-----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, PAqR3MCepHLbUHzEekgeVHhT1NWt9rfk+ukzEhQdKuYdWB/2gSmX9CFf73IKu7mK 20zcOtpVDLfnFcxrjpZqcA== 0000950134-98-002740.txt : 19980401 0000950134-98-002740.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950134-98-002740 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 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: 10-K SEC ACT: SEC FILE NUMBER: 000-17171 FILM NUMBER: 98581218 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 10-K 1 FORM 10-K FOR PERIOD ENDED DECEMBER 31, 1997 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee required] For the fiscal year ended December 31, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 [No fee required] For the transition period from __________ to __________ Commission file number 0-17171 URANIUM RESOURCES, INC. (Exact name of Registrant as specified in its Charter) DELAWARE 75-2212772 (State of Incorporation) (I.R.S. Employer Identification No.) 12750 MERIT DRIVE, SUITE 1020, DALLAS, TEXAS 75251 (Address of principal executive offices, including zip code) (972) 387-7777 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.001 par value per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the Common Stock of the Registrant held by nonaffiliates at March 24, 1998 was approximately $19,743,168. Number of shares of Common Stock outstanding as of March 24, 1998: 12,053,027 shares. Documents Incorporated by Reference: Document Location in 10-K -------- ---------------- Proxy Statement for 1998 Annual Meeting of Stockholders Part III ================================================================================ 2 URANIUM RESOURCES, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 TABLE OF CONTENTS PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Marketing Strategy/Uranium Sales Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The ISL Mining Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Environmental Considerations and Permitting; Water Rights . . . . . . . . . . . . . . . . . . . . 6 The Uranium Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Market Price Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Sources of Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Required Primary Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Uranium Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 South Texas Producing Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 South Texas Development Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 New Mexico Development Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Santa Fe Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Reclaimed Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Reclamation and Restoration Costs and Bonding Requirements . . . . . . . . . . . . . . . . . . 19 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Longoria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ProBank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Benton Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . . . . . . . . . . . . . . 21 PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . 29 Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . 32 Forward Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Capital Resources and Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Environmental Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
i 3 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . 38 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . 39 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . 39 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . 39 PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . 39 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Index to Consolidated Financial Statements, Auditors' Report, Financial Statements and Supplemental Data F-1 to F-22 Index to Exhibits E-1 to E-3
ii 4 URANIUM RESOURCES, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 PART I The "Company" or "Registrant" is used in this report to refer to Uranium Resources, Inc. and its consolidated subsidiaries. Items 1 and 2 contain "forward-looking statements" and are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements relating to 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, business strategies and other plans and objectives of the Company's management for future operations and activities and other such matters. The words "believes," "plans," "intends," "strategy," "projects," "targets," or "anticipates" and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company's disclosures under the heading: "Cautionary Statement for the Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995" beginning on page 22. Certain terms used in this Form 10-K are defined in the "Glossary of Certain Terms" appearing at the end of Part I hereto. 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. ITEM 1. BUSINESS. THE COMPANY 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 in situ leach ("ISL") mining 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. 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. 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 re-establishment of production and through December 1997 the Company has produced approximately 1.3 million pounds 1 5 from Rosita and 1.5 million pounds from Kingsville Dome at average production costs of $11.90 and $13.65 per pound, respectively. During 1997 the Company produced 640,000 pounds from Kingsville Dome at an average cost of $15.47 and production from Rosita was 230,000 pounds at an average cost of $16.92. 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." 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 February 28, 1998, the Company had 115 employees, including its professional staff consisting of 10 geologists, 6 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. The Company is implementing its strategy through (i) continued production at its existing production sites; (ii) making capital expenditures for property exploration, acquisition and development; (iii) permitting additional development sites; 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 cost of production. For the year ended December 31, 1997, the Company produced approximately 871,000 million pounds of uranium at an average cost of $15.85 per pound. The Company estimates that for 1997, its uranium production was approximately 15% 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 March 1997, the Company acquired for exploration and development potential certain uranium mineral interests covering approximately 500,000 acres in northwestern New Mexico from Santa Fe Pacific Gold Corporation ("Santa Fe"). In this transaction, the Company issued 1.2 million shares of it's Common Stock and undertook 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 mineral interests found excluding coal. Included in the purchase was the acquisition of a previously existing royalty obligation from the Company to Santa Fe on certain properties that were leased from Santa Fe. The Company has two development projects in South Texas, Vasquez and Alta Mesa, both targeted to commence production in the latter part of 1998 or early 1999. The Company also has three development projects in two districts in New Mexico, the Churchrock district and the Crownpoint district. Permitting and licensing is in process at all such projects. Commencement of production at these properties is subject to timely permitting, the availability of sales contracts and the availability of capital. 2 6 MARKETING STRATEGY/URANIUM SALES CONTRACTS 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 up 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 December 31, 1997, based on prices escalated in accordance with the contract terms through that date, the Company had long-term contracts for approximately $54,542,000 of future sales for deliveries through 2002, as compared with contracts for approximately $73,359,000 as of December 31, 1996, in each case excluding the revenue related to the sale of Russian uranium under the matched sale program. The Company's long-term sales contract portfolio includes a mix of various pricing terms. 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. The following table provides information concerning the Company's long-term sales contracts from January 1, 1998 through 2002 (excluding the delivery of Russian uranium) with prices escalated through December 31, 1997 and using the December 31, 1997 spot price of uranium for the market price based contracts:
1998 1999 2000 2001 2002 Total -------- -------- ------ ------ ------ -------- Number of customers 8 5 4 3 2 N/A Total long-term contracted Deliveries (thousands of Pounds) 1,439 872 753 568 250 3,882 Total sales (thousands) $21,517 $12,090 $10,033 $7,398 $3,504 $ 54,542 Average minimum sales Price per pound $ 14.95 $ 13.86 $ 13.32 $13.04 $14.01 $ 14.05
For deliveries in periods subsequent to 1998, 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 January 1, 1998 through December 31, 2002 are represented by nine long-term contracts with eight different customers, three of which represented 18%, 15% and 13% of sales for the year ended December 31, 1997 and five of which represented 20%, 16%, 15%, 12% and 11% of sales for the year ended December 31, 1996. As of December 31, 1997, the Company had two outstanding long-term purchase contracts for Russian origin uranium totaling 90,000 pounds with deliveries in 1998. These contracts have a price escalation factor related to future inflation. 3 7 RESERVES The following table sets forth the Company's total in-place proven and probable uranium reserves as of December 31, 1997. The reserves are generally based on estimated recovery factors of 65%-75%, certain cut-off grades and a price of $16 per pound.
In-Place Reserves As of Recoverable December 31, 1997 Reserves as of Producing (P) / ------------------------------ December 31, Properties Development (D) Proven Probable 1997 ---------- --------------- ------ -------- ---- (Amounts in thousands of pounds of U3O8) Texas Kingsville Dome P 1,053 2,212 2,607 Rosita P 1,407 -- 914 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 Santa Fe D 1,418 13,306 9,571 ------- ------ ------- TOTALS 54,374 32,013 57,287 ======= ====== =======
The foregoing table does not include approximately 27.0 million pounds of proved and probable in-place reserves (estimated 17.6 million pounds recoverable) contained on acreage adjoining the Crownpoint property for which the Company executed leases with the landowners in 1992. These leases are subject to ratification by the U.S. Bureau of Indian Affairs (the "BIA"). See Item 2. Properties - New Mexico Development Properties - Crownpoint District. 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. 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: 4 8 ORE BODY EVALUATION Ore bodies which are currently being mined by the ISL process are associated with groundwater saturated permeable sandstone formations typically 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 oxidizing environment 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 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 loaded uranium 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. The Company has historically utilized a central plant for the ion exchange portion of the production process. In order to increase operating efficiency and reduce future capital expenditures, the Company began the design and development of wellfield-specific remote ion exchange methodology. Instead of piping the solutions for miles through large diameter pipe lines and mixing the waters of several wellfields together, each wellfield will be mined using a dedicated satellite ion exchange facility. This will allow for ion exchange to take place in the wellfield instead of at the central plant. Nominal design flow will be in the range of 1,200 gpm, about 25% of the design flow of the central plant at the Kingsville Dome project. Each of these units will consist of several ion-exchange columns and a resin transfer facility. When fully loaded with uranium, the resin will be transferred to a trailer and the resin trucked to the central plant for elution. After stripping the uranium from the resin, the resin will be transferred into the trailer and transported back to the satellite plant in the wellfield. 5 9 These satellite facilities will allow each wellfield to be mined using its own native groundwater only, thus eliminating the problems associated with progressive buildup of dissolved solids in the groundwaters and enhancing mining efficiencies and uranium recoveries. 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 of the mine site entails decontamination, dismantling and removal for disposal or reuse of the structures, equipment and materials used at the site during the mining and 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. 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 6 10 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. In Texas, the radioactive materials license required for ISL uranium mining is granted by the Texas Department of Health ("TDH") and the UIC permits are granted by the Texas Natural Resource Conservation Commission ("TNRCC"). The TNRCC also regulates air quality and surface deposition or discharge of treated waste water associated with the ISL mining process. In order for a licensee to receive final release from further radioactive materials license obligations after all of its mining and post-mining clean-up has been completed, approval must be issued by the TDH along with concurrence from the NRC. 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 permitting 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 a sufficient quantity of water to fulfill the applicant's 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 7 11 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. THE URANIUM INDUSTRY GENERAL The only significant commercial use for uranium is to fuel nuclear power plants for the generation of electricity. Nuclear plants generated approximately 17% of the world's electricity in 1996, up from less than 2% in 1970. According to the Uranium Institute ("UI"), 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. Prospects for growth beyond 2000 are good. Pressure to reduce greenhouse gases that are primarily caused by the burning of fossil fuels makes nuclear power generation an increasingly important energy source alternative to coal, oil or natural gas. In addition, new generation reactor designs are more standardized which could result in more predictable capital outlays, streamlined start up schedules and inherently safe operations. As of November 30, 1997, there were 364 nuclear reactors operating in the Western World, 106 of which are in the United States and another 32 under construction outside of the United States. Estimates for uranium consumption by Western World commercial reactors was approximately 142 million pounds of uranium in 1997 representing an increase of 51% over the rate of consumption recorded for 1987. Western World consumption is estimated to range between 135 to 150 million pounds annually during the next five years. MARKET PRICE FORMATION 1997 represented a volatile year in terms of price formation. At December 31, 1996, the spot price was $14.70 per pound compared to $12.05 per pound at December 31, 1997. The spot price recorded its low for the year of $10.20 at August 30, 1997 but rebounded $2.55 to $12.75 by November 30, 1997. During May of 1996, spot prices reached a high of $16.50 per pound, a level which had not been reached since December of 1987, but began a slow decline from August 1996 to its current level ($10.75 per pound at February 28, 1998). The first half of 1996 was characterized by increased utility demand together with relatively illiquid inventories. As prices approached their highs for the year, more inventory became available and demand became satisfied at lower prices. The heavy utility contracting in 1996 resulted in weakened contract demand during 1997 and thus weakening prices. (The volume of spot transactions world wide during the first quarter of 1997 was only 32% of that during the first quarter of 1996). In addition, aggressive selling by the Russian Executive Agent to fill portions of their allotted HEU