereunder and the closing of the purchase of the Shares contemplated hereby are subject to the satisfaction of each of the following conditions: (a) All the representations and warranties of the Company contained in this Agreement shall be true and correct as of the date hereof and as of the Closing Date with the same force and effect as if made on and as of such date. (b) The Registration Statement shall have become effective not later than 5:00 P.M., New York City time, on the date of this Agreement or at such later date and time as you may approve in writing, and at the Closing Date no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been commenced or shall be pending before or contemplated by the Commission. (c) You shall be satisfied that since the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) there shall not have been any action or inaction which might result in a material adverse change in the condition (financial or otherwise), earnings, assets, results of operations, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise (a "Material Adverse Change") which makes it impractical or inadvisable in your judgment to proceed with the public offering or purchase the Shares as contemplated hereby, (ii) except as set forth in the Registration Statement and the Prospectus, no verbal or written agreement or other transaction shall have been entered into by the Company or any of its subsidiaries, which is not in the ordinary course of business or which could result in a Material Adverse Change, (iii) no loss or damage (whether or not insured) to the property of the Company or any of its subsidiaries shall have been sustained the result of which would have a Material Adverse Effect, (iv) no legal or governmental action, suit or proceeding affecting the Company or any of its subsidiaries the result of which could have a Material Adverse Effect or may materially affect the transactions contemplated by this Agreement shall have been instituted or threatened and (v) on the Closing Date you shall have received a certificate dated the Closing Date, signed by Paul K. Willmott and Thomas H. Ehrlich, in their capacities with the Company as the Chairman, Chief Executive Officer and President in the case of Mr. Willmott, and Vice President and Chief Financial Officer in the case of Mr. Ehrlich, confirming the matters set forth in paragraphs (a), (b) and (c) of this Section 8. 19 20 (d) You shall have received on the Closing Date an opinion (satisfactory to you and your counsel), dated as of the Closing Date of Baker & Hostetler, counsel for the Company, to the effect that: (i) Each of the Company and its subsidiaries is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect and to the best of such counsel's knowledge, after due inquiry, no proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. All of the issued and outstanding shares of capital stock of, or other ownership interests in, each of the Company's subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company free and clear, to best knowledge of counsel, after due inquiry, of any security interest, claim, lien, encumbrance or adverse interest of any nature. (ii) The Company has authorized and outstanding capital stock as set forth under the heading "Capitalization" in the Prospectus and all of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable, and were not issued in violation of or subject to any preemptive rights granted by the Company's certificate of incorporation or by statute or, to the best knowledge of such counsel after due inquiry, other rights to subscribe for or purchase securities. The form of certificate for the Shares is in due and proper form and complies with all applicable statutory requirements. (iii) The Shares have been duly authorized and, when issued and delivered, will be validly issued, fully paid and non-assessable. No preemptive rights granted by the Company's certificate of incorporation or by statute or, to the best knowledge of such counsel, after due inquiry, rights of first refusal or other similar subscription or purchase rights of shareholders of the Company, or of holders of warrants, options, convertible securities or other rights to acquire shares of capital stock of the Company, exist with respect to any of the Shares or the issue and sale thereof. To the best knowledge of such counsel, after due inquiry, no rights to register outstanding shares of the Company's capital stock, or shares issuable upon the exercise of outstanding warrants, options, convertible securities or other rights to acquire shares of such capital stock, exist which have not been validly exercised or waived with respect to the Registration Statement. The capital stock of the Company, including the Shares, conforms in all material respects to the description thereof contained in the Prospectus. (iv) Except as disclosed in the Prospectus and the financial statements of the Company and the related notes thereto included in the Prospectus, neither the Company nor any of its subsidiaries has outstanding any preemptive rights, or to the best of such counsel's knowledge, after due inquiry, any options to purchase or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations, or any registration rights. 20 21 (v) This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company enforceable in accordance with its terms, except as enforceability may be limited by general equitable principles, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether such enforceability is considered in a proceeding in equity or at law), bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting creditors' rights generally and except no opinion need be given as to the enforceability of those provisions relating to indemnity or contribution for liabilities arising under the Act. (vi) The Registration Statement has become effective under the Act, no stop order suspending its effectiveness has been issued and no proceedings for that purpose are, to the best of such counsel's knowledge, after due inquiry, pending before or contemplated by the Commission. (vii) The statements set forth in the Prospectus under the headings "Capitalization" and "Description of Capital Stock" and Item 15 of Part II of the Registration Statement insofar as such statements constitute a summary of documents referred to therein or of legal matters or proceedings, are complete and accurate in all material respects and fairly summarize in all material respects the information called for with respect to such documents, legal matters and proceedings. (viii) The Shares and the Common Stock conform in all material respects as to legal matters to the description thereof contained in the Prospectus. (ix) Neither the Company nor any of its subsidiaries is in violation of its respective charter or by-laws and, to the best of such counsel's knowledge, after due inquiry, neither the Company nor any of its subsidiaries is in default in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any other agreement, indenture or instrument to which the Company or any of its subsidiaries is a party or by which it or any of its subsidiaries or their respective property is bound, except as disclosed in the Prospectus or except where such violation or default would not result in a Material Adverse Effect. (x) To the best of such counsel's knowledge, after due inquiry, and except as disclosed in the Prospectus, each of the Company and its subsidiaries is in possession of and is operating in compliance with all authorizations, licenses, permits, consents, approvals, certificates, orders and other rights of or with any court, regulatory, administrative or other governmental body reasonably necessary or required to conduct its businesses as now conducted or to own, lease or operate its properties, except where the failure to have possession thereof or to comply therewith would not have a Material Adverse Effect. (xi) No consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any federal, state or local governmental authority or any court or other tribunal is required by the Company or any of its subsidiaries for the execution or delivery of, or the performance of the Company's obligations under, this Agreement (except 21 22 filings under the Act and filings under Blue Sky or securities laws of states or other jurisdictions or as may be required under the rules of the NASD). (xii) No consent of any party to any contract, agreement, instrument, lease, license, arrangement, or understanding to which the Company or any of its subsidiaries is a party, or to which any of their respective properties or assets are subject, is required for the execution or delivery of, or the performance of the Company's obligations under, this Agreement. (xiii) Neither the execution and delivery of, nor the performance of the Company's obligations under, this Agreement nor the issuance and sale of the Shares as contemplated hereby nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof, will violate, result in a breach of, conflict with, nor (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any material contract, agreement, instrument, lease, license, arrangement, or understanding to which the Company or any of its subsidiaries is a party, or to which any of their respective properties or assets are subject, and which are known to counsel after due inquiry, nor violate or result in a breach of any term of the respective charter or by-laws of the Company or any of its subsidiaries nor violate, result in a breach of, or conflict with any law, rule, or regulation, or to the best of such counsel's knowledge after due