derived uranium import quota led to a bottoming of prices in 8 12 August of 1997 of $10.20 per pound. Utility and producer demand entered at that time helping to fuel a quick recovery to $12.75 per pound at November 30, 1997. The majority of uranium is sold under long-term contracts. However, the spot price affects the price level at which such long-term contracts can be attained. In rising markets, base price escalated contracts are sought by buyers while spot price related term contracts have been their preference during declining markets. SOURCES OF SUPPLY Western World production of uranium in 1996 reached 74 million pounds and is estimated to have increased to approximately 77 million pounds in 1997. Production at this level would represent approximately 54% of estimated consumption for that year. Since 1985 Western World consumption has outstripped Western World production by over 500 million pounds. This gap has been met through inventory drawdowns, imports of CIS uranium product and to a lesser extent, imports from China and former East Bloc countries. Liquidation of government stockpiles has also played a role since approximately 1995 and could be a more significant source of supply in the future. Inventory Drawdowns: From the early 1970's to 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 declined from highs of above $40.00 per pound to below $8.00 per pound in 1991. As prices fell, Western World production was reduced dramatically from a high of 115 million pounds in 1980 to a low of 57 million pounds by 1994. As production fell, consumption increased quickening the pace of commercial inventory drawdown. Currently it is estimated that excess inventory levels (levels in excess of preferred inventories) are less than two years of forward reactor requirements. Preferred inventories are by nature, a function of policy and price. In rising markets, consumers tend to build inventories as a hedge and in falling markets, tend to reduce inventories thereby reducing carrying costs. Both actions tend to exacerbate price movements. CIS Imports: A rapid increase in the quantity of CIS imports beginning in the late 1980's significantly countered the effect of inventory drawdowns and led to the filing of an anti-dumping suit by the U.S. in late 1991. In October of 1992, suspension agreements were signed limiting CIS access to the U.S. market via strict quotas and anti- circumvention measures. Agreements with the primary uranium producing CIS republics remain in place through at least 2002. Amendment to Russian Suspension Agreement: On March 11, 1994, the suspension agreement with Russia was amended allowing for up to 43 million pounds of uranium to be imported into the U.S. over ten years, only if it is matched with an equal volume of newly produced U.S. uranium. Although this amendment may increase the supply of uranium to the U.S. market place, it has proven to be an important program for most domestic producers. CIS Production: Primary uranium production in Russia, Kazakhstan and Uzbekistan, the major CIS producing republics has declined steadily. In 1993, these republics produced a total of approximately 20 million pounds of uranium. By 1996, production had fallen to approximately 12.5 million pounds representing a 37% decline. Highly Enriched Uranium: In January of 1994, the U.S. and Russia entered into an Agreement (the "Russian HEU Agreement"), to convert highly enriched uranium ("HEU") derived from dismantling Russian nuclear weapons into low enriched uranium ("LEU"), suitable for use in nuclear power plants. At a projected maximum conversion rate for HEU, approximately 24 million pounds of uranium could be available to Western World markets on an annual basis. 9 13 Legislative Disposition of HEU: 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. market place at an annual rate not to exceed 2 million pounds in 1998 increasing gradually to 20 million pounds in 2009 and thereafter. At this maximum rate, HEU material could supply approximately 51% of annual U.S. reactor requirements projected for 2009. In addition, HEU is allowed to be used in the U.S. as a source of Russian uranium for matching sales without reducing maximum quotas allowed under the legislation. This legislation also sets forth the procedures/restrictions on sales of U.S. government stockpiles including previously purchased Russian HEU and LEU and natural uranium inventories. The controlled disposition of these government stockpiles is designed to mitigate any adverse impact on the domestic uranium industry as determined by the Secretary of the United States Department of Energy (the "DOE"). Reprocessing: Reprocessing of spent nuclear fuel meets approximately 5-7 million pounds of Western World demand each year. This activity is primarily focused in Western Europe and Japan and it is not expected to increase significantly in the near future. REQUIRED PRIMARY PRODUCTION Industry analysts expect annual Western World consumption to range between 135 million and 150 million pounds annually for the near future. The Company estimates that between 30 million and 40 million pounds of this demand could be filled by a combination of government stockpiles (including converted Russian and United States HEU and inventory sold by the DOE), and imports from CIS republics and former East Bloc countries. To achieve market equilibrium, primary production in the Western World will need to supply between 95 million and 120 million pounds on an annual basis subject to adjustments for any remaining excess inventory drawdown and limited uranium reprocessing. Production from existing facilities in the Western World however, is projected to decline from current levels of 77 million to approximately 57 million pounds by 2001 as existing reserves are depleted. New production therefore will have to be brought on line to fill the potential annual gap of between 38 million and 63 million pounds. 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. 10 14 The following table shows U.S. production and Western World production and consumption for the years presented. PRODUCTION AND CONSUMPTION OF U3O8(1) (Western World Countries) (Amounts in millions of pounds of U3O8)
Total Western Total U.S. Total U.S. Total Western 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 6.3 45.5 74.0 138.7 1997 (est.) 5.8 53.1 77.0 142.1
- ---------- (1) Source: Industry - various publications of Department of Energy/Energy Information Administration ("DOE/EIA"), Trade Tech, UxCo, the Uranium Institute and Nuclear Assurance Corporation. 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 February 28, 1998 was $10.75. 11 15 The following graph shows spot prices per pound from 1978 to December 31, 1997, as reported by Trade Tech. [GRAPH] - ------------- 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 1997 its uranium production was approximately 15% of the total U.S. production and approximately 2% of the total Western World production. ITEM 2. PROPERTIES. 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. KINGSVILLE DOME The Property. The Kingsville Dome property consists of mineral leases from private landowners (and a small portion owned in fee) on 3,068 gross (3,043 net) acres located in central Kleberg County, Texas. The leases provide for royalties based upon uranium sales. The leases have expiration dates 12 16 ranging from February 1998 to 2007. 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. Reserves. As of December 31, 1997, the property contained approximately 3.3 million pounds of in-place proven and probable uranium reserves (estimated 2.6 million pounds recoverable). Production History. Initial 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. Production at Kingsville Dome was approximately 1.5 million pounds from recommencement of production in March 1996 through December 31, 1997 with 640,000 pounds produced in 1997. 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 in 1998. The Company spent approximately $9.0 million in capital expenditures in 1997 and anticipates spending approximately $4.3 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 groundwater is planned to commence in early 1998. The Company anticipates spending approximately $430,000 in 1998 on such restoration activities. ROSITA The Property. The Rosita property consists of mineral leases on 3,359 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. Reserves. As of December 31, 1997, the property contained approximately 1.4 million pounds of in-place proven and probable uranium reserves (estimated 900,000 million pounds recoverable). Production History. The Company began initial production at Rosita in October 1990. Total production from Rosita for the eighteen months through March 31, 1992 was approximately 1.1 million pounds. In March 1992, due to depressed uranium prices, the Company shut-in production. Wellfield development activities resumed at Rosita in March 1995, and production recommenced in June 1995. From that date through December 31, 1997 approximately 1.3 million pounds were produced with 230,000 pounds produced in 1997. Further Development Potential. The Company estimates that there are approximately 900,000 pounds of uranium remaining to be produced from the Rosita project. The Company expects its existing reserves at Rosita to continue in production beyond 1999. The Company spent approximately $2.5 million for development activities, permitting and land holding costs in 1997 and projects expenditures of over $750,000 in 1998. 13 17 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. Restoration and Reclamation. The Company expects to commence initial groundwater restoration in early 1998 and expects to expend approximately $100,000 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 1999, 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 which had arisen on the Vasquez property regarding a party who owns 50% of the mineral estate has been substantially concluded and such party has disclaimed its interest in the uranium on this property. The Company leases are with the owner of both the surface of the land and 50% of the minerals. As a result of these leases, the Company has the right to mine 100% of the minerals on this property . Reserves. As of December 31, 1997, 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 late 1998 or early 1999. The Company spent approximately $400,000 in capital expenditures in 1997 and anticipates spending approximately $440,000 in 1998 for permitting, development and land holding costs. The Company anticipates having to demonstrate financial surety in connection with the commencement of production at this project 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 and the TDH. These applications are currently under review and the Company expects the permits to be in place in 1998. 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 annual royalties if production does not begin by certain specified times. The Company made such a payment in 1997. The Company paid $4 million for the lease of which $1 million is recoverable against 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 December 31, 1997, 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 anticipated to begin in the fourth quarter of 1998 depending on the progress in licensing and permitting. The Company spent approximately $515,000 in 1997 for permitting and land holding costs and anticipates spending approximately $680,000 in 1998 for plant construction, permitting and development costs. The 14 18 Company anticipates having to demonstrate financial surety in connection with these activities 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 the latter part of 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, in March 1997, the Company acquired 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 its New Mexico properties will proceed incrementally, subject to timely permitting, the availability of water rights, the availability of sales contracts and the availability of capital. The Company plans to develop the Churchrock district first and the Crownpoint district next. 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 finalized and completed the publication of the FEIS in the first quarter of 1997. The NRC issued an operating license in January 1998 which would allow operations to begin in the Churchrock district, however, the effective date of the license has been temporarily stayed pending a decision by the NRC. As a result of the current stay in place, there can be no assurance that the license will be maintained in its current form allowing the Company to proceed with its planned operations or that the NRC process will be concluded on a timely basis. 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 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 issued 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. In addition to the EPA's assertions, the Navajo Nation claims regulatory jurisdiction over a significant portion of the Company's New Mexico development properties. These claims subject the development of those properties within the area claimed as "Indian country" to further uncertainties, including a potential for delays in UIC permitting. For certain properties not permitted by the EPA at the time a Navajo regulatory program is promulgated and accepted by the EPA for a determination of primacy, 15 19 the Company would then apply to the Navajo EPA for its UIC permits. Although 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. In February 1998, the United States Supreme Court in Alaska v. Native Village of Venetie Tribal Government interpreted the terms "Indian country" and "dependent Indian Communities". Such interpretation stated that "Indian country" includes "all dependent Indian communities within the United States" and that such lands refer to a specific category of Indian lands that are not reservation nor allotted lands. Such lands must meet the following two criteria; (i) they must have been set aside by the Federal Government for the use of Indians as Indian land; and (ii) they must be under federal superintendence. On the basis of this ruling the Company believes that its private fee lands and federal claims positions in New Mexico may fall under the jurisdiction of the State of New Mexico for regulatory purposes. 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 the mineral estate in fee for both Sections 17 and the Mancos properties. The surface estate on Section 17 is owned by the U.S. Government and held in trust for 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. On March 25, 1997, the Company acquired from Santa Fe, the fee mineral interests in Section 17 and Mancos thereby acquiring the position owned by the lessor and extinguished certain of the royalty obligations on those properties. Reserves. As of December 31, 1997, 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. 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 were approximately $1.0 million in 1997. The Company anticipates spending approximately $320,000 in 1998 for permitting and land holding costs. The Company anticipates having to demonstrate financial surety in connection with production activities which it expects to meet by posting a bond collaterized by cash in an amount equal to 50% of the bond. 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 16 20 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 reapplied and revised its water budget to be consistent with the rights of UNC as determined by the State Engineer. The State Engineer is currently conducting a hearing regarding the application for the transfer of the water rights. A claim by the Navajo Nation to jurisdiction over these water rights was denied by the State Engineer's hearing officer and in the prior proceeding, the state district court. These decisions do not preclude a contrary claim from being made in another proceeding. 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 Navajo Nation has asserted jurisdiction over Section 8 as being a "dependent Indian community". The EPA has informed the Company that the regulatory jurisdiction of the property is considered to be in "dispute" and would require an EPA-issued permit prior to the commencement of mining. The Company does not plan to pursue permits for Mancos at this time. 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." While the EPA has not yet taken a final position on this issue, they have determined that a dispute does exist between the NMED and the Navajo tribe. As a result of this dispute, the EPA has indicated that an EPA permit will be required on this property. 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. The State of New Mexico has filed 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 unpatented mining claims. This acreage is subject to an obligation of the 17 21 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 license. These leases expire 10 years after the approval by the BIA. Reserves. With respect to all the Crownpoint acreage except Unit 1, as of December 31, 1997, 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. Development Plan. The New Mexico properties will be developed according to the license conditions issued by the NRC. Under the license, the first operating property will be Churchrock followed by Unit 1 and Crownpoint. Costs relating to permitting activities and land holding costs for Crownpoint were $1,153,000 in 1997, and are expected to total $210,000 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 Unit 1 may likely involve the claim 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 NRC license is part of the overall development plan for both the Churchrock and Crownpoint districts discussed above. 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 U.S. Government and held in trust for the Navajo Nation and may be subject to the same jurisdictional dispute as for Section 17 in Churchrock. SANTA FE PROPERTIES GENERAL In March 1997 the Company acquired from Santa Fe certain uranium mineral interests and exploration rights for uranium in New Mexico. The Properties. The properties consist of: (a) 37,000 acres as to which the Company has acquired a fee interest in the entire mineral estate, excluding coal ("Category I Properties"); (b) approximately 140,000 acres as to which the Company has acquired the fee interest in uranium (the "Category II Properties"); and (c) approximately 346,000 acres as to which the Company has acquired the exclusive right to explore for uranium and other minerals excluding coal (the "Category III Properties"). 18 22 The Company is obligated to spend on exploration $200,000 per year for the ten year period starting in March 1997 and $400,000 per year for the seven year period starting in March 2007. This expenditure can be made on any of the Category II or Category III properties. The license is for 17 years, expiring in March 2014. In the event that the sale price of uranium shall exceed $25 per pound for any twelve-month period URI has committed to spend on exploration (or pay to Santa Fe) during the following 5 years an aggregate of $5 million; and in the event that the sale price of uranium shall exceed $30 per pound for any twelve-month period URI has committed to spend on exploration (or pay to Santa Fe) during the following 5 years an aggregate of $10 million. With respect to Category II and Category III properties, at such time as URI shall apply for a mining permit with respect to any such properties Santa Fe has the right to put the remaining mineral interests owned by it (excluding coal) to the Company at a price of $200 per acre for any acreage in any section which is covered by the mining application. The acreage price shall be increased by the same percentage as the percentage increase in the price of uranium on the date of such application over $15.80 per pound. URI has the option to purchase at any time the entire mineral estates (excluding coal) on such properties on the same terms. Reserves. The Company estimates that the Category I Properties contain 14.7 million pounds of proven in-place uranium reserves (estimated 9.6 million pounds recoverable). Development Plan. The planned development strategy is to integrate qualified properties from the Santa Fe lands into the production plans for Churchrock and Crownpoint. Exploration Potential. There is significant exploration potential for the Santa Fe properties. Numerous ore grade holes drilled on the properties demonstrates this potential; however, because the deposits are not delineated, development costs are uncertain. 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. 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 19 23 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 surety bond requirement at December 31, 1997 was 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 $3.3 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 at December 31, 1997 approximates $4.7 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 as a condition to receipt of the requisite permits for 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 will be subject to annual review and revision by the NRC and State of New Mexico. ITEM 3. LEGAL PROCEEDINGS LONGORIA 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 has been completed and the Company has made application to the TDH for final release of its obligations on the property and anticipates to receive such release in early 1998. The suit is pending at March 31, 1998 and the Company does not believe the conclusion of this lawsuit will have a material operating or financial impact on the Company. PROBANK On July 12, 1995, the Company filed a lawsuit in the federal district court in Colorado against Professional Bank, a Colorado chartered bank ("ProBank"). In the action styled Uranium Resources, Inc. v. Professional Bank, the Company alleged 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 Oren L. Benton. The Company recovered $300,000 of the total in 1995 and recovered $575,000 from ProBank in June 1997 in settlement of the action against ProBank. 20 24 BENTON BANKRUPTCY During 1994, the Company encountered liquidity problems that resulted in the Company entering into certain transactions with companies controlled by Mr. 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"). On February 19, 1998, David J. Beckman, as Liquidating Trustee for the CSI Liquidating Trust and the NTC Liquidating Trust commenced an action against the Company in the United States Bankruptcy Court for the District of Colorado seeking to recover certain transfers made from CSI Enterprises, Inc. ("CSI") and Nuexco Trading Corporation ("NTC") to the Company. The Adversary Proceeding is styled David J. Beckman v. Uranium Resources, Inc., Adversary Proceeding No. 98- 1131 SBB ("Adversary Proceeding"). Specifically, the Liquidating Trustee seeks to recover (a) $1,400,000 paid by NTC to the Company on or about November 7, 1994 and (b) transfers by CSI to the Company of $80,000 (12/2/94), $40,000 (12/9/94), $45,000 (12/16/94), $36,150 (2/10/95) and $1,900 (2/14/95). The Liquidating Trustee seeks to recover these amounts pursuant to 11 U.S.C. Section 547, 11 U.S.C. Section 544(b), 11 U.S.C. Section 550 and state law. The Company has not yet responded to the Adversary Proceeding. The Company intends to vigorously defend this action. The Company is unable to assess what adverse consequences, if any, might result from such assertion. The Company has asserted certain claims against Benton and the Benton Companies in the bankruptcy proceedings. The Company is subject to periodic inspection by certain regulatory agencies 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The 1997 Annual Meeting of Stockholders was held on May 1, 1997, in Dallas, Texas. Shares representing 9,303,484 votes (86% of total outstanding) were present in person or by proxy. At the meeting, the Stockholders of the Company elected Leland O. Erdahl, Paul K. Willmott, George R. Ireland and James B. Tompkins to the Board of Directors for a one-year term. In addition, the Company's stockholders ratified Arthur Andersen LLP as independent accountants for the Company in 1997. The ratification of Arthur Andersen LLP as independent accountants was approved by a vote of 9,276,570 shares in favor, 2,216 opposed and 24,788 abstaining. 21 25 CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The Company is including the following cautionary statement to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statement made by, or on behalf of, the Company. The factors identified in this cautionary statement are important factors (but not necessarily all of the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, the Company cautions that, while it believes such assumptions or bases to be reasonable and makes them in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, the Company, or its management, expresses an expectation or belief as to the future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result, or be achieved or accomplished. Taking into account the foregoing, the following are identified as important risk factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company: 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. The Company expects to fund its 1998 capital requirements from cash flow from operations and existing working capital financing arrangements. However, certain capital requirements for new development projects in 1998 and beyond may require additional sources of capital. There can be no assurance that the Company will raise sufficient capital to fund these capital requirements. 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. 22 26 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 necessary permits could have a material adverse effect upon the Company and its developmental plans for these 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 will 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 restoration, decommissioning, decontamination and reclamation costs are approximately $4.7 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 totaling approximately $5.6 million at December 31, 1997, $3.3 million 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. RESERVE ESTIMATES 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. 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, 23 27 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 reserves. COMPETITION There is global competition in the uranium industry for mineral properties, capital, customers and the employment and retention or 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 United States 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. 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 year's, prior to 1996, imports of uranium, including imports of uranium from the CIS, have resulted in significant downward pressure on uranium prices. The spot market price for uranium has demonstrated a large range since January 1995. Prices have risen from $9.65 per pound as of January 31, 1995 to a high of $16.50 per pound as of May 31, 1996. The spot price as of February 28, 1998 was $10.75 per pound. The current spot prices of uranium are at levels which would allow for sales contracts that are priced above the Company's cash cost of uranium production, allowing the Company to achieve a positive cash flow of operations. The Company's cash flow from operations for the year ended December 31, 1997 was $4,931,000. There is no assurance that such price level will remain at this level. URANIUM CONTRACTS PROFITABILITY As of December 31, 1997, the Company had contracts for delivery of an estimated 3.9 million pounds of uranium (exclusive of 90,000 pounds of Russian uranium sales made pursuant to the matched sales program) to domestic utilities from January 1, 1998 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 power 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. As of November 1997, there 24 28 were 106 nuclear units in the United States. Currently, there are no new nuclear power plants under construction in the U.S. As of November 1997, there were 364 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. A significant portion of the Company's contracted sales of uranium from January 1, 1998 through December 31, 2002 are represented by nine long-term contracts with eight different customers, three of which represented 18%, 15% and 13% of sales for the year ended December 31, 1997; five of which represent 20%, 16%, 15%, 12% and 11% of sales for the year ended December 31, 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 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 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 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. 25 29 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 U3 O8. 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. Section 1151 and understood to encompass territory situated within Indian reservations, land owned by Indian allottees and land within a 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. over feeding . . . . . . . . . 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. 26 30 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 minable, and can be profitably recovered under conditions specified at the time of the appraisal, based on a positive feasibility study. The calculation of minable 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. 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, workers' 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. Trade Tech . . . . . . . . . . A Denver-based publisher of information for the nuclear fuel industry; the successor to the information services business of Nuexco. 27 31 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. 28 32 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. MARKET INFORMATION The Company's Common Stock trades on NASDAQ under the trading symbol URIX. The following table sets forth the high and low sales prices for the Common Stock as reported through NASDAQ for the periods indicated:
Common Stock ------------ Fiscal Quarter Ending High Low --------------------- ---- --- December 31, 1997 7-1/8 2-1/2 September 30, 1997 7 3-7/8 June 30, 1997 6-3/8 4-3/4 March 31, 1997 8 5 December 31, 1996 13-5/8 7-1/8 September 30, 1996 14-25/32 9-35/64 June 30, 1996 17-5/8 12-1/8 March 31, 1996 15-1/2 5-5/8
The high and low sales prices for the common stock for the period January 1, 1998 through March 24, 1998, was $4.375 and $2.125, respectively. HOLDERS As of March 24, 1998, the Company had 12,053,027 shares of Common Stock outstanding held of record by 114 persons. DIVIDENDS The Company did not declare or pay any cash or other dividends on its Common Stock during the years ending December 31, 1995, 1996 or 1997. The Company does not anticipate paying dividends for the foreseeable future. 29 33 ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31, -------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- (In thousands, except per share and per pound amounts) CONSOLIDATED STATEMENTS OF OPERATIONS DATA Uranium sales: Produced uranium $ 14,738 $ 17,827 $ 7,195 $ 959 $ 1,341 Purchased uranium 15,003 6,437 14,634 16,375 11,881 Cost of uranium sales (29,269) (20,122) (17,235) (13,466) (10,216) Writedown of uranium properties -- -- (163) -- (1,945) ---------- ---------- ---------- ---------- ---------- Earnings (loss) from operations Before corporate expenses 471 4,142 4,431 3,868 1,061 Corporate expenses (2,937) (3,055) (3,496) (2,177) (1,903) ---------- ---------- ---------- ---------- ---------- Earnings (loss) from operations (2,466) 1,087 935 1,691 (842) Interest and other, net (868) (328) (324) 163 387 Loss on acceleration of uranium contract -- -- -- (349) -- Loss on termination of joint venture and transfer to stockholders -- -- (1,781) -- -- ---------- ---------- ---------- ---------- ---------- Earnings (loss) before income taxes (1,598) 759 1,170 1,505 (455) Federal income tax (benefit) (273) -- (234) 300 (107) ---------- ---------- ---------- ---------- ---------- Net earnings (loss) $ (1,325) $ 759 $ (936) $ 1,205 $ (348) ========== ========== ========== ========== ========== Earnings (loss) per common share: Basic $ (0.11) $ 0.09 $ (0.12) $ 0.17 $ (0.05) ========== ========== ========== ========== ========== Diluted $ (0.11) $ 0.08 $ (0.12) $ 0.17 $ (0.05) ========== ========== ========== ========== ========== Weighted average common stock And equivalents outstanding: Basic 11,760 8,789 8,098 6,929 6,640 Diluted 11,760 10,031 8,098 7,193 6,640 CONSOLIDATED OPERATING AND OTHER DATA Cash provided by operations $ 4,931 $ 9,294 $ 5,301 $ 5,080 $ 6,283 Pounds of uranium produced 871 1,360 612 -- -- Pounds of uranium purchased 1,275 488 660 1,329 510 Pounds of uranium delivered 2,240 1,656 1,633 1,081 753 Capital expenditures $ 14,901 $ 14,607 $ 3,583 $ 3,183 $ 3,101 Average sales price per pound(1) $ 13.71 $ 16.35 $ 15.64 $ 16.03 $ 17.56 Average cost of produced pounds sold (2) $ 15.61 $ 11.34 $ 10.28 $ 13.60 $ 12.96 Average cost of purchased pounds sold $ 10.40 $ 10.21 $ 9.41 $ 10.68 $ 10.88 Cash cost per produced pound(3) $ 12.17 $ 8.51 $ 7.11 N/A N/A Average cost per produced pound(2) $ 15.85 $ 12.12 $ 10.09 N/A N/A Average cost per purchased pound $ 10.40 $ 10.21 $ 9.52 $ 10.07 $ 11.24