inquiry, any order, judgment, or decree binding on the Company or any of its subsidiaries or to which any of their respective operations, businesses, properties, or assets are subject, except where such violation, breach or conflict would not, individually or in the aggregate, have a Material Adverse Effect or would impair materially the ability of the Company to perform its obligations hereunder or thereunder. (xiv) To the best of such counsel's knowledge, after due inquiry, such counsel does not know of any legal or governmental proceeding pending or threatened to which the Company or any of its subsidiaries is a party or to which any of their respective property is subject which is required to be described in the Registration Statement or the Prospectus and is not so described or, or of any contract or other document which is required to be described in the Registration Statement or the Prospectus or is required to be filed as an exhibit to the Registration Statement which is not described or filed as required. (xv) Neither the Company nor any of its subsidiaries is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (xvi) (1) The Company is eligible to use Form S-3 under the Act for the registration of the Shares, (2) the Registration Statement and the Prospectus and any supplement or amendment thereto (except for financial statements and notes, schedules and other financial statistical data included therein, as to which no opinion need be expressed) comply as to form in all material respects with the Act and the Exchange Act, and (3) no facts have come to the attention of such counsel that have led such counsel to believe that the Registration Statement and the prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a material fact, or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus 22 23 as amended or supplemented, if applicable (except for financial statements as aforesaid) contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statement therein, in the light of the circumstances under which they were made, not misleading. (xvii) Documents incorporated by reference into the Prospectus (except for financial statements and notes, schedules and other financial statistical data included therein as to which no opinion need be expressed), at the time they were filed with the Commission, complied in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder; and to the best of such counsel's knowledge, after due inquiry, such documents, when they were so filed, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (xviii) No transfer taxes are required to be paid in connection with the sale and delivery of the Shares from the Company to the purchase of the Shares hereunder. In giving the opinions stated in clause (x) above, Baker & Hostetler as counsel for the Company may rely upon the opinion of another counsel of the Company, in which case the opinion of Baker & Hostetler shall state that they believe that the Placement Agent and they are entitled to rely on the opinion of the other counsel. Baker & Hostetler may also state in the opinion that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and certificates of public officials; provided that such certificates have been delivered to the Placement Agent and are in a form satisfactory to the Placement Agent. (e) You shall have received on the Closing Date an opinion, dated as of the Closing Date of Holland & Hart LLP, counsel for the Placement Agent, in form and substance reasonably satisfactory to you. (f) You shall have received on the Closing Date a letter in form and substance satisfactory to you, from, Arthur Andersen LLP, independent public accountants, with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus and substantially in the form and substance of the letter delivered to you by Arthur Andersen LLP on the date of this Agreement. (g) Prior to the Closing Date the Company shall have furnished you or your counsel such further information, certificates and documents as you may reasonably request. (h) The Company shall not have failed at or prior to the Closing Date to perform or comply with any of the agreements herein contained and required to be performed or complied with by the Company at or prior to the Closing Date. (i) All proceedings taken in connection with the issuance, sale, transfer and delivery of the Shares shall be satisfactory in form and substance to the Placement Agent and it counsel. 23 24 (j) The Minimum Purchase shall have been tendered to the Company in accordance with the terms hereof. If any of the conditions herein above provided for in this Section 6 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Placement Agent hereunder may be terminated by you by notifying the Company of such termination at or prior to the Closing Date. In such event, the Company and the Placement Agent shall not be under any obligation to each other, except Sections 3(l), 4, 5, 7 and 9 hereof shall survive and remain in effect. 7. Effective Date of Agreement and Termination. This Agreement shall become effective upon the later of (i) execution of this Agreement and (ii) when notification of the effectiveness of the Registration Statement has been released by the Commission. This Agreement may be terminated by you by providing notice to the Company as follows: (a) at any time prior to the Closing Date if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any adverse change or development involving a prospective adverse change in the condition, financial or otherwise, of the Company or any of its subsidiaries or the earnings, affairs, or business prospects of the Company or any of its subsidiaries, whether or not arising in the ordinary course of business, (ii) any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic conditions or in the financial markets of the United States or elsewhere that, in your judgment, is material and adverse, (iii) the suspension or material limitation of trading in securities on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market or limitation on prices for securities on any such exchange or National Market, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects, or will materially and adversely affect, the business or operations of the Company or any of its subsidiaries, (v) the declaration of a banking moratorium by either federal or New York State authorities or (vi) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in your opinion has a material adverse effect on the financial markets in the United States; or (b) as provided in Section 6 of this Agreement. Notwithstanding any termination of this Agreement, the obligation under Sections 3(l), 4, 5, 7 and 9 hereof shall survive and remain in effect. 8. Right of First Refusal. If the Offering is consummated and if, at any time during the two-year period next following the effective date of the Registration Statement, the Company or any of its subsidiaries or affiliates determines to retain a financial advisor, investment banker or other similar agent in connection with any financial advisory, investment banking or related service engagement, the Company, its subsidiary or affiliate shall first offer to 24 25 retain the Placement Agent as its exclusive financial advisor, investment banker or agent, as the case may be, for the provision of such services on the basis of the Placement Agent's usual and customary terms, conditions and fees; provided such terms, conditions and fees are not less favorable than those generally available to the Company from another comparable financial advisor, investment banker or similar agent. 9. Miscellaneous; Out-of-Pocket Expenses. Notices given pursuant to any provision of this Agreement shall be directed as follows: (a) if to the Company, to Uranium Resources, Inc., 12750 Merit Drive, Suite 1020, Dallas, TX 75251, and (b) if to the Placement Agent, to EVEREN Securities, Inc., 77 West Wacker Drive, 31st Floor, Chicago, Illinois 60601, or in any case to such other address as the person to be notified may have requested in writing. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if delivered, mailed or transmitted by any standard form of telecommunication. The respective indemnities, contribution agreements, representations, warranties and other statements of the Company, its executive officers and directors and of the Placement Agent set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Shares, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of any of the Placement Agent or by or on behalf of the Company, the executive officers or directors of the Company or any controlling person of the Company, (ii) acceptance of the Shares and payment for them hereunder or (iii) termination of this Agreement. The Company shall reimburse the Placement Agent for actual accountable out-of-pocket expenses reasonably incurred by the Placement Agent in connection with the Offering, including, but not limited to, the fees and disbursements of the Placement Agent's counsel, unless the closing of the purchase of Shares contemplated by this Agreement does not occur as a result of a material breach by the Placement Agent of its obligations under this Agreement. Total reimbursable expenses paid by the Company under this paragraph, excluding fees and disbursements of the Placement Agent's counsel, shall not exceed $41,000. The reimbursable expenses paid by the Company under this paragraph for fees of the Placement Agent's counsel in the United States (which includes legal fees for blue sky matters in the United States, but does not include fees of local counsel relating to international blue sky matters or any counsel's disbursements, such as travel, filing fees, faxes and photocopies) shall not exceed a total of $135,000. The Placement Agent shall not be entitled to reimbursement for the value of the time which the Placement Agent and its employees have expended in connection with the Offering. Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Placement Agent, any controlling persons referred to herein and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. 25 26 Each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule in any jurisdiction, such provision will be ineffective only to the extent of such invalidity, illegality or unenforceability in such jurisdiction or any provision hereof in any other jurisdiction. This Agreement shall be governed and construed in accordance with the internal laws (and not the laws pertaining to conflicts of laws) of the State of Colorado. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. Please confirm that the foregoing correctly sets forth the agreement between the Company and the Placement Agent. Very truly yours, URANIUM RESOURCES, INC. By: ---------------------------------- Name: Title: Date: EVEREN SECURITIES, INC. By: -------------------------------- Name: Title: Date: 26 EX-1.2 3 FORM OF ESCROW AGREEMENT 1 EXHIBIT 1.2 ESCROW AGREEMENT ESCROW AGREEMENT, dated as of ___________, 1996 by and among Uranium Resources, Inc., a Delaware corporation (the "Company"), EVEREN Securities, Inc. (the "Placement Agent") and Norwest Bank Colorado, N.A., a national banking association incorporated under the laws of the United States of America (the "Escrow Agent"). WHEREAS, the Company proposes to sell a minimum 1,400,000 (the "Minimum Shares") and up to a maximum 1,700,000 shares (the "Maximum Shares" and, together with the Minimum Shares, the "Shares") of its common stock, $.001 par value (the "Common Stock"), in an offering (the "Offering") registered pursuant to a Registration Statement (as amended, the "Registration Statement") filed by the Company with the Securities and Exchange Commission, at an offering price of $_______ per share; WHEREAS, the Placement Agent has agreed to offer the Shares as the agent of the Company on a "best efforts" basis, pursuant to the terms of the Placement Agreement, dated as of the date hereof (the "Placement Agreement") between the Company and the Placement Agent; WHEREAS, the Company needs to provide for the safekeeping and investment of the proceeds of the sale of the Shares until such time as the Placement Agent accepts subscriptions for at least the Minimum Shares and up to the Maximum Shares and the proceeds of the sale of the Shares are deposited with the Escrow Agent or until such time as the Offering terminates and the Escrow Agent is required to return such proceeds to the subscribers as provided for herein; and WHEREAS, with respect to all subscription payments received from subscribers, the Company proposes to establish an escrow account with the Escrow Agent. NOW, THEREFORE, it is agreed as follows: 1. ESTABLISHMENT OF ESCROW. The Escrow Agent hereby agrees to receive and disburse the proceeds from the Offering and any interest earned thereon in accordance herewith. Proceeds from the Offering shall be deposited with the Escrow Agent in accordance with Rule 15c2-4 of the Rules and Regulations under the Securities Exchange Act of 1934. 2. DEPOSIT OF ESCROWED PROPERTY. The subscribers shall cause to be wired to the Escrow Agent funds delivered in payment for Shares (the "Escrowed Property"). Upon receipt of such funds, the Escrow Agent shall credit such funds 2 to an interest bearing account (the "Escrow Account") held by the Escrow Agent. The subscribers will not be entitled to pay for the Shares by check. 3. LIST OF SUBSCRIBERS. The Placement Agent shall furnish or cause to be furnished to the Escrow Agent, at the time of deposit of funds pursuant to Section 2, a list, substantially in the form of Exhibit A hereto, containing the name of, the address of, the number of Shares subscribed for by, the wire transfer instruction for, the subscription amount delivered to the Escrow Agent by, and the social security number, if applicable, of, each subscriber whose funds are being deposited, for each listed subscriber. The Escrow Agent shall notify the Placement Agent and the Company of any discrepancy between the subscription amounts set forth on any list delivered pursuant to this Section 3 and the subscription amounts received by the Escrow Agent and shall notify the Placement Agent upon its receipt of funds directly from any subscriber. The Escrow Agent is authorized to revise such list to reflect the actual subscription amounts received and the release of any subscription amounts pursuant to Section 4. 4. DISBURSEMENT OF FUNDS. a. If (i) the Escrow Agent shall receive a notice, substantially in the form of Exhibit B hereto (an "Offering Termination Notice"), from the Company and the Placement Agent, or (ii) the Minimum Shares shall not have been subscribed for and funds thereof deposited with the Escrow Agent on or before December __, 1996 (the "Termination Date"), the Escrow Agent shall promptly pay to each subscriber listed on the list held by the Escrow Agent pursuant to Section 3 whose total subscription amount shall not have been released pursuant to paragraph (c) of this Section 4, in the manner set forth in paragraph (d) of this Section 4, the remaining subscription amount, together with any interest thereon, held by the Escrow Agent as set forth on such list held by the Escrow Agent. b. In the event that (i) the Minimum Shares have been subscribed for and funds in respect thereof shall have been deposited with the Escrow Agent on or before the Termination Date and (ii) no Offering Termination Notice shall have been delivered to the Escrow Agent, the Company and the Placement Agent may deliver to the Escrow Agent a joint notice, substantially in the form of Exhibit C hereto (a "Closing Notice"), designating the date on which Shares are to be sold and delivered to the subscribers thereof (a "Closing Date"), and identifying the subscribers and the number of the Shares to be sold to each thereof on such Closing Date. The Escrow Agent, after receipt of such Closing Notice, shall pay to the Placement Agent or its designees on such Closing Date, in federal or other immediately available funds, in the manner specified by the Company and the Placement Agent in such Closing Notice, an amount (the "Placement Agent Fee") equal to the sum of (a) a commission of 7% of the aggregate subscription amounts deposited into the Escrow Account, plus 2 3 (b) an amount specified by the Placement Agent on an expense report in the form of Exhibit D hereto (the "Placement Agent Expense Report"), which expenses shall not exceed $_______. In addition, the Escrow Agent shall pay to the Company or its designees on such Closing Date, in federal or other immediately available funds, in the manner specified by the Company and the Placement Agent in such Closing Notice, an amount equal to (i) the aggregate of the subscription amounts paid by the subscribers identified in such Closing Notice for the Shares to be sold on such Closing Date as set forth on the list held by the Escrow Agent pursuant to Section 3, plus (ii) any and all interest on the Escrowed Property, less (iii) the Placement Agent Fee. c. If at any time and from time to time prior to the release of any subscriber's total subscription amount pursuant to paragraph (a) or (b) of this Section 4 from escrow, the Placement Agent shall deliver to the Escrow Agent a notice, substantially in the form of Exhibit E hereto (a "Subscription Termination Notice"), to the effect that any or all of the subscriptions of such subscriber have been rejected by the Placement Agent (a "Rejected Subscription"), the Escrow Agent shall, promptly after receipt of such Subscription Termination Notice pay to such subscriber, in the manner set forth in paragraph (d) of this Section 4, the amount of such Rejected Subscription, including interest thereon. d. For the purposes of this Section 4, any payment that the Escrow Agent shall be required to make to any subscriber shall be made by wire transfer of immediately available funds. 5. NOTICES. Any notices or other communication required or permitted to be given hereunder shall be in writing and shall be (a) transmitted by facsimile, (b) delivered by nationally recognized overnight courier, (c) delivered by hand or (d) sent by mail, registered or certified, with proper postage prepaid, and addressed as follows: If to the Company, to: Uranium Resources, Inc. 12750 Merit Drive, Suite 1020 Dallas, Texas 75251 Attn.: Paul Wilmott If to the Placement Agent, to: EVEREN Securities, Inc. 80 South 8th Street, Suite 3900 Minneapolis, MN 55402 Attn.: Dick Gilbert 3 4 If to the Escrow Agent, to: Norwest Bank Colorado, N.A. 1740 Broadway Denver, CO 80274-8693 Attn.: Darin Locke or to such other address as the person to whom notice is to be given may have previously furnished to the others in the above-referenced manner. All such notices and communications, if mailed, shall be effective when deposited in the mails, except that notices and communications to the Escrow Agent and notices of changes of address shall not be effective until received. 