(1) Excludes sales of the Russian component of deliveries made under the matched sales amendment. The economic benefit of such sales are treated as "pass-through" sales. (2) Average cost per produced pound consists of all operating costs, depletion, depreciation and accrued restoration and reclamation costs. (3) Cash cost per pound consists of all operating costs and wellfield development costs associated with producing wellfields. 30 34
Year Ended December 31, ------------------------------------------------------------- 1997 1996 1995 1994 1993 -------- -------- -------- -------- -------- (In thousands) CONSOLIDATED BALANCE SHEET DATA Cash and cash equivalents $ 2,325 $ 16,934 $ 4,716 $ 2,528 $ 2,530 Working capital (deficit) 5,999 15,269 4,710 (2,545) (2,777) Uranium properties (net) 61,303 42,444 37,200 37,230 34,420 Total assets 74,864 68,794 48,085 44,850 40,846 Total debt (1) 8,419 12,577 7,487 9,227 11,286 Total liabilities 22,959 23,497 18,214 16,632 20,563 Total shareholders' equity 51,905 45,297 29,872 28,218 20,283
(1) Includes current portion of long-term debt and notes payable. 31 35 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS This Item 7 contains "forward-looking statements" which are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements relating to liquidity, financing of operations, continued volatility of uranium prices and estimate of future net cash flows attributable to proved undeveloped reserves and other such matters. The words "believes," "expects," "projects," "targets," or "estimates" and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company's disclosures under the heading: "Cautionary Statement for the Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995" beginning on page 22. CAPITAL RESOURCES AND LIQUIDITY Operating Cash Flows At December 31, 1997, the Company's cash and cash equivalents were $2,325,000 compared to $16,934,000 at year end 1996. Cash and cash equivalents in 1996 increased by $12,218,000 from 1995 year end levels. The Company's uranium operations generated positive cash flow of $4,931,000 for the year ended December 31, 1997, in comparison to positive cash flow from operations in 1996 and 1995 of $9,294,000 and $5,301,000, respectively. The Company's net working capital at December 31, 1997 and 1996 was $5,999,000 and $15,269,000, respectively. In March 1998, the Company entered into an agreement to extend the maturity date of its $6,000,000 secured convertible note from May 31, 1998 to May 31, 2000. As a result of this two year extension, the Company reclassified this obligation as a long-term obligation and had a positive impact of $6,000,000 to its net working capital at December 31, 1997. The note is convertible into shares of the Company's common stock. In return for the extension in the maturity of the note, the conversion price was adjusted from $4.00 per share to $3.00. The exercise price of certain outstanding warrants held by the noteholder to purchase 1,000,000 shares of the Company's common stock was also adjusted from $4.00 per share to $3.00 per share, and the expiration date of the warrants was extended by two years, to May 31, 2000. During January 1995, when companies controlled by Oren L. Benton (the "Benton Companies") held effective control of the common stock of the Company, the Company transferred $1 million to the Benton Companies in connection with a planned joint venture to process uranium at a Benton Companies' mill. Shortly thereafter, an additional $1,080,000 was transferred to or for the benefit of Mr. Benton or certain Benton Companies without the authorization of the Company's Board of Directors. In February 1995, Mr. Benton and certain of the Benton Companies filed for bankruptcy. The Company has recovered $875,000 related to the unauthorized transfer ($300,000 in 1995 and $575,000 in 1997); however, the remaining $1.2 million has not been recovered and there can be no assurance that the Company's efforts to pursue remedies will be successful. A loss for these transactions of $1.78 million was recorded in 1995 and the recovery of $575,000 in 1997 resulted in an increase to other income in the second quarter of this year. 32 36 Investing Cash Flows The Company resumed development activities at its Rosita site during the second quarter of 1995 and uranium production began in June 1995. During 1996 and 1997, $2,002,000 and $2,450,000 in capital expenditures were incurred at Rosita, respectively. Capital expenditures to be incurred for 1998 at Rosita, primarily for satellite plant and additional wellfield development, are expected to be approximately $763,000. Significant development activities at the Company's Kingsville Dome facility began in December 1995 and resulted in commencement of production at this site in March 1996. Capital expenditures at Kingsville Dome during 1996 and 1997 totaled $6,695,000 and $8,998,000, respectively and are expected to be $4,280,000 in 1998. The Company expects to fund its 1998 operations and capital expenditures at its Kingsville Dome and Rosita projects from cash on hand, sales proceeds under uranium deliveries and through existing financing arrangements. In June 1996, the Company acquired the rights to a significant uranium deposit in South Texas known as the Alta Mesa project. The Company spent $4,000,000 to acquire the uranium rights to the property which is estimated to contain approximately 6.2 million pounds of in-place proven and probable reserves. Capital expenditures related primarily to permitting activities and land holding costs have totaled approximately $400,000 and $515,000, respectively in 1996 and 1997. Capital expenditures for permitting, plant construction and wellfield development are expected to be $680,000 in 1998. Extensive drilling and environmental work has been undertaken on this property by previous leaseholders which will be useful to the Company for licensing and pre-production evaluation of the project. The Company is targeting the production to commence in late 1998 with an annual capacity of 1.0 million pounds per year. The projected recovery factors on the Alta Mesa property are estimated at 65% to 75% of their in-place reserves and initial estimated production costs, including acquisition costs, plant and wellfield capital costs, operating costs and projected reclamation costs are projected to be below $10.00 per pound. The initial capital costs to acquire the rights to the Alta Mesa property were obtained through a one-year note from the Lindner Dividend Fund. This $4.0 million note was repaid in January 1997 from the proceeds from the Company's equity placement completed in December 1996. Capital expenditures at the Company's Churchrock, Crownpoint and Vasquez projects for permitting and land holding costs totaled approximately $1,300,000 and $2,900,000 in 1996 and 1997, respectively and are expected to be $1,200,000 in 1998. Capital requirements for 1998 and beyond for these projects are expected to be met through future sales proceeds from current and additional uranium delivery contracts and through future sources of debt and/or equity financing. Cash used for other investing activities for 1996 and 1997 totaled $2,070,000 and $524,000, respectively and was for the purchase of certificates of deposit to fund certain bonding requirements at the Company's producing and development properties. These certificates of deposit are pledged under these bonding requirements and therefore are not readily available to the Company. See Note 1 - "Restricted Cash" of the Notes to Consolidated Financial Statements. Financing Cash Flows During May 1996, the Company entered into a one-year $3.0 million revolving credit facility. This facility was renewed and expanded to a $5.0 million credit facility which concludes July, 1999. This agreement is secured by the Company's uranium inventory and/or by receivables from its uranium sales 33 37 contracts. Principal and interest payments under the loan are due monthly, with interest on the loan accruing at the prime rate plus 1%. Principal advances, net of repayments, under the facility amounted to $1,950,000 in 1997. In June 1996, the Company received $4.0 million in proceeds from the one-year note entered into with the Lindner Dividend Fund, noted previously. The terms of the note provided for the payment of both the principal and accrued interest by June 1997 with interest on the note accruing at a rate of 6.5% per annum. The principal and accrued interest on this note was paid in January 1997. In December 1996, the Company completed an equity placement in which 2,000,000 shares of the Company's common stock were sold in a public offering. Net proceeds to the Company totaled over $14,000,000 with $4,900,000 of the proceeds used in January 1997 to repay the $4.0 million note from the Lindner Dividend Fund and to pay certain other long-term obligations. The balance of the proceeds was used for working capital purposes and to fund development activities at the Company's projects. In 1996, the Company also generated approximately $630,000 from the issuance of approximately 167,000 shares of common stock upon the exercise of certain stock options and stock warrants. Net cash generated from the Company's financing activities in 1995 totaled approximately $720,000. The Company received $2,000,000 in December 1995 from the exercise of 500,000 of the warrants issued in connection with the Lindner Notes and also received $460,000 during the year from the issuance of approximately 156,000 shares of common stock associated with the exercise of certain employee and directors stock options. The Company received $6,000,000 under the convertible loan made in May 1995 by Lindner Investments and Lindner Dividend Fund and had debt payments during the year under a note to a bank totaling $7,740,000. ENVIRONMENTAL ASPECTS The Company utilizes ISL solution mining technology as its only mining method. Unlike conventional uranium mining companies, the Company's mining technology does not create "tailings". Nevertheless, the Company is highly regulated. Its primary environmental costs to date have been related to obtaining and complying with environmental mining permits and, once mining is completed, the reclamation and restoration of the surface areas and underground water quality to a condition consistent with applicable requirements. Accruals for the estimated future cost of such activities are made on a per-pound basis as part of production costs. See the Consolidated Statements of Operations for the applicable provisions for such future costs. See also Note 1 - "Restoration and Reclamation Costs" of Notes to Consolidated Financial Statements. RESULTS OF OPERATIONS 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. The Company's customers have generally elected, where possible, to take delivery of the bulk of the annual deliveries under their long-term sales contracts later in each year. 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 for the entire year. 34 38 Years Ended December 31, 1997, 1996 and 1995 The following is a summary of the key operational and financial statistics related to the Results of Operations:
1997 1996 1995 ---------- ---------- ---------- (In thousands, except per pound data) Uranium sales revenue (1) $ 29,741 $ 24,264 $ 21,829 Total pounds delivered 2,240 1,656 1,633 Average sales price/pound(2) $ 13.71 $ 16.35 $ 15.64 Pounds produced 871 1,360 612 Pounds purchased 1,275 488 660 Average production cost of produced pounds $ 15.85 $ 12.12 $ 10.09 Average cost of purchased pounds $ 10.40 $ 10.21 $ 9.52 Average cost of produced pounds sold $ 15.61 $ 11.34 $ 10.28 Average cost of purchased pounds sold $ 10.40 $ 10.21 $ 9.41
(1) 1997, 1996 and 1995 uranium sales revenues include approximately $2.8 million, $4.5 million and $3.5 million, respectively, from the sale of Russian uranium which is sold under the matched sales Amendment. (2) Average sales price does not include the sales of Russian material sold as a "pass through" sale under the matched sales Amendment. Revenue from uranium sales in 1997 increased by $5,477,000 from 1996 amounts. This increase resulted primarily from higher uranium deliveries this year compared to 1996. Deliveries were comprised of produced pounds, purchased uranium sold into existing contracts and purchased uranium whose economic benefit is essentially treated as a "pass through" sale (this includes the delivery of Russian origin uranium under the Company's matched sales contracts). The quantity of the pass through sales increased from 390,000 pounds in 1996 to 685,000 pounds in 1997 and while such sales have a positive impact on revenues they have virtually no impact on earnings from operations or net income. The deliveries of the Company's produced pounds and non-pass through purchased pounds in 1996 was approximately 1,266,000 pounds compared to 1,555,000 in 1997. The average sales price for such sales in 1996 was $16.35 per pound compared to $14.68 in 1997. The deliveries in 1996 included 250,000 pounds of spot sales made pursuant to matched sale agreements, the average price for these deliveries was $17.95 per pound. No spot sales under the matched sales agreements were made in 1997. The average sales price for total uranium deliveries (including Russian origin uranium) in 1997 and 1996 was $13.28 per pound and $14.65 per pound, respectively. Revenue from uranium sales in 1995 was $21,829,000 on deliveries of 1,633,000 pounds. Sales made in 1995 under the matched sales agreements totaled 780,000 pounds during the year. The 780,000 pounds delivered in 1995 included 320,000 of URI produced uranium and 460,000 pounds of Russian purchased uranium. Sales under the Company's long-term contracts not subject to the Amendment totaled 715,000 pounds in 1995 at an average sales price of $17.50 per pound. The deliveries in 1995 also included 137,000 pounds sold in the spot market. 35 39 Details of the cost of uranium sales were as follows:
1997 1996 1995 ------- ------- ------- (In thousands) Cost of purchased uranium $13,258 $ 4,979 $10,315 Royalties 834 1,198 432 Operating expenses 6,564 4,866 2,738 Provision for restoration and reclamation costs 1,032 1,480 597 Depreciation and depletion of uranium properties 7,581 7,599 3,154 Writedown of uranium properties -- -- 163 ------- ------- ------- Total cost of uranium sales $29,269 $20,122 $17,399 ======= ======= =======