6. CONCERNING THE ESCROW AGENT. To induce the Escrow Agent to act hereunder, it is further agreed by the Company and the Placement Agent that: a. The Escrow Agent shall not be under any duty to give the Escrowed Property held by it hereunder any greater degree of care than it gives its own similar property and shall not be required to invest any funds held hereunder except as directed in this Escrow Agreement. Uninvested funds held hereunder shall not earn or accrue interest. b. This Escrow Agreement expressly sets forth all the duties of the Escrow Agent with respect to any and all matters pertinent hereto. No implied duties or obligations shall be read into this Escrow Agreement against the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any agreement among the other parties hereto except his Escrow Agreement. c. The Escrow Agent shall not be liable, except for its own gross negligence or willful misconduct, and, except with respect to claims based upon such gross negligence or willful misconduct that are successfully asserted against the Escrow Agent, the other parties hereto shall jointly and severally indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent) from and against any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys' fees and disbursements, arising out of and in connection with this Escrow Agreement. Without limiting the foregoing, the Escrow Agent shall in no event be liable in connection with its investment or reinvestment of any cash held by it hereunder in good faith, in accordance with the terms hereof, including, without limitation, any liability for any delays (not resulting from gross negligence or willful misconduct) in the investment or reinvestment of the Escrowed Property, or any loss of interest incident to any such delays. d. The Escrow Agent shall be entitled to rely upon any order, judgment, certification, demand, notice, instrument or other writing delivered to it hereunder without being required to determine the authenticity or the 4 5 correctness of any fact stated therein or the propriety or validity of the service thereof. The Escrow Agent may act in reliance upon any instrument or signature believed by it in good faith to be genuine and may assume, if in good faith, that any person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so. e. The Escrow Agent may act pursuant to the advice of counsel with respect to any matter relating to this Escrow Agreement and shall not be liable for any action taken or omitted in good faith and in accordance with such advice. f. The Escrow Agent does not have any interest in the Escrowed Property deposited hereunder but is serving as escrow holder only. Any payments of income from the Escrow Account shall be subject to withholding regulations then in force with respect to United States taxes. The Company will provide the Escrow Agent with appropriate forms for Tax I.D. number certification, or non-resident alien certifications. This paragraph (f) and paragraph (c) of this Section 6 shall survive notwithstanding any termination of this Escrow Agreement or the resignation of the Escrow Agent. g. The Escrow Agent makes no representations as to the validity, value, genuineness or the collectibility of any security or other documents or instrument held by or delivered to it. h. The Escrow Agent shall not be called upon to advise any party as to the wisdom in selling or retaining or taking or refraining from any action with respect to any securities or other property deposited hereunder. i. The Escrow Agent (and any successor escrow agent) at any time may be discharged from its duties and obligations hereunder by the delivery to it of a notice of termination signed by both the Company and the Placement Agent or at any time the Escrow Agent may resign by giving written notice to such effect to the Company and the Placement Agent. Upon any such termination or resignation, the Escrow Agent shall deliver the Escrowed Property to any successor escrow agent jointly designated by the other parties hereto in writing, or to any court of competent jurisdiction if no such successor escrow agent is agreed upon, whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with this Escrow Agreement. The termination or resignation of the Escrow Agent shall take effect on the earlier of (i) the appointment of a successor (including a court of competent jurisdiction) or (ii) the day that is 30 days after the date of delivery: (A) to the Escrow Agent of the other parties' notice of termination or (B) to the other parties hereto of the Escrow Agent's written notice of resignation. If at that time 5 6 the Escrow Agent has not received a designation of a successor escrow agent, the Escrow Agent's sole responsibility after that time shall be to keep the Escrowed Property safe until receipt of a designation of successor escrow agent or a joint written disposition instruction by the other parties hereto or an enforceable order of a court of competent jurisdiction. j. The Escrow Agent shall have no responsibility for the contents of any writing of any third party contemplated herein as a means to resolve disputes and may rely without any liability upon the contents thereof. k. In the event of any disagreement among or between the other parties hereto and/or the subscribers for the Shares resulting in adverse claims or demands being made in connection with Escrowed Property, or in the event that the Escrow Agent in good faith is in doubt as to what action it should take hereunder, the Escrow Agent shall be entitled to retain the Escrowed Property until the Escrow Agent shall have received (i) a final and non-appealable order of a court of competent jurisdiction directing delivery of the Escrowed Property or (ii) a written agreement executed by the other parties hereto and consented to by the subscribers directing delivery of the Escrowed Property, in which event the Escrow Agent shall disburse the Escrowed Property in accordance with such order or agreement. Any court order referred to in (i) above shall be accompanied by a legal opinion by counsel for the presenting party satisfactory to the Escrow Agent to the effect that said court order is final and non-appealable. The Escrow Agent shall act on such court order and legal opinions without further question. l. As consideration for its agreement to act as Escrow Agent as herein described, the Company agrees to pay the Escrow Agent fees determined in accordance with the terms set forth on Exhibit F hereto (and made a part of this Escrow Agreement as if herein set forth). In addition, the Company agrees to reimburse the Escrow Agent for all reasonable expenses, disbursements and advances incurred or made by the Escrow Agent in performance of its duties hereunder (including reasonable fees, expenses and disbursements of its counsel). m. The other parties hereto irrevocably (i) submit to the jurisdiction of any state or federal court sitting in Denver County, Colorado in any action or proceeding arising out of or relating to this Escrow Agreement, (ii) agree that all claims with respect to such action or proceeding shall be heard and determined in such state or federal court and (iii) waive, to the fullest extent possible, the defense of an inconvenient forum. The other parties hereby consent to and grant any such court jurisdiction over the persons of such parties and over the subject matter of any such dispute and agree that delivery or mailing of process or other papers in connection with any such action or proceeding in the manner provided hereinabove, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. 6 7 n. No printed or other matter in any language (including, without limitation, the Registration Statement, notices, reports and promotional material) which mentions the Escrow Agent's name or the rights, powers, or duties of the Escrow Agent shall be issued by the other parties hereto or on such parties' behalf unless the Escrow Agent shall first have given its specific written consent thereto. The Escrow Agent hereby consents to the use of its name and the reference to the escrow arrangement in the Registration Statement and to the filing of this Agreement as an exhibit to the Registration Statement. 7. MISCELLANEOUS. a. This Escrow Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective successors and assigns, heirs, administrators and representatives, and the subscribers of the Shares and shall not be enforceable by or inure to the benefit of any other third party except as provided in paragraph (i) of Section 6 with respect to the termination of, or resignation by, the Escrow Agent. No party may assign any of its rights or obligations under this Escrow Agreement without the written consent of the other parties. b. This Escrow Agreement shall be construed in accordance with and governed by the internal law of the State of Colorado (without reference to its rules as to conflicts of law). c. This Escrow Agreement may only be modified by a writing signed by all of the parties hereto and consented to by the subscribers of the Shares adversely affected by such modifications. No waiver hereunder shall be effective unless in a writing signed by the party to be charged. d. This Escrow Agreement shall terminate upon the payment pursuant to Section 4 of all amounts held in the Escrow Account. e. The section headings herein are for convenience only and shall not affect the construction thereof. Unless otherwise indicated, references to Sections are to Sections contained herein. f. This Escrow Agreement may be executed in one or more counterparts but all such separate counterparts shall constitute but one and the same instrument. 7 8 IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be executed as of the day and year first above written. By: ------------------------------------ Name: ------------------------------ Title: ----------------------------- By: ------------------------------------ Name: ------------------------------ Title: ----------------------------- By: ------------------------------------ Name: ------------------------------ Title: ----------------------------- 8 9 EXHIBIT A Summary of Cash Received for Subscription for Shares of Common Stock,
SUBSCRIBER'S NUMBER OF AMOUNT OF DATE RECEIVED NAME SHARES SUBSCRIPTION ------------- - ---- ------ RECEIVED --------
9 10 EXHIBIT B Form of Offering Termination Notice Dear Ladies/Gentlemen: Pursuant to Section 4(a) of the Escrow Agreement dated as of December __ 1996 (the "Escrow Agreement") among Uranium Resources, Inc. (the "Company"), EVEREN Securities, Inc. (the "Placement Agent") and you, the Company and the Placement Agent hereby notify you of the termination of the offering of the Shares (as that term is defined in the Escrow Agreement) and direct you to make payments to the subscribers and the Company provided for in Section 4(a) of the Escrow Agreement. Very truly yours, By: ------------------------------------ Name: ------------------------------ Title: ----------------------------- By: ------------------------------------ Name: ------------------------------ Title: ----------------------------- 10 11 EXHIBIT C Form of Closing Notice Dear Sirs: Pursuant to Section 4(b) of the Escrow Agreement dated as of December __ 1996 (the "Escrow Agreement") among Uranium Resources, Inc. (the "Company"), EVEREN Securities, Inc. (the "Placement Agent") and you, the Company and the Placement Agent hereby certify that subscription for the Minimum Shares (as that term is defined in the Escrow Agreement) have been received and the Company will sell and deliver _____ Shares to the subscribers thereof at a closing to be held on _______, 1996 (the "Closing Date"). The names of the subscribers concerned, the number of Shares subscribed for by each of such subscribers and the related subscription amounts are set forth on the schedule annexed hereto. We hereby request that the aggregate subscription amount be paid as follows: To the Placement Agent: Wire transfer $________ to the Placement Agent's account at Citibank New York, ABA# 021000089, for the account of Everen Clearing Corp. (#38897669) To the Company: Wire transfer the balance of the Escrow Account to the Company's account at Very truly yours, By: ------------------------------------ Name: ------------------------------ Title: ----------------------------- By: ------------------------------------ Name: ------------------------------ Title: ----------------------------- 11 12 EXHIBIT D Placement Agent Expense Report 12 13 EXHIBIT E Form of Subscription Termination Notice Dear Sirs: Pursuant to Section 4(c) of the Escrow Agreement dated as of December __, 1996 (the "Escrow Agreement") among Uranium Resources, Inc. (the "Company"), EVEREN Securities, Inc. (the "Placement Agent") and you, the Placement Agent hereby notifies you that the subscriptions of the subscribers set forth below have been rejected:
Subscriber Name Number of Shares of Rejected Subscription Rejected Subscription Amount
You are hereby directed to make payments to the aforementioned subscribers as provided for in Section 4(c) of the Escrow Agreement. Very truly yours, By: ------------------------------------ Name: ------------------------------ Title: ----------------------------- 13 14 EXHIBIT F Escrow Agent Fee Schedule Fees NORWEST BANK COLORADO CORPORATE TRUST SERVICES SUBSCRIPTION ESCROW FEE SCHEDULE URANIUM RESOURCES, INC. INCEPTION AND ADMINISTRATION FEE o $3,000 for a custom drafted escrow agreement The Inception and Administration Fee, payable when the account is opened, covers legal review of drafts and final documents, attendance at closings, and establishment and maintenance of the account. TRANSACTION CHARGES WHEN AND IF APPLICABLE Security Transactions $25.00 Wire Transfers (Outgoing Only) $15.00 Aggregate Daily Receipts $15.00 Disbursements $5.00 Preparation Interest Allocations $10.00/ calculation Preparing and Filing Taxpayer Reports Each 1099 $5.00 Minimum Charge $100.00
EXTRAORDINARY SERVICES Additional reasonable compensation will be charged for extraordinary services based on our then current standard hourly charge. Extraordinary services include, but are not limited to, processing assignments of escrow interests, reviewing and accepting modifications or amendments to the escrow agreement, and letter of credit laws. 14 15 REIMBURSABLES All out-of-pocket expenses incurred in the administration of the account, including postage, telephone charges, insurance, photocopies, supplies, and legal fees, with the exception of legal fees incurred at the inception of the account, will be billed to the customer at cost. OVERDRAFTS Any overdrafts at Norwest Bank Colorado caused by failed or incomplete wires of funds or failed or incomplete securities deliveries will be reimbursable to Norwest Bank Colorado at prime plus two percent (2%). Norwest Bank Colorado 15 EX-4.2 4 RESTATED BYLAWS OF THE COMPANY 1 EXHIBIT 4.2 RESTATED BYLAWS OF URANIUM RESOURCES, INC. 2 INDEX TO BYLAWS OF URANIUM RESOURCES, INC. ---oOo---
Caption Page - ------- ---- ARTICLE I - MEETINGS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . 1 1.1 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 Notice of Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.5 Adjournments . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.6 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.7 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.8 Judges of Election . . . . . . . . . . . . . . . . . . . . . . . . 2 1.9 Action by Consent . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.10 Action by Telephone Conference . . . . . . . . . . . . . . . . . . 2 ARTICLE II - BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . 3 2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.3 Election and Term of Office . . . . . . . . . . . . . . . . . . . . 3 2.4 Vacancies and Additional Directorships . . . . . . . . . . . . . . 3 2.5 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.6 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . 4 2.7 Quorum, Manner of Acting and Presence . . . . . . . . . . . . . . . 4 2.8 Resignation of Directors . . . . . . . . . . . . . . . . . . . . . 4 2.9 Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . 5 2.10 Action by Consent . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.11 Action by Telephone Conference . . . . . . . . . . . . . . . . . . 5 ARTICLE III - COMMITTEES OF THE BOARD . . . . . . . . . . . . . . . . . . . . 5 3.1 Designation, Power, Alternate Members and Term of Office . . . . . . . . . . . . . . . . . . . . . . . 5 3.2 Meetings, Notices and Records . . . . . . . . . . . . . . . . . . . 6 3.3 Quorum, Manner of Acting and Presence . . . . . . . . . . . . . . . 6 3.4 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.5 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.6 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.7 Action by Consent . . . . . . . . . . . . . . . . . . . . . . . . . 7
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Caption Page - ------- ---- ARTICLE IV - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4.1 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4.2 Election, Term of Office and Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.3 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.6 Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . 8 4.7 The President . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.8 Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.9 The Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.10 The Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.11 Assistant Secretaries, Assistant Treasurers and Subordinate Officers . . . . . . . . . . . . . . . . . . . . 10 ARTICLE V - INDEBTEDNESS OF THE CORPORATION AND DEPOSIT OF CORPORATE FUNDS . . . . . . . . . . . . . . . . . . 11 5.1 Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.3 Checks, Drafts, etc. . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE VI - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 11 6.1 Actions, Suits or Proceedings Other Than by or in the Right of the Corporation . . . . . . . . . . . . . . 11 6.2 Actions or suits by or in the Right of the Corporation . . . . . . 12 6.3 Indemnification for Costs, Charges and Expenses of Successful Party . . . . . . . . . . . . . . . . . . 13 6.4 Determination of Right to Indemnification . . . . . . . . . . . . . 13 6.5 Advance of Costs, Charges and Expenses . . . . . . . . . . . . . . 13 6.6 Procedure for Indemnification . . . . . . . . . . . . . . . . . . . 14 6.7 Other Rights; Continuation of Right to Indemnification . . . . . . 14 6.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 6.9 Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VII - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 15 7.1 Registered Office and Agent . . . . . . . . . . . . . . . . . . . . 15 7.2 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 7.3 Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . 16 7.4 Voting of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 16 7.5 Record Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 7.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-ii- 4 ARTICLE I MEETINGS OF STOCKHOLDERS Section 1.1 Annual Meetings. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as properly may come before such meeting shall be held on such date and at such time and place, within or without the State of Delaware, as may be designated by the Board of Directors. Section 1.2 Special Meetings. Special meetings of the stockholders for any proper purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board or the President, to be held on such date, and at such time and place within or without the State of Delaware, as the caller shall direct. Section 1.3 Notice of Meeting. Written notice, signed by the Chairman of the Board, the President, any Vice President, the Secretary or an Assistant Secretary, of every meeting of stockholders stating the date and time when, and the place where, it is to be held shall be delivered personally or mailed to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the meeting, except as otherwise provided by law. The purpose or purposes for which the meeting is called may in the case of an annual meeting, and shall in the case of a special meeting, also be stated. If mailed, such notice shall be directed to a stockholder at such stockholder's address as it shall appear on the records of the Corporation, or at such other address as such stockholder may have furnished, in writing, to the Secretary for such purpose. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. Section 1.4 Quorum. The presence at any meeting, in person or by proxy, of the holders of record of a majority of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, the Certificate of Incorporation or these Bylaws. Section 1.5 Adjournments. In the absence of a quorum, a majority in interest of the stockholders entitled to vote, present in person or by proxy, or, if no stockholder entitled 5 to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting, may adjourn the meeting from time to time until a quorum shall be present. Section 1.6 Voting. At each meeting of stockholders, except as otherwise provided by law or the Certificate of Incorporation, every holder of record of stock entitled to vote shall be entitled to one vote in person or by proxy for each share of such stock standing in his name on the records of the Corporation. Directors shall be chosen by a plurality of the votes cast at the election by the holders of the class of stock entitled to vote for the election of directors, and, except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all other questions shall be determined by a majority of the votes cast on such question. Section 1.7 Proxies. Any stockholder entitled to vote may vote by proxy, provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegraphing or cabling) by the stockholder himself or by such stockholder's duly authorized attorney. Section 1.8 Judges of Election. The Board of Directors may appoint judges of election to serve at any election of directors and at balloting on any other matter that may properly come before a meeting of stockholders. If no such appointment shall be made, or if any of the judges so appointed shall fail to attend, or refuse or be unable to serve, then such appointment may be made by the presiding officer at the meeting. Section 1.9 Action by Consent. Any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a written consent or consents thereto setting forth such action is signed by the holders of record of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or to take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of such action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Section 1.10 Action by Telephone Conference. Subject to the provisions required or permitted for notice of meetings, unless otherwise restricted by the Certificate of Incorporation or these Bylaws, stockholders may participate in and hold any meeting by conference telephone or similar communications -2- 6 equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE II BOARD OF DIRECTORS Section 2.1 General. The business of the Corporation shall be managed by its Board of Directors which may exercise all power of the Corporation and do all lawful acts and things as are not by law, the Certificate of Incorporation or these Bylaws directed or required to be exercised or done by the stockholders. Section 2.2 Number. The number of directors which shall constitute the whole Board of Directors shall be fixed from time to time by resolution of the Board of Directors or stockholders (any such resolution of either the Board of Directors or stockholders being subject to any later resolution of either of them). The Board of Directors on the date hereof shall consist of seven (7) directors and subsequent Boards of Directors shall consist of not less than three (3) directors nor more than nine (9) directors until changed as herein provided. Section 2.3 Election and Term of Office. Directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2.4. Directors (whether elected at an annual meeting or to fill a vacancy or otherwise) shall continue in office until the next annual election and until their successors shall have been elected and qualified or until their earlier death, resignation or removal in the manner hereinafter provided. Section 2.4 Vacancies and Additional Directorships. Vacancies in the Board of Directors, whether by reason of death, resignation or otherwise, and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office, although less than a quorum, or by the stockholders. In the event of the resignation of directors effective at a future date, such vacancies may be filled by a majority of the directors then in office, including those who have resigned, effective on such future date. -3- 7 Section 2.5 Meetings. The Board of Directors by resolution may provide for the holding of regular meetings and may fix the times and places, either within or without the State of Delaware, at which such meetings shall be held. Special meetings of the Board shall be held upon the call of the Chairman of the Board, the President or any two (2) directors. Section 2.6 Notice of Meetings. Notice need not be given of regular meetings of the Board. Except as otherwise provided by law, notice of each special meeting shall be mailed to all directors, addressed to their residences or usual places of business, at least two (2) days before the day of the meeting, or shall be sent to them at such places by telegram, radio or cable, or telephoned or delivered to them personally, not later than the day of the meeting. Such notice shall state the time and place of such meeting, but, unless otherwise required by law, the Certificate of Incorporation or these Bylaws, need not state the purpose thereof. Notice of any meeting need not be given to a director who shall attend such meeting in person or who shall waive notice thereof, either before or after such meeting, in a signed writing. Section 2.7 Quorum, Manner of Acting and Presence. At each meeting of the Board of Directors the presence of a majority of the total number of members of the Board of Directors then holding office (but not less than one- third of the total number of directors nor less than two (2) directors) shall be necessary and sufficient to constitute a quorum for the transaction of business. In the absence of a quorum, a majority of those present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present and the meeting may be held and adjourned without further notice of waiver. A majority of those present at any meeting at which a quorum is present may decide any questions brought before such meeting, except as otherwise provided by law, the Certificate of Incorporation of the Corporation or these Bylaws. Section 2.8 Resignation of Directors. Any director may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board, the President, any Vice President or the Secretary. Unless otherwise specified in such notice, such resignation shall be effective upon receipt thereof by the Board of Directors or any such officer, and the acceptance of such resignation shall not be necessary to make it effective. -4- 8 Section 2.9 Removal of Directors. At any special meeting of the stockholders, duly called as provided in these Bylaws, any director or directors may be removed from office, either with or without cause, as provided by law, by vote of the holders of the class of stock that elected such director. Section 2.10 Action by Consent. Action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board. Section 2.11 Action by Telephone Conference. Subject to the provisions required or permitted for notice of meetings, unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or members of any committee designated by such Board may participate in and hold a meeting of such Board or committee by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE III COMMITTEES OF THE BOARD Section 3.1 Designation. Power, Alternate Members and Term of Office. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in such resolution and permitted by law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation or a facsimile thereof to be affixed to or reproduced on all such papers as said committee shall designate. The Board of Directors may designate one or more directors as alternate members of any committee who, in the order specified by the Board of Directors, may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one or more of the members thereof should be absent or disqualified, and if either the Board of Directors has not so designated any alternate member or members, or the -5- 9 number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another director to act at the meeting in the place of such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board of Directors, subject to these Bylaws; provided, however, that any committee member who ceases to be a member of the Board of Directors shall ipso facto cease to be a committee member. Each committee shall appoint a secretary, who may be the Secretary of the Corporation or an Assistant Secretary thereof. Section 3.2 Meetings, Notices and Records. Each committee may provide for the holding of regular meetings, with or without notice, and may fix the times and places at which such meetings shall be held. Special meetings of each committee shall be held upon call by or at the direction of its chairman or, if there be no chairman, by or at the direction of any one of its members. Except as otherwise provided by law, notice of each special meeting of a committee shall be mailed to each member of such committee, addressed to such member at such member's residence or usual place of business, at least two (2) days before the day on which the meeting is to be held, or shall be sent to such member at such place by telegram, radio or cable, or telephoned or delivered to such member personally, not later than the day before the day on which the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purposes thereof, unless otherwise required by law, the Certificate of Incorporation of the Corporation of these Bylaws. Notice of any meeting of a committee need not be given to any member thereof who shall attend such meeting in person or who shall waive notice thereof, before or after such meeting, in a signed writing. Each committee shall keep a record of its proceedings. Section 3.3 Quorum, Manner of Acting and Presence. At each meeting of any committee the presence of a majority of its members then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, except that when a committee consists of one member, then the one member shall constitute a quorum. In the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present and the meeting may be held as adjourned without further notice or waiver. The act of a -6- 10 majority of the members present at any meeting at which a quorum is present shall be the act of such committee. Subject to the foregoing and other provisions of these Bylaws and except as otherwise determined by the Board of Directors, each committee may make rules for the conduct of its business. Members of any committee may participate in a meeting by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. Section 3.4 Resignations. Any member of a committee may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board, the President, any Vice President or the Secretary. Unless otherwise specified in such notice, such resignation shall take effect upon receipt thereof by the Board of Directors or any such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 3.5 Removal. Any member of any committee may be removed at any time or without cause by the Board of Directors. Section 3.6 Vacancies. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining member or members of such committee, so long as a quorum is present, may continue to act until such vacancy is filled by the Board of Directors. Section 3.7 Action by Consent. Action required or permitted to be taken at any meeting of a committee may be taken without a meeting if all members of the committee consent thereto in writing and the writing or writings are filed with the minutes of the proceedings of the committee. ARTICLE IV OFFICERS Section 4.1 Officers. The officers of the Corporation shall be a President, one or more Vice Presidents and a Secretary and may include a Chairman of the Board (who shall be a director of the Corporation) and a Treasurer. The Board of Directors from time to time may elect Assistant Treasurers, Assistant Secretaries and such other officers as it shall deem necessary. Any number of offices may be held by the same person. -7- 11 Section 4.2 Election, Term of Office and Qualifications. Officers shall be elected by the Board of Directors and shall hold office until the earlier of their death, resignation, or removal in the manner hereinafter provided. Section 4.3 Resignations. Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President, a Vice President or the Secretary. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or any such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 4.4 Removal. Any officer may be removed with or without cause at any meeting of the Board of Directors by affirmative vote of a majority of the directors then in office. Section 4.5 Vacancies. A vacancy in any office by reason of death, resignation, removal, disqualification, or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election to such office. Section 4.6 Chairman of the Board. The Chairman of the Board shall be the chief executive officer of the Corporation and shall preside at all meetings of the shareholders and the Board of Directors. The Chairman of the Board shall have general powers of oversight, supervision and management of the business and affairs of the Corporation and shall perform such other duties as may be prescribed by the Board of Directors. Unless the Board of Directors shall otherwise delegate such duties, the Chairman of the Board shall be ex- officio a member of all standing committees. Section 4.7 The President. The President shall serve under the general direction of the Chairman of the Board, if any, and shall have responsibility for the general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall appoint and discharge employees and agents of the Corporation (other than officers elected by the Board) and may sign, with any other officer thereunto duly authorized, certificates representing stock of the Corporation, the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature), and may sign and execute, in the name and on behalf of the Corporation, deeds, mortgages, bonds, contracts, agreements or other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board to -8- 12 some other officer or agent. The President shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall have such other powers and perform such other duties as from time to time may be prescribed by the Board of Directors or these Bylaws. Section 4.8. Vice President. The Vice President, or, if more than one, the Vice Presidents in the order established by the Board of Directors or the Chairman of the Board, shall, in the absence or disability of the President, exercise all of the powers and duties of the President. Each such Vice President shall have the power to sign and execute, in the name and on behalf of the Corporation, deeds, mortgages, bonds, contracts, agreements or other instruments, except in cases where the signing and execution hereof shall be expressly delegated by the Board to some other officer as agent and shall have such other powers and perform such other duties as from time to time may be prescribed by the Board of Directors or the Chairman of the Board or these Bylaws. Section 4.9. The Treasurer. The Treasurer or, if no Treasurer is elected by the Board of Directors, such other officer as shall be designated by the Board of Directors shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipt and disbursements in books belonging to the Corporation; shall deposit all monies, and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors; and shall have and perform such other duties incident to the office of Treasurer as from time to time may be prescribed by the Board of Directors, the Chairman of the Board or these Bylaws. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman (of the Board and the Board of Directors, at regular meetings of the Board, whenever they may require it, an account of all transactions. Section 4.10 The Secretary. The Secretary shall (a) record all proceedings of the meeting of the stockholders, the Board of Directors and any committees in a book or books to be kept for that purpose; (b) cause all notices to be duly given in accordance with the provisions of these Bylaws and as required by law; (c) whenever any committee shall be designated by resolution of the Board of Directors, furnish the chairman of such committee with a copy of such resolution; -9- 13 (d) be custodian of the records and of the seal of the Corporation, and cause such seal to be affixed to or a facsimile to be reproduced on all certificates representing stock of the corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation shall have been duly authorized; (e) see that the lists, books, reports, statements, certificates and other documents and records required by law are properly kept and filed; (f) have charge of the stock and transfer books of the Corporation, and exhibit such stock book at all reasonable times to such persons as are entitled by law have access thereto; (g) sign (unless the Treasurer or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing stock of the Corporation, the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (h) in general, perform all duties incident to the office of Secretary and have such other powers and perform such other duties as from time to time may be prescribed by the Board of Directors, the Chairman of the Board or these Bylaws. Section 4.11 Assistant Secretaries. Assistant Treasurers and Subordinate Officers. Assistant Treasurers and Assistant Secretaries shall have the power to perform, in the name and on behalf of the Corporation, such duties as may be required to be performed by the Secretary, Treasurer and Comptroller, respectively, and shall have and perform such other duties as from time to time may be prescribed by the Board of Directors, the Chairman of the Board or these Bylaws. The Corporation may have such assistant and subordinate officers as the Board of Directors may from time to time deem desirable. Each such officer shall hold office for such period and perform such duties as the Board of Directors, the