The Company produced approximately 871,000 pounds from its two South Texas facilities in 1997. During the first half of 1997, the Company experienced certain severe production challenges resulting from operating inefficiencies and operating techniques in dealing with the subsurface geochemical conditions at Kingsville Dome and Rosita. As a result, the Company's 1997 production fell compared to the 1,360,000 pounds produced in 1996. Starting in the second quarter of 1997, a number of organizational and operating changes, including plant design modifications, were implemented to address specific production inefficiencies. The main operating changes related to the water quality of the mine areas under wellfield at each site. Certain redesign of the plants and wellfield patterns were performed to mitigate the effects of continuously recycled ground water utilized in the production process by minimizing the amount of mine water that previously was used in multiple wellfields. By focusing on mining each wellfield with its own native groundwater, the efficiency of the mining process is increased. This change in methodology required a brief shut-down during the year at the Kingsville Dome plant to allow for a re-piping of the facility. This change in technique is expected to permit future mining from this and future sites to utilize less capital intensive remote ion exchange facilities to mine new wellfields at Kingsville Dome and Rosita and at the Alta Mesa and Vasquez projects once their production begins. The utilization of these modified techniques is projected to reduce capital requirements for new projects such as Alta Mesa and Vasquez by approximately $4.0 million at each project. The change to the remote ion exchange methods is also projected to lower operating costs for mining new wellfields located farther away from the main plant at each location. The results from these changes were first demonstrated in the operations results achieved in the fourth quarter of 1997. The fourth quarter saw increases in average monthly production from approximately 55,000 pounds in the third quarter to nearly 95,000 pounds per month in the fourth quarter. With this increase in production, the average per pound production cost fell from $16.65 in the third quarter to $14.55 in the fourth quarter. Production from Rosita totaled 230,000 pounds in 1997 compared to 500,000 pounds in 1996. The Company will continue production at Rosita in its current mine areas, such areas are expected to contain the majority of the remaining uranium reserves at this site with projected production from this area continuing beyond 1999. The Company expects that as production options in new wellfields at Rosita become limited, that the latter stages of production may result in production costs that are higher than previously experienced. New operating techniques to increase productivity from these wellfields will be reviewed and may be implemented to determine how various recovery options may impact future projects. There can be no assurance that such methods will enhance production or improve cost efficiencies. 36 40 Kingsville Dome production for 1997 of 640,000 pounds as compared to 860,000 pounds in 1996. The Company is continuing to develop and produce from this facility and in January 1998 received authorization to begin production at its next production area ("PAA #3"). Wellfield drilling and development in PAA #3 is underway and production is expected from these wellfields by mid-1998. The average cost of uranium purchases made in 1997 was $10.40 per pound compared to $10.21 in 1996. Total deliveries in 1997 consisted of 1,275,400 purchased pounds, at an average cost per pound of $10.40, and 965,000 produced pounds at $15.61 per pound. During 1996, the Company delivered 487,500 purchased pounds at an average cost per pound of $10.21 and 1,168,000 pounds of produced uranium at an average cost of $11.34 per pound. Operating expenses totaled $6,564,000 ($6.80 per pound) in 1997 compared to $4,866,000 ($4.92 per pound) for produced pounds that were sold in 1996. Total operating expenses and depreciation and depletion include standby costs for the Kingsville Dome and Rosita facilities when these facilities are not in production. These costs have been recorded as direct charges to operations. Standby costs for 1996 and 1995 were $313,000 and $875,000, respectively. The provision for restoration and reclamation in 1997 consists of $910,000 ($0.95 per pound) for production sold in 1997 and $120,000 for costs associated with reclamation activities related to the Benavides project (a previous mining location). The provision for restoration and reclamation in 1996 consists of $1,100,000 ($0.94 per pound) for production sold during 1996 and $380,000 for costs associated with reclamation activities related to the Benavides project. The provision for restoration and reclamation in 1995 consists of $499,000 ($0.93 per pound) for Rosita production sold during 1995 and additional increases to the Benavides and Bruni reserves (previous mining locations) of $97,000. The depreciation and depletion provision in 1997 consisted of $7,580,000 (an average rate of $7.86 per pound). The depreciation and depletion provision in 1996 consisted of $7,578,000 (an average rate of $6.49 per pound) for Rosita and Kingsville Dome production sold and Kingsville Dome depreciation while on standby of $21,000. The depreciation and depletion provision in 1995 consisted of $3,042,000 (an average rate of $5.67 per pound) for Rosita production sold and Rosita and Kingsville Dome depreciation while on standby of $112,000. Royalties in 1997 totaled $834,000 compared to $1,198,000 in 1996 and $432,000 in 1995. The decrease in 1997 is directly attributable to the lower production from Rosita and Kingsville Dome and the corresponding reduction in sales of produced uranium compared to 1996. Similarly, the increase in 1996 over 1995 amounts resulted from the startup of Kingsville Dome production in 1996 and the increased sales of produced uranium compared to 1995 deliveries. Corporate expenses consisting of general and administrative ("G&A") expenses decreased to $2,914,000 in 1997 from $3,055,000 in 1996. This decrease resulted primarily from legal and accounting fees and other expenses incurred in 1996 associated with the unsuccessful acquisition bid for a significant uranium production company and continuing legal costs associated with the unauthorized transfer of funds in 1995. Corporate expenses decreased to $3,055,000 in 1996 from $3,496,000 in 1995. This decrease resulted from a reduction of activities related to the Benton Companies transactions in 1996 and the costs associated with the issuance of the Lindner Notes incurred in 1995. Interest and other income increased by $754,000 in 1997 compared to 1996. This increase resulted primarily from the settlement in June 1997 of the Company's lawsuit against the Professional Bank of Denver, Colorado ($575,000) and an increase in interest income for the current year. The higher interest income resulted from higher average available cash and investment balances that were generated from the Company's equity placement in December 1996. Interest and other income in 1996 increased to $282,000 from $201,000 in 1995 primarily resulting from uranium drying services provided during 1996. 37 41 Total interest costs for 1997, net of capitalized amounts decreased from 1996. This decrease resulted from the repayment in January 1997 of the additional $4.0 million borrowed in June 1996 to finance the purchase of the Alta Mesa property ($134,000 reduction in interest cost). Interest cost in 1997 increased as a result of the Company entering into a financial surety agreement with USF&G for the issuance of surety bonds related to the Company's reclamation and restoration commitments at its current and prior mine locations (increase of $85,000). Net interest cost in 1997 also decreased compared to 1996 because of higher capitalized interest during the current year (approximately $367,000). The increase in permitting and development activities in New Mexico and Texas properties required the additional capitalization of interest related to these projects. Total interest costs for 1996 including capitalized amounts increased from the prior year primarily because of the $4.0 million borrowings received in June 1996 and from advances received under the Company's credit facility with NationsBank which commenced May 1996. The Company currently utilizes computer software in the management of its operations and in accounting for its operating results that could be affected by the date change in the year 2000. All critical software utilized by the Company has been purchased from and is supported by third party vendors. The Company has conducted a review of the potential impact of the year 2000, and believes that it will not encounter significant operational or financial costs related to compliance with this issue. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by Item 8 appears on pages F-1 through F-23 of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 38 42 PART III ITEMS 10, 11, 12 AND 13. In accordance with General Instruction G(3), Items 10, 11, 12, and 13 are hereby incorporated by reference from sections of the Company's definitive proxy statement entitled "Election of Directors", "Executive Compensation", "Security Ownership of Principal Stockholders and Management", and "Certain Transactions with Related Parties". Such definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) (1) Financial Statements. See the Index to Consolidated Financial Statements on page F-1 for a listing of those financial statements filed as part of this Annual Report. (a) (2) Financial Statement Schedules. See the Index to Consolidated Financial Statements on page F-1 for a listing of those financial statements filed as part of this Annual Report. (a) (3) Exhibits. See the Index to Exhibits on page E-1 for a listing of the exhibits that are filed as part of this Annual Report. (b) Reports on Form 8-K None. 39 43 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 27, 1998 URANIUM RESOURCES, INC. By: /s/ Paul K. Willmott ------------------------------- Paul K. Willmott, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Date - --------- ---- /s/ Paul K. Willmott March 27, 1998 - --------------------------------------------------- Paul K. Willmott, Director, President and Chief Executive Officer /s/ Thomas H. Ehrlich March 27, 1998 - --------------------------------------------------- Thomas H. Ehrlich, Vice President - Finance and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Leland O. Erdahl March 27, 1998 - --------------------------------------------------- Leland O. Erdahl, Director /s/ George R. Ireland March 27, 1998 - --------------------------------------------------- George R. Ireland, Director /s/ James B. Tompkins March 27, 1998 - --------------------------------------------------- James B. Tompkins, Director
40 44 URANIUM RESOURCES, INC. AND CONSOLIDATED SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants . . . . . . . . . . F-2 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . F-3 Consolidated Statements of Operations . . . . . . . . . . . . F-5 Consolidated Statements of Common Shareholders' Equity . . . F-6 Consolidated Statements of Cash Flows . . . . . . . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . . . . F-8
The additional financial data referred to below should be read in conjunction with these financial statements. Schedules not included with this additional financial data have been omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto. The individual financial statements of the subsidiaries of the Company have been omitted because all such subsidiaries are included in the consolidated financial statements being filed. ADDITIONAL FINANCIAL DATA Financial statement schedules for the years ended December 31, 1997, 1996 and 1995 II - Valuation and qualifying accounts and reserves . . F-22 The accounts of the Company are maintained in United States dollars. All dollar amounts in the financial statements are stated in United States dollars except where indicated. F-1 45 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Uranium Resources, Inc.: We have audited the accompanying consolidated balance sheets of Uranium Resources, Inc. (a Delaware Corporation) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Uranium Resources, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index of financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Dallas, Texas February 23, 1998 (except with respect to the matters discussed in Note 5 and Note 7 as to which the date is March 23, 1998) F-2 46 URANIUM RESOURCES, INC. CONSOLIDATED BALANCE SHEETS ASSETS
December 31, ------------------------------ 1997 1996 ------------ ------------ Current assets: Cash and cash equivalents $ 2,325,158 $ 16,934,276 Short-term investment: Certificate of deposit, restricted 3,304,195 2,779,840 Receivables, net 4,507,090 1,829,539 Uranium inventory 2,260,200 3,575,285 Materials and supplies inventory 91,047 88,483 Prepaid and other current assets 253,910 239,435 ------------ ------------ Total current assets 12,741,600 25,446,858 ------------ ------------ Property, plant and equipment, at cost: Uranium properties 97,100,015 71,364,561 Other property, plant and equipment 580,676 546,985 Less-accumulated depreciation and depletion (36,235,274) (29,335,818) ------------ ------------ Net property, plant and equipment 61,445,417 42,575,728 Other assets 676,952 771,084 ------------ ------------ $ 74,863,969 $ 68,793,670 ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. F-3 47 URANIUM RESOURCES, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, ------------------------------ 1997 1996 ------------ ------------ Current liabilities: Accounts payable $ 3,233,277 $ 2,201,145 Notes payable 1,950,000 5,440,000 Accrued interest payable 5,035 185,186 Current portion of long-term debt 7,000 730,074 Royalties payable 630,284 746,113 Current portion of restoration reserve 511,000 368,000 Other accrued liabilities 405,814 507,117 ------------ ------------ Total current liabilities 6,742,410 10,177,635 ------------ ------------ Other long-term liabilities and deferred credits 4,787,427 4,279,289 Long-term debt, less current portion 6,462,343 6,407,054 Deferred federal income taxes 4,967,000 2,633,000 Shareholders' equity: Common stock, $.001 par value, shares authorized: 25,000,000 shares issued and outstanding (net of treasury shares): 1997 - 12,053,027; 1996 - 10,813,027 12,205 10,966 Paid-in capital 40,222,359 32,290,630 Retained earnings 11,679,643 13,004,514 Less: Treasury stock (152,500 shares), at cost (9,418) (9,418) ------------ ------------ Total shareholders' equity 51,904,789 45,296,692 ------------ ------------ $ 74,863,969 $ 68,793,670 ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. F-4 48 URANIUM RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, ------------------------------------------------ 1997 1996 1995 ------------ ------------ ------------ Revenues: Uranium sales - Produced uranium $ 14,737,579 $ 17,827,204 $ 7,194,655 Purchased uranium 15,002,838 6,437,105 14,634,591 ------------ ------------ ------------ Uranium sales 29,740,417 24,264,309 21,829,246 Costs and expenses: Cost of uranium sales - Direct cost of purchased uranium 13,257,989 4,979,407 10,314,611 Royalties 833,534 1,197,890 432,050 Operating expenses 6,564,363 4,866,436 2,738,420 Provision for restoration and reclamation costs 1,032,587 1,479,939 596,482 Depreciation and depletion 7,580,809 7,599,047 3,153,793 Writedown of uranium properties and other uranium assets -- -- 163,145 ------------ ------------ ------------ Total cost of uranium sales 29,269,282 20,122,719 17,398,501 ------------ ------------ ------------ Earnings from operations before corporate expenses 471,135 4,141,590 4,430,745 Corporate expenses - General and administrative 2,913,776 3,033,819 3,467,639 Depreciation 22,956 20,875 28,235 ------------ ------------ ------------ Total corporate expenses 2,936,732 3,054,694 3,495,874 ------------ ------------ ------------ Earnings (loss) from operations (2,465,597) 1,086,896 934,871 Other income (expense): Interest expense, net of capitalized interest (168,789) (610,403) (525,369) Interest and other income, net 1,036,290 282,370 201,263 Loss on termination of joint venture -- -- (1,000,953) Loss on transfer to stockholder -- -- (780,000) ------------ ------------ ------------ Earnings (loss) before federal income taxes (1,598,096) 758,863 (1,170,188) Federal income tax provision (benefit): Current 44,775 25,000 18,000 Deferred (318,000) (25,000) (252,000) ------------ ------------ ------------ Net earnings (loss) $ (1,324,871) $ 758,863 $ (936,188) ============ ============ ============ Net earnings (loss) per common share: Basic $ (0.11) $ 0.09 $ (0.12) ============ ============ ============ Diluted $ (0.11) $ 0.08 $ (0.12) ============ ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. F-5 49 URANIUM RESOURCES, INC. CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
Common Stock ----------------------------- Paid-In Retained Treasury Shares Amount Capital Earnings Stock ------------ ------------ ------------ ------------ ------------ Balances, December 31, 1994 7,954,683 $ 8,142 $ 15,040,064 $ 13,181,839 $ (11,580) Net loss -- -- -- (936,188) -- Common stock issuance for employee/director stock option plans 156,015 156 458,908 -- -- Common stock issuance for stock warrants 500,000 500 1,999,500 -- -- Treasury shares issued 35,000 -- 128,038 -- 2,162 ------------ ------------ ------------ ------------ ------------ Balances, December 31, 1995 8,645,698 $ 8,798 $ 17,626,510 $ 12,245,651 $ (9,418) Net income -- -- -- 758,863 -- Common stock issuance 2,000,000 2,000 14,030,949 -- -- Common stock issuance for employee stock option plans 119,329 120 441,219 -- -- Common stock issuance for stock warrants 48,000 48 191,952 -- -- ------------ ------------ ------------ ------------ ------------ Balances, December 31, 1996 10,813,027 $ 10,966 $ 32,290,630 $ 13,004,514 $ (9,418) Net loss -- -- -- (1,324,871) -- Common stock issuance 1,200,000 1,200 7,798,800 -- -- Common stock issuance for employee stock option plans 25,500 25 74,944 -- -- Common stock issuance for stock warrants 14,500 14 57,985 -- -- ------------ ------------ ------------ ------------ ------------ Balances, December 31, 1997 12,053,027 $ 12,205 $ 40,222,359 $ 11,679,643 $ (9,418) ============ ============ ============ ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. F-6 50 URANIUM RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, ------------------------------------------------ 1997 1996 1995 ------------ ------------ ------------ Cash flows from operations: Net earnings (loss) $ (1,324,871) $ 758,863 $ (936,188) Reconciliation of net income to cash provided by operations- Provision for restoration and reclamation costs 1,032,587 1,479,939 596,482 Depreciation and depletion 7,603,765 7,619,922 3,182,028 Writedown of uranium properties and other assets -- -- 163,145 Provision (credit) for deferred income taxes (318,000) (25,000) (252,000) Decrease in restoration and reclamation accrual (317,270) (513,975) (104,108) Other non-cash items, net 205,169 274,243 401,711 ------------ ------------ ------------ Cash flow provided by operations, before changes in operating working capital items 6,881,380 9,593,992 3,051,070 Effect of changes in operating working capital items- (Increase) decrease in receivables (2,677,551) 2,175,652 (3,952,451) (Increase) decrease in inventories 496,100 (1,000,793) 3,761,066 Increase in prepaid and other current assets (446,910) (367,894) (238,201) Increase (decrease) in payables and accrued liabilities 677,795 (1,107,157) 2,679,313 ------------ ------------ ------------ Net cash provided by operations 4,930,814 9,293,800 5,300,797 Investing activities: Increase in investments (524,355) (2,067,746) (149,883) Additions to property, plant and equipment - Kingsville Dome (8,998,305) (6,695,472) (560,772) Rosita (2,450,105) (2,001,722) (2,108,508) Alta Mesa (514,503) (4,403,070) -- Churchrock (1,013,257) (596,725) (477,686) Crownpoint (1,152,783) (709,590) (291,394) Other property (771,571) (200,457) (144,833) Increase in other assets (25,487) (156,593) (99,218) ------------ ------------ ------------ Net cash used in investing activities (15,450,366) (16,831,375) (3,832,294) Financing activities: Proceeds from borrowings 3,500,000 10,869,000 6,135,000 Payments and refinancings of principal (7,722,535) (5,779,379) (7,874,225) Issuance of common stock and warrants, net 132,969 14,666,288 2,459,064 ------------ ------------ ------------ Net cash provided by (used in) financing activities (4,089,566) 19,755,909 719,839 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents (14,609,118) 12,218,334 2,188,342 Cash and cash equivalents, beginning of period 16,934,276 4,715,942 2,527,600 ------------ ------------ ------------ Cash and cash equivalents, end of period $ 2,325,158 $ 16,934,276 $ 4,715,942 ============ ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. F-7 51 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND DESCRIPTION OF COMPANY The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of Uranium Resources, Inc. ("URI") and its wholly owned subsidiaries (collectively "the Company"). All significant intercompany transactions have been eliminated in consolidation. URI was formed in 1977 and incorporated in Delaware in 1987. The Company is primarily engaged in the business of acquiring, exploring, developing and mining uranium properties, using the in situ leach ("ISL") or solution mining process. The primary customers of the Company are major utilities who utilize nuclear power to generate electricity. The Company continuously evaluates the creditworthiness of its customers. The Company has been, in the past, involved in a number of significant ISL uranium mining joint venture arrangements and has also provided consulting, plant design and construction expertise to other companies. At present the Company owns both producing and development properties in South Texas and development properties in New Mexico. The Company's Rosita and Kingsville Dome uranium production facilities in South Texas resumed operations in June 1995 and March 1996, respectively, and were both in operation at December 31, 1997. INVENTORIES Uranium inventory consists of uranium concentrates (U3O8) located at the Company's Rosita and Kingsville Dome sites and also at converters awaiting delivery to customers. All uranium inventories are valued at the lower of cost (first-in, first-out) or market. The cost of produced uranium includes all operating production costs, and provisions for depreciation, depletion and future restoration obligations. Materials and supplies inventory is valued at the lower of average cost or market. BORROWED URANIUM Uranium is occasionally borrowed from other parties to facilitate deliveries under sales contracts. Repayment of the loan is normally made from production or from purchased uranium. The liability for borrowed uranium is recorded at the latest spot market price (estimated replacement cost) and the cost is adjusted to the actual amount when the borrowed material is repaid. PROPERTY, PLANT AND EQUIPMENT Uranium Properties Capitalization of Development Costs - All acquisition, exploration and development costs (including financing, salary and related overhead costs) incurred in connection with the various uranium properties are capitalized. Gains or losses are recognized upon the sale of individual property interests. All costs incurred in connection with unsuccessful acquisition and exploration efforts and abandoned properties are charged to expense when known. All properties with significant acquisition or incurred costs are evaluated for their realizability on a property-by- property basis. Any impairment of such costs is recognized by providing a valuation allowance (see Note 2 - "Uranium Properties - Writedown of Abandoned Property"). Total exploration and evaluation costs capitalized in 1997, 1996 and 1995 were $120,000, $116,000 and $4,000, respectively. F-8 52 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 Depreciation and Depletion - In general, depletion of uranium mineral interests and related development costs is computed on a property-by-property basis using the units-of-production method based on the proved and probable recoverable uranium reserves as estimated periodically by the Company's geologists and engineers. Depreciation and depletion is provided on the investment costs, net of salvage value, of the various uranium properties' production plants and related equipment using the estimated production life of the uranium reserves. Other ancillary plant equipment and vehicles are depreciated using a straight line method based upon the estimated useful lives of the assets. Other Property Other property consists of corporate office equipment, furniture and fixtures and transportation equipment. Depreciation on other property is computed based upon the estimated useful lives of the assets. Repairs and maintenance costs are expensed as incurred. Gain or loss on disposal of such assets is recorded as other income or expense as such assets are disposed. Capitalization of Interest The Company capitalizes interest cost with respect to properties undergoing exploration or development activities that are not subject to depreciation or depletion. The average interest rate on outstanding borrowings during the period is used in calculating the amount of interest to be capitalized. Interest capitalized in the twelve months ended December 31, 1997, 1996 and 1995 amounted to $378,000, $11,000 and $11,000, respectively. Total interest costs in these periods were $547,000, $621,000 and $536,000, respectively. RESTORATION AND RECLAMATION COSTS Various federal and state mining laws and regulations require the Company to reclaim the surface areas and restore underground water quality to the pre-existing mine area average quality. Accruals for the estimated future cost of restoration and reclamation are made on a per-pound basis as part of production costs, or when it is determined by an engineering study that an adjustment to the accrual is required. REVENUE RECOGNITION FOR CERTAIN URANIUM SALES The Company recognizes revenue from the sale of uranium under which substantially all of its obligations related to the delivery have been completed. Under certain uranium sales contracts which contain origin-specific delivery requirements, the revenue from the portion of a sale which requires the satisfaction of future obligations is recorded as unearned revenue until these commitments are satisfied. Commitments that are expected to be completed within one year are classified as current; all others are recorded as long-term deferred credits. EARNINGS PER SHARE Effective with the year ended December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128 ("FAS 128"), "Earnings per Share", which sets standards for the calculation and presentations of earnings per share. FAS 128 supercedes APB Opinion No.15, Earnings per Share. Net earnings (loss) per common share - basic has been calculated based on the weighted average shares outstanding during the year and net earnings (loss) per common share - diluted has been calculated assuming the exercise or conversion of all dilutive securities on January 1 of each year presented or as of the date of issuance if later. F-9 53 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 The weighted average number of shares used to calculate basic earnings per share were 11,760,000, 8,789,000 and 8,098,000 in 1997, 1996 and 1995, respectively. The weighted average number of shares used to calculate diluted earnings per share were 11,760,000, 10,031,000 and 8,098,000 in 1997, 1996 and 1995, respectively. The potential common stock that was excluded from the calculation of diluted earnings per share were 2,413,977, 46,000 and 1,321,940 in 1997, 1996 and 1995, respectively. UNAMORTIZED DEBT ISSUANCE COSTS Debt discount and related expenses arising from the issuance of debt securities are amortized by the effective interest method. CONSOLIDATED STATEMENTS OF CASH FLOWS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Additional disclosures of cash flow information follow:
Twelve Months Ended December 31, 1997 1996 1995 -------- -------- -------- Cash paid during the period for: Interest $687,000 $501,000 $524,000
The change in inventories in the Consolidated Statements of Cash Flows during 1997, 1996 and 1995 excludes the changes in uranium inventories for non-cash capitalized restoration and depreciation and depletion provisions. Such increases (decreases) totaled $(816,000), $1,923,000 and $391,000, respectively. Certain additional non-cash transactions occurred in 1997 and 1995, and such major transactions are summarized as follows: In March 1997, 1,200,000 common shares were issued to Santa Fe Pacific Gold in exchange for certain uranium mineral interests and exploration rights covering approximately 523,000 acres in New Mexico. $7,800,000 In May 1995, 35,000 treasury shares were issued to financial advisors in connection with the Lindner Note (Note 5). $ 130,200 RESTRICTED CASH At December 31, 1997, 1996 and 1995, the Company had pledged a certificate of deposit of $3,304,000, $2,780,000 and $713,000, respectively, in order to collateralize surety bonds required for future restoration and reclamation obligations related to the Company's South Texas production and development properties. These funds are not readily available to the Company and are not included in cash equivalents. F-10 54 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions. Such estimates and assumptions may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RISKS AND UNCERTAINTIES Historically, the market for uranium has experienced significant price fluctuations. Prices are significantly impacted by global supply and demand which is affected by the demand for nuclear power, political and economic conditions, governmental legislation in uranium producing and consuming countries, and production levels and costs of production of other producing companies. Increases or decreases in prices received could have a significant impact on the Company's future results of operations. 2. URANIUM PROPERTIES KINGSVILLE DOME PROPERTY In 1981, the Company acquired an exploration property in South Texas, known as Kingsville Dome, from Exxon Corporation. After significant production in 1988-1990, the property was put on a standby basis because of low uranium spot prices and production ceased in September 1990. Wellfield development activities began in December 1995 at Kingsville Dome which lead to the resumption of production at the property in March 1996. Total uranium production for the period March 1996 through December 31, 1996 was approximately 860,000 pounds at a cost of approximately $12.31 per pound. Production in 1997 totaled 640,000 pounds at an average cost of approximately $15.47 per pound. Cost of uranium sales in 1996, and 1995 in the Consolidated Statements of Operations includes $293,000 and $512,000, respectively of costs incurred to maintain the facility while Kingsville Dome was on standby and not in production. At December 31, 1997 the property contained approximately 2.6 million pounds of estimated recoverable proved and probable reserves and the net carrying value of the property was approximately $19,098,000. ROSITA PROPERTY In late 1985, the Company acquired several lease holdings in a uranium prospect ("Rosita") in South Texas. Construction and development activities began in the first quarter of 1990 and were completed in September 1990 with production commencing immediately thereafter. The property was originally put on a standby basis and production ceased in March 1992. Wellfield development activity began in early 1995 at Rosita which lead to the resumption of production at the property in June 1995. Total production for the year ended December 31, 1996 was approximately 500,000 pounds at a cost of approximately $11.80 per pound. Production in 1997 totaled 230,000 pounds at an average cost of approximately $16.92 per pound. Cost of uranium sales at December 31, 1995 in the Consolidated Statements of Operations includes $246,000 of Rosita standby costs. At December 31, 1997, the property contained approximately 900,000 pounds of estimated recoverable proved and probable uranium reserves and the net carrying value of the property at December 31, 1997 was approximately $7,443,000. F-11 55 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 ALTA MESA PROPERTY In June 1996, the Company acquired the Alta Mesa property consisting of 4,575 acres of leases in South Texas for a cash payment of $4 million of which $1 million is recoverable against 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). As of December 31, 1997 the Alta Mesa property contained approximately 4,036,000 pounds of estimated recoverable proved and probable reserves. The Company filed license applications in the fourth quarter of 1996 and anticipates having the final permits in place in 1998. The net carrying value of this property at December 31, 1997 was approximately $4,918,000. CHURCHROCK PROPERTIES In December 1986, the Company acquired properties in the Churchrock region of New Mexico containing approximately 6,951,000 pounds of estimated recoverable proved and probable uranium reserves. In September 1991, an additional 200 acres of leases were obtained in exchange for a future production royalty payment which, based upon the expected selling price of the uranium production, may vary between 5% and 10%. Preliminary analysis of the drilling data of these 200 acres indicates approximately 5,488,000 pounds of estimated recoverable proved and probable reserves. Permitting activities are currently ongoing on both of these properties. The net carrying value