Chairman of the Board, or President may prescribe. -10- 14 ARTICLE V INDEBTEDNESS OF THE CORPORATION AND DEPOSIT OF CORPORATE FUNDS Section 5.1 Borrowing. No loans, advances, obligations or indebtedness shall be incurred, obtained or contracted for, by or on behalf of the Corporation, and no negotiable paper shall be issued in its name, unless and except as (i) permitted by the Corporation's Certificate of Incorporation, (ii) permitted under any indentures or other documents evidencing outstanding indebtedness of the Corporation and (iii) authorized by the Board of Directors. Such authorization may be general or confirmed to specific instances. Any officer or agent of the Corporation thereunto so authorized may obtain loans and advances for the Corporation, and for such loans and advances may make, execute and deliver promissory notes, bonds, or other evidences of indebtedness of the Corporation. Any officer or agent of the Corporation thereunto so authorized may pledge, hypothecate or transfer as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, any and all stocks, bonds, other securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same and do every act and thing necessary or proper in connection therewith. Section 5.2 Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to its credit in such banks, trust companies or other depositories as the Board of Directors may select. Endorsements for deposit to the credit of the Corporation in any of its duly authorized depositories shall be made in such manner as the Board of Directors from time to time may determine. Section 5.3 Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, and all notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers or agent or agents of the Corporation, and in such manner, as from time to time shall be determined by the Board of Directors. ARTICLE VI INDEMNIFICATION Section 6.1 Actions, Suits or Proceedings Other Than by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or -11- 15 investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon at plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 6.2 Actions or Suits by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection with such action or suit and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action on suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably -12- 16 entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Section 6.3 Indemnification for Costs, Charges and Expenses of Successful Party. Notwithstanding the other provisions of this Article, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Section 6.4 Determination of Right to Indemnification. Any indemnification under Sections 6.1 and 6.2 of this Article (unless ordered by, a court) shall be paid by the Corporation unless a determination is made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders, that indemnification of the director, officer, employee or agent is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Sections 6.1 and 6.2 of this Article. Section 6.5 Advance of Costs, Charges and Expenses. Costs, charges and expenses (including attorneys' fees) incurred by a person referred to in Sections 6.1 and 6.2 of this Article in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a director or officer in his capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation as authorized in this Article. Such costs, charges and expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may, in the manner set forth above, and upon approval of such director, -13- 17 officer, employee or agent of the Corporation, authorize the Corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 6.6 Procedure for Indemnification. Any indemnification under Sections 6.1, 6.2 and 6.3, or advance of costs, charges and expenses under Section 6.5 of this Article, shall be made promptly, and in any event within sixty (60) days, upon the written request of the directors, officer, employee or agent. The right to indemnification or advances as granted by this Article shall be enforceable by the director, officer, employee or agent in any court of competent jurisdiction, if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within sixty (60) days. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification by the Corporation shall be promptly paid by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 6.5 of this Article where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Sections 6.1 or 6.2 of this Article, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met the applicable standard of conduct set forth in Sections 6.1 or 6.2 of this Article, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 6.7 Other Rights; Continuation of Right to Indemnification. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any law (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Corporation, and shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification under this -14- 18 Article shall be deemed to be a contract between the Corporation and each director, officer, employee or agent of the Corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director, officer, employee or agent or the obligations of the Corporation arising hereunder. Section 6.8 Insurance. The Corporation may, but shall have no obligation to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. Such insurance, if made available, shall be on terms acceptable to the Board of Directors, which determination shall be made by a vote of a majority of the entire Board of Directors. Section 6.9 Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director, officer, employee and agent of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated, and to the full extent permitted by applicable law. ARTICLE VII MISCELLANEOUS PROVISIONS Section 7.1 Registered Office and Agent. The registered office of the Corporation shall be located at the office of The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 and said corporation shall be the registered agent of this Corporation at such office. The Corporation may have other offices, either within or without the State of Delaware, at such place or places as shall be determined from time to time by the Board of Directors or as the business of the corporation may require. -15- 19 Section 7.2 Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. Section 7.3 Corporate Seal. The seal of the Corporation shall be circular in form and contain the name of the Corporation and the year and state of its incorporation. Such seal may be altered from time to time at the discretion of the Board of Directors. Section 7.4 Voting of Stock. Unless otherwise specifically directed by the Board of Directors, all stock owned by the Corporation, other than stock of the Corporation, shall be voted on behalf of the Corporation, in person or by proxy, by the Chairman of the Board, the Chief Executive Officer, the President or any Vice President of the Corporation. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution. Section 7.5 Record Dates. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board of Directors. Section 7.6 Amendments. All Bylaws of the Corporation may be amended or repealed, and new Bylaws may be made, by an affirmative majority of the votes cast at any annual or special stockholders' meeting by holders of outstanding shares of stock of the Corporation entitled to vote, or by an affirmative vote of a majority of the directors present at any organizational, regular, or special meeting of the Board of Directors. -16- EX-5.1 5 OPINION OF BAKER & HOSTETLER 1 EXHIBIT 5.1 December 13, 1996 Uranium Resources Inc. 12750 Merit Drive, Suite 1020 Lock Box 12 Dallas, Texas 75251 Gentlemen: We have acted as counsel for Uranium Resources, Inc. (the "Company") in connection with the registration under the Securities Act of 1933 (the "Act") on Form S-3 of 1,700,000 shares of the Company's Common Stock, $0.001 Par Value (the "Shares") to be issued by the Company in connection with a best efforts offering through Everen Securities as Placement Agent. The Registration Statement on Form S-3 and exhibits thereto filed with the Securities and Exchange Commission under the Act are referred to herein as the "Registration Statement." We have examined the Certificate of Incorporation of the Company, the Bylaws of the Company, the Minutes of the Board of Directors and Resolutions of Shareholders of the Company, the applicable laws of the State of Delaware and a copy of the Registration Statement. Based on the foregoing, and having regard for such legal considerations as we deem relevant, we are of the opinion that the Shares have ben duly authorized and, when issued in accordance with the Registration Statement, will be validly issued and fully paid and nonassessable. We hereby consent to the use of this opinion as part of the Registration Statement. Very truly yours, BAKER & HOSTETLER EX-23.1 6 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated February 28, 1996, included in Uranium Resources, Inc. Form 10-K for the year ended December 31, 1995, and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP ------------------------------------ Dallas, Texas December 12, 1996 EX-23.2 7 CONSENT OF DOUGLAS INTERNATIONAL, INC. 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT GEOLOGICAL CONSULTANTS As independent geological consultants, we hereby consent to the use of our report (and to all references to our firm) included in or made a part of this registration statement. /s/ Douglas International, Inc. ------------------------------------ Denver, Colorado December 13, 1996 -----END PRIVACY-ENHANCED MESSAGE-----