of these properties at December 31, 1997 was approximately $7,914,000. CROWNPOINT PROPERTY In August 1988, the Company acquired the Crownpoint property, consisting of 163 acres of leases and related equipment and buildings for cash payments of $550,000, amounts payable in future years of $950,000 and a sliding scale overriding royalty on future production. The present value of the future payable amount, $407,054 at December 31, 1997, is recorded as a purchase money obligation. Additionally, also in 1988, the Company staked 321 acres of claims in the same area. In August 1993, the Company acquired approximately 959 acres of leases adjoining the Crownpoint properties. Initial interpretation of the drilling data for all the properties acquired in 1988 and 1993 indicate total estimated recoverable proved and probable uranium reserves of approximately 25,323,000 pounds. The net carrying value of these properties at December 31, 1997 was approximately $8,317,000. SANTA FE PROPERTIES In March 1997 the Company acquired from Santa Fe certain uranium mineral interests and exploration rights for uranium in New Mexico. The major components of the transaction include the following detail. The Properties. The properties consist of: (a) 37,000 acres as to which the Company has acquired a fee interest in the entire mineral estate, excluding coal ("Category I Properties"); (b) approximately 140,000 acres as to which the Company has acquired the fee interest in uranium (the "Category II Properties"); and (c) approximately 346,000 acres as to which the Company has acquired the exclusive right to explore for uranium (the "Category III Properties"). F-12 56 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 The Company is obligated to spend on exploration $200,000 per year for the ten year period starting in March 1997 and $400,000 per year for the seven year period starting in March 2007. This expenditure can be made on any of the Category II or Category III properties. The net carrying value of the property at December 31, 1997 was approximately $11,038,000. WRITEDOWN OF ABANDONED PROPERTY In the fourth quarter of 1995, the Company determined that certain evaluation projects in South Texas would not be pursued toward acquisition. The costs related to these projects were expensed in 1995 resulting in a pre-tax charge of approximately $163,000. PROPERTY REALIZABILITY The Company's ability to recover its investment in its uranium properties is dependent upon a number of factors, including, the sales price of uranium, the Company's ability to deliver profitable uranium production to its existing and future sales contracts and the Company's ability to access the financing/capital that may be necessary to develop and produce future projects. As discussed in Note 1, the market price of uranium has been volatile in recent years and there can be no assurance that the Company can continue to enter into new sales contracts at prices that are above the Company's existing or future production costs or that it will be able to recover its investment in its uranium properties. 3. CONTRACT COMMITMENTS SALES CONTRACTS The Company has entered into several long-term contract commitments to sell uranium. Included in URI's long-term contracts are sales to be made under the Amendment to the Russian Suspension Agreements (the "Amendment"). Such sales involve the sale of Russian origin uranium providing it is matched with U.S. uranium mined after March 11, 1994. Under these arrangements, the Russian uranium is essentially sold at its approximate purchase price. As a result, these "pass-through" sales of specifically Russian origin uranium are not expected to have a significant impact on the future profitability of the Company's operations but they are an important aspect of the Company's ability to sell its uranium at prices that exceed market. Total future sales of uranium concentrates (excluding the Russian component of sales made under the Amendment) of approximately 3,882,000 pounds represent future revenues of approximately $54,542,000 over the various contract periods from January 1, 1998 through 2002. The average current price of such future contracted deliveries, with escalation calculated through December 31, 1997, is $14.05. The Company has contracts which include various pricing provisions including contracts with market related prices and price ceilings and price floors which escalate for between 80%-100% of future inflation, contracts with fixed prices which escalate for between 80%-100% of future inflation and another contract whose pricing is based upon 99% of market prices without a price ceiling or floor. All revenues for the twelve months ended December 31, 1997 were from sales to nine customers, four of which represented more than 10% of total revenues. Sales to these four customers totaled $5,500,000, $4,650,000, $4,445,000 and $3,851,000 in 1997. All revenues for the twelve months ended December 31, 1996 were from sales to nine customers, five of which represented more than 10% of total revenues. Sales to these five customers totaled $4,860,000, $3,861,000, $3,565,000, $2,790,000 and $2,663,000 during 1996. All revenues for the twelve months ended December 31, 1995 were from sales to ten customers, three of which represented more than 10% of total revenues. Sales to these three customers totaled $5,040,000, $3,011,000 and $2,600,000 during 1995. F-13 57 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 PURCHASE CONTRACT COMMITMENTS In 1990, the Company entered into a long-term purchase contract to purchase 250,000 pounds per year from 1992 through 1995, at an original base price of $10.50 per pound as of January 1, 1990, escalated at the rate of 50% of the prime rate and 50% of inflation. In 1995, the Company took deliveries of 200,000 pounds under this contract. On November 29, 1995, the Company and the supplier both agreed to terminate the contract and forego the delivery of the remaining 50,000 pounds. In July 1992, the Company entered into a long-term purchase contract to purchase 200,000 pounds annually from 1993 through 1995. The contract contained spot market pricing considerations and carried a minimum price of $8.00 per pound escalated at a 6% rate and a maximum price of $8.00 per pound escalated at an 18% rate. Deliveries under this contract were completed in 1995. On August 28, 1995, the Company entered into two long-term Russian origin uranium purchase contracts to purchase between 40,000 and 60,000 pounds annually from 1995 through 1998 and to purchase a total of 480,000 pounds to be purchased from 1995 to 1998, respectively. The original base price of these two purchase commitments is significantly below current market prices for similar transactions. These contracts are subject to future price escalations based upon inflation indices. As of December 31, 1997, 90,000 pounds remain to be purchased with deliveries in 1998. 4. SHORT-TERM DEBT NATIONSBANK CREDIT AGREEMENT In May 1996 the Company entered into a $3.0 million revolving-credit facility with NationsBank, N.A. ("Nations"). In July, 1997 the facility was renewed and expanded to $5.0 million and for a two-year term. This facility is secured by the Company's uranium inventory and/or its receivables from its uranium sales contracts with interest on the loan accruing at the prime rate plus 1%. Principal and interest payments under the facility are due monthly. As of December 31, 1997, $1,950,000 was outstanding under this facility. LINDNER SHORT-TERM NOTE In June 1996 the Company entered into an agreement with Lindner Dividend Fund for a $4.0 million note to acquire the Alta Mesa property. The terms of the note provide for the payment of both the principal and accrued interest by June 1997. Interest on the note accrued at a rate of 6.5% per annum. The entire principal amount plus accrued interest was repaid in January 1997. 5. LONG-TERM DEBT CITIBANK DEBT RESTRUCTURING AND EQUITY CONVERSION On August 19, 1994 Nuexco Exchange, A.G., ("NEAG"), a company then owned by Mr. Benton, acquired a note (the "Note") outstanding to Citibank, N.A. ("Citibank") for $6,500,000. To fund this acquisition of the Note and for an additional loan to the Company, NEAG borrowed $12,500,000 from Union Bank of Switzerland ("UBS") and made a new loan to the Company of $6,000,000. The $6,000,000 loaned to the Company was used to purchase 648,648 pounds of uranium at $9.25 per pound from EFN. The notes due NEAG ("NEAG Notes") were secured by 599,423 pounds of uranium purchased from EFN and by the contracts between the Company and certain utilities for delivery of uranium. NEAG assigned their notes due from the Company and the related security to UBS. NEAG and UBS released all other F-14 58 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 collateral that had secured the original Citibank Note. The balance of the notes was paid in full by October 1995. LINDNER NOTE On May 25, 1995 the Company entered into an agreement with Lindner Investments and Lindner Dividend Fund, (the "Lender") two mutual funds managed by Ryback & Associates, for a $6 million secured convertible note with the Company (the "Lindner Note"). The Lindner Note was initially issued for a term of three years and bore interest at an annual rate of 6.5% and was convertible at any time during the three-year term into 1.5 million shares of the Company's common stock at an initial conversion price of $4.00 per share. The Lender also received a three-year warrant to purchase 1.5 million shares of the Company's common stock at an initial price of $4.00 per share. In 1995, the Lender exercised 500,000 shares of warrants under the agreement for an infusion of $2.0 million to the Company. Certain other financial advisors associated with the transaction were granted warrants and options to purchase up to 150,000 shares at an initial exercise price of $4.00 per share. As of December 31, 1997, these certain other financial advisors have exercised 62,500 shares of warrants under the agreement. In March 1998, the Company entered into an agreement with the Lender to extend the maturity date of the Lindner Note to May 31, 2000. The note is convertible at any time during this term into 2.0 million shares of the Company's common stock at a conversion price of $3.00 per share. The exercise price and expiration date of the warrant was also adjusted. The remaining 1,000,000 shares under the warrant can be purchased by the Lender at $3.00 per share at any time during the term of the agreement which was extended to May 31, 2000. The Lindner Note is secured by a mortgage on the Company's Rosita and Kingsville Dome uranium properties in Texas. Part of the proceeds from the Lindner Note were used to pay down existing payables and provide funding to complete the production start-up of the Company's Rosita property. The balance of the proceeds were used to fund pre- production activities at the Company's Kingsville Dome facility to permit commencement of production in 1996. PURCHASE MONEY OBLIGATION In 1987, the Company acquired certain long-term sales contract delivery rights in exchange for cash plus an assignment of a $3,000,000 future production payment, at $1.00 per pound of production sold from the Kingsville Dome and Rosita projects, starting in 1988. The production payment was recorded as a purchase money obligation at an original calculated present value of $2,379,839. The balance of the production payment was repaid in January 1997 ($730,074). SUMMARY OF LONG-TERM DEBT
At December 31, ---------------------------- 1997 1996 ----------- ----------- Long-term debt of the Company consists of: Lindner Note $ 6,000,000 $ 6,000,000 Purchase money obligation - Sales contract acquisitions -- 730,074 Crownpoint property (Note 2) 407,054 407,054 Other 62,289 -- ----------- ----------- 6,469,343 7,137,128 Less - Current portion (7,000) 730,074 ----------- ----------- Total long-term debt $ 6,462,343 $ 6,407,054 =========== ===========
F-15 59 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 Maturities of long-term debt are as follows:
For the Twelve Months Ended: For the Twelve Months Ended: - ---------------------------- ---------------------------- December 31, 1998 7,000 December 31, 2001 $ 450,000 December 31, 1999 7,000 December 31, 2002 and beyond -- December 31, 2000 6,005,000
6. RELATED-PARTY TRANSACTIONS During January 1995, a control group of companies based in Denver, Colorado (the "Benton Companies") held effective control of the common stock of the Company, the Company transferred $1.0 million to the Benton Companies in connection with a planned joint venture to process uranium at a Benton Companies' mill. The specific Benton Companies which were to be part of the planned joint venture did not receive the transferred funds. In February 1995, the Benton Companies filed for bankruptcy (the "Benton Bankruptcy"). Because of the bankruptcy, the realizability of the Company's $1.0 million investment is doubtful. Shortly thereafter, the then Chairman and CFO of the Company, who were also officers of the Benton Companies, transferred $1.08 million out of the Company without the authorization of the Company's Board of Directors. The Company recovered $300,000 in June 1995 and $575,000 in mid-1997 from the $1.08 million transfer, but $1.2 million of the initial $2.08 has not been recovered and there can be no assurance that the Company's efforts to pursue remedies will be successful. The Company recorded losses totaling $1.78 million for these transactions in 1995. The $575,000 recovered in 1997 was recorded to other income in the second quarter of this year. In connection with the Benton Bankruptcy, the bankrupt estates have commenced an action against the Company in the United Stated Bankruptcy Court for the District of Colorado. The action seeks to recover approximately $1,600,000 from various transactions entered into with the Benton Companies. The Company intends to vigorously defend this action. The Company is unable to assess what adverse consequences, if any, might result from such action. The Company has asserted claims against Benton and the Benton Companies in the bankruptcy proceedings. 7. SHAREHOLDERS' EQUITY COMMON STOCK Common Stock Issued in 1997 In March 1997, the Company issued 1,200,000 shares of common stock to Santa Fe Pacific Gold Corporation in exchange for certain uranium mineral interests in New Mexico. The value of the common stock for the transaction was $6.50 per share and resulted in an increase to shareholders equity of $7.8 million. F-16 60 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 Common Stock Issued in 1996 In December 1996, the Company completed a public sale of 2,000,000 shares of the Company's common stock at a price of $7.875 per share. The offering raised $15,750,000 before commissions and expenses of approximately $1,700,000. Issuance of Treasury Shares On May 25, 1995, the Company issued 35,000 shares of the Company's common stock which were held as treasury shares to financial advisors in connection with the Lindner Note as discussed in Note 5. WARRANTS Lindner Warrants In connection with the May 1995 Lindner Note as discussed in Note 5, the Company issued a three-year warrant to purchase 1,500,000 shares of the Company's common stock at an initial conversion price of $4.00 per share. The warrants were initially exercisable at any time through May 1998. In 1995, 500,000 warrants were exercised. In addition, the Lindner Note was convertible at any time during the three year term into 1,500,000 shares of the Company's common stock at an initial conversion price of $4.00 per share, none of which have been converted at December 31, 1997. In March 1998, the Company extended the maturity date of the Lindner Note and revised the terms of the warrants and the convertible securities. See Note 5 - Long-Term Debt "Lindner Note" for further discussion. Financial Advisors' Warrants/Options On May 25, 1995, the Company issued a three-year warrant to purchase 100,000 shares of the Company's common stock at an initial conversion price of $4.00 per share to certain financial advisors associated with the Lindner Note transaction. The warrants are convertible at any time through May 1998. In addition, the Company granted options to purchase 50,000 shares at an initial conversion price of $4.00 per share. The options are immediately exercisable and expire on March 6, 2000. As of December 31, 1997, 62,500 warrants have been exercised. STOCK OPTIONS Directors Stock Options On May 25, 1995, the Company granted options to certain directors of URI, to purchase 200,000 shares of the Company's common stock at an exercise price of $4.50 per share. All such options are immediately exercisable and were originally scheduled to expire May 24, 1998 or 30 days after the holder ceases to be a director of the Company or one year after such holder's death, whichever occurs first. In November 1997, the term of these options was revised for three years and the exercise price was increased to $4.75 per share. None of these options have been exercised as of December 31, 1997. On August 16, 1995, the Company granted options to a director of URI, to purchase 100,000 shares of the Company's common stock at an exercise price of $8.38 per share which was the fair market value of a share of common stock on August 16, 1995. Such options are immediately exercisable and were originally scheduled to expire May 24, 1998, 30 days after the holder ceases to be a director of the Company or one year after his death, whichever occurs first. In November 1997, the term of these options was revised for three years and the exercise price was increased to $8.63 per share. None of these options have been exercised as of December 31, 1997. F-17 61 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 Other Stock Options On July 31, 1995, the Company granted options to a former officer of the Company to purchase 50,000 shares of the Company's common stock at an exercise price of $4.75 per share which was the fair market value of a share of common stock on that date. All of these options were exercised in 1996. 8. STOCK-BASED COMPENSATION PLANS The Company has three stock option plans, the Employees' Stock Option Plan, the Stock Incentive Plan and the Directors' Stock Option Plan. The Company accounts for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with FASB Statement No. 123 ("FAS 123"), the Company's net earnings (loss) and earnings (loss) per share ("EPS") for the year ended December 31, 1997, 1996 and 1995 would have been reduced to the following pro forma amounts:
1997 1996 1995 ----------- ---------- ------------ Net Earnings (Loss): As reported $(1,324,871) $ 758,863 $ (936,188) Pro forma $(2,983,028) $ (519,164) $ 1,414,842) Basic EPS: As reported $ (0.11) $ 0.08 $ (0.12) Pro forma $ (0.25) $ (0.06) $ (0.16) Diluted EPS: As reported $ (0.11) $ 0.08 $ (0.12) Pro forma $ (0.25) $ (0.06) $ (0.16)
The fair value of each option is estimated on the date of grant using the Black-Sholes option-pricing model with the following weighted average assumptions used for grants in 1997, 1996 and 1995, respectively: expected volatility of 70%, 65% and 71% and risk-free interest rates of 6.4%, 6.0% and 6.1%. An expected life of 5.0, 4.6 and 5.0 years was used for options granted to the employees and directors, respectively. The FAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, and accordingly the resulting pro forma compensation cost may not be representative of that to be expected in future years. The Directors' Stock Option Plan provides for the grant of 20,000 stock options to each of the non-employee directors along with additional annual grants of stock options upon re-election as directors at the Company's annual meeting. Currently there are 84,000 stock options outstanding under the Directors' Stock Option Plan. Also, on January 15, 1992, the Board of Directors approved the grant of 577,248 stock options under the Employees' Stock Option Plan. All of the previously outstanding options were canceled upon the effectiveness of the new options. On August 10, 1994, the Board of Directors increased the available options under the Employees' Stock Option Plan and the Directors' Stock Option Plan to 850,000 options and 150,000 options, respectively. On October 11, 1995, the Board of Directors elected to discontinue grants under the Employees' Stock Option Plan with the adoption of a stock incentive plan covering key employees. The Stock Incentive Plan provides for the grant of a maximum of 750,000 stock options. These options may be qualified or nonqualified. As of December 31, 1996, there are 338,810 options outstanding under the Stock Incentive Plan. Additional details about the options granted under the stock option plans are as follows: F-18 62 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997
------------------------------------------------ At December 31, 1997 ------------------------------------------------ Options Exercise Options Available Options Options Options Date of Grant Price Granted for Exercise Exercised Canceled Outstanding - ----------------------------------------------------------------------------------------------------------- January 15, 1992 $2.94 617,248 104,623 327,625 185,000 104,623 May 22, 1992 $3.00 2,000 -- 1,000 1,000 -- - ----------------------------------------------------------------------------------------------------------- Balances at December 31, 1992 619,248 104,623 328,625 186,000 104,623 - ----------------------------------------------------------------------------------------------------------- February 26, 1993 $2.50 10,000 -- 2,500 7,500 -- May 27, 1993 $3.50 2,000 -- 500 1,500 -- - ----------------------------------------------------------------------------------------------------------- Balances at December 31, 1993 631,248 104,623 331,625 195,000 104,623 - ----------------------------------------------------------------------------------------------------------- July 11, 1994 $4.38 20,000 15,000 -- -- 20,000 August 10, 1994 $4.25 140,000 14,000 1,000 120,000 19,000 December 15, 1994 $5.88 3,000 1,500 -- 1,000 2,000 - ----------------------------------------------------------------------------------------------------------- Balances at December 31, 1994 794,248 135,123 332,625 316,000 145,623 - ----------------------------------------------------------------------------------------------------------- February 24, 1995 $4.13 210,000 50,000 -- 110,000 100,000 April 12, 1995 $3.88 10,000 5,000 -- -- 10,000 May 26, 1995 $3.75 40,000 20,000 -- -- 40,000 August 16, 1995 $8.38 100,000 50,000 -- -- 100,000 August 31, 1995 $6.88 127,508 53,792 -- 19,924 107,584 October 11, 1995 $6.94 35,000 17,500 -- -- 35,000 December 19, 1995 $5.50 3,000 1,500 -- -- 3,000 - ----------------------------------------------------------------------------------------------------------- Balances at December 31, 1995 1,319,756 332,915 332,625 445,924 541,207 - ----------------------------------------------------------------------------------------------------------- February 22, 1996 $9.75 178,810 40,238 -- 17,880 160,930 May 29, 1996 $17.00 3,000 750 -- -- 3,000 May 30, 1996 $16.13 75,000 18,750 -- -- 75,000 July 22, 1996 $11.13 50,000 12,500 -- -- 50,000 - ----------------------------------------------------------------------------------------------------------- Balances at December 31, 1996 1,626,566 405,153 332,625 463,804 830,137 - ----------------------------------------------------------------------------------------------------------- February 10, 1997 $7.125 182,405 -- -- 10,700 171,705 April 1, 1997 $5.50 55,000 -- -- -- 55,000 May 1, 1997 $5.00 3,000 -- -- -- 3,000 - ----------------------------------------------------------------------------------------------------------- Balances at December 31, 1997 1,866,971 405,153 332,625 474,504 1,059,842 ===========================================================================================================
The exercise price for the options granted under the stock option plans has been the approximate market price of the common stock on the date granted. The terms of the options provide that no options may be exercised for one year after grant, and then for ratable exercise over the subsequent four-year period, with a total exercisable period of ten years. The exercise price for the options granted under the Stock Incentive Plan has been the approximate market price of the common stock on the date granted. The terms of the options are determined by the Board of Directors upon grant; however, no options may be exercised after a period of ten years. F-19 63 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 9. FEDERAL INCOME TAXES The deferred federal income tax liability consists of the following:
December 31, ---------------------------- 1997 1996 ----------- ----------- Property development costs - net of amortization $ 6,775,000 $ 6,745,000 Property acquisition costs $ 2,652,000 -- Accelerated depreciation 210,000 180,000 Restoration reserves (1,605,000) (1,362,000) Net operating loss and percentage depletion carryforwards (5,396,000) (5,296,000) Valuation allowance and other - net 2,331,000 2,366,000 ----------- ----------- Total deferred income tax liability $ 4,967,000 $ 2,633,000 =========== ===========
Major items causing the Company's tax provision to differ from the federal statutory rate of 34% were:
For the Twelve Months Ended December 31, ------------------------------------------------------------------------------------------------- 1997 1996 1995 --------------------------- ---------------------------- ---------------------------- % of Pretax % of Pretax % of Pretax Amount Income Amount Income Amount Income ----------- ---------- ----------- ---------- ----------- ---------- Pretax income (loss) $(1,598,096) $ 758,863 $(1,170,188) ----------- ---------- ----------- ---------- ----------- ---------- Pretax income (loss) times statutory tax rate (543,000) 34.0% 258,000 34.0% (398,000) (34.0%) Increases (reductions) in taxes resulting from: Percentage depletion 543,000 (34.0%) (258,000) (34.0%) 398,000 34.0% Alternative minimum Tax (273,225) 0.0% -- 0.0% (234,000) (20.0%) ----------- ---------- ----------- ---------- ----------- ---------- Income tax expense (benefit) $ (273,225) (17.1%) $ -- 0.0% $ (234,000) (20.0%) =========== ========== =========== ========== =========== ==========
The Company's net operating loss carryforwards generated in 1997 and in prior years have generally been valued, net of valuation allowance, at Alternative Minimum Tax ("AMT") rates imposed by the 1986 Tax Reform Act ("the 86 ACT"). It is expected that these deferred tax assets will be realized at such rates. At December 31, 1997, approximately $8,300,000 of percentage depletion (available for regular tax purposes) had not been utilized to shelter book income and is available to carry forward to future accounting periods. The Company paid $45,000 in federal income taxes in 1997. No tax payments were required in 1996 or 1995. The Company also has available for regular federal income tax purposes at December 31, 1997 estimated net operating loss carryforwards of approximately $10,400,000 which expire primarily in 1999 through 2011, if not previously utilized. At December 31, 1997, the Company had investment tax credit carryforwards of approximately $14,000, after adjusting for the reductions required by the 86 ACT, which expire for regular tax purposes in 1998 through 2000. F-20 64 URANIUM RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) DECEMBER 31, 1997 10. OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS Other long-term liabilities and deferred credits on the balance sheet consisted of:
December 31, ----------------------------------- 1997 1996 ---------------- ----------------- Reserve for future restoration and reclamation costs, net of current portion of $511,000 and $368,000 in 1997 and 1996 (Note 1) $ 4,251,108 $ 3,768,495 Unearned revenue from Russian matched sales (Note 1) 536,318 510,794 ---------------- ----------------- $ 4,787,427 $ 4,279,289 ================ =================
11. COMMITMENTS AND CONTINGENCIES The Company's mining operations are subject to federal and state regulations for the protection of the environment, including water quality. These laws are constantly changing and generally becoming more restrictive. The ongoing costs of complying with such regulations has not been significant to the Company's annual operating costs. Future mine closure and reclamation costs are provided for as each pound of uranium is produced on a unit-of-production basis. The Company reviews its reclamation obligations each year and determines the appropriate unit charge. The Company also evaluates the status of current environmental laws and their potential impact on their accrual for costs. The Company believes its operations are in compliance with current environmental regulations. The Company is from time to time involved in various legal proceedings of a character normally incident to its business. Management does not believe that adverse decisions in any pending or threatened proceedings will have a material adverse effect on the Company's financial condition or results of operations. 12. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments," requires disclosure about the fair value of financial instruments. Carrying amounts for all financial instruments approximate fair value as of December 31, 1997. The fair value of debt is estimated based on the discounted value of the future cash flows using borrowing rates currently available to the Company for loans with similar terms and average maturities. F-21 65 SCHEDULE II URANIUM RESOURCES, INC. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Additions --------------------------- Balance at Charged to Charged to Beginning Costs Other Balance at End Description of Period and Expenses Accounts Deductions (a) of Period - -------------------------------------------------------------------------------------------------------------- Year ended December 31, 1997: Accrued restoration costs ... $4,136,495 $1,032,587 $ 89,703(b) $ 317,271 $4,762,108(d) Year ended December 31, 1996: Accrued restoration costs ... $2,990,151 $1,479,939 $ 180,380(b) $ 513,975 $4,136,495(d) Year ended December 31, 1995: Accrued restoration costs ... $2,427,624 $ 596,482 $ 70,153(b) $ 104,108 $2,990,151(d)
- ----------- (a) Deductions represent costs incurred in the restoration process. (b) Increase (decrease) resulted primarily from the change in the amounts of restoration provision included in ending uranium inventory. (c) Decrease resulted primarily from restoration provision amounts in beginning inventory which were expensed in the current year. (d) Amounts recorded as current liabilities at December 31, 1997, 1996 and 1995 are $511,000, $368,000 and $544,000, respectively. F-22 66 EXHIBIT INDEX
Sequentially Exhibit Numbered Number Description Page 3.1* Restated Certificate of Incorporation of the Company, as amended (filed with the Company's Annual Report on Form 10-K dated March 27, 1997). 3.2* Restated Bylaws of the Company (filed with the Company's Form S-3 Registration No. 333-17875 on December 16, 1996). 4.1* Registration Rights Agreement dated March 25, 1997 between the Company and Santa Fe Pacific Gold Corporation (filed with the Company's Annual Report on Form 10-K dated March 27, 1997). 10.1* Amended and Restated Directors Stock Option Plan (filed with the Company's Form S-8 Registration No. 333-00349 on January 22, 1996). 10.2* Amended and Restated Employee's Stock Option Plan (filed with the Company's Form S-8 Registration No. 333-00403 on January 22, 1996). 10.3* 1995 Stock Incentive Plan (filed with the Company's Form S-8 Registration No. 333-00405 on January 22, 1996). 10.4* Non-Qualified Stock Option Agreement dated August 16, 1995, between the Company and Leland O. Erdahl (filed with the Company's Annual Report on Form 10-K dated March 27, 1996). 10.5* Non-Qualified Stock Option Agreement dated May 25, 1995, between the Company and George R. Ireland (filed with the Company's Annual Report on Form 10-K dated March 27, 1996). 10.6* Non-Qualified Stock Option Agreement dated May 25, 1995, between the Company and James B. Tompkins (filed with the Company's Annual Report on Form 10-K dated March 27, 1996). 10.7* Stock Option Agreement dated March 6, 1995 between the Company and James P. Congleton, as amended on May 25, 1995 (filed with the Company's Annual Report on Form 10-K dated March 27, 1996). 10.8* Warrant to Purchase Common Stock dated May 25, 1995, between the Company and Grant Bettingen, Inc. (filed with the Company's Annual Report on Form 10-K dated March 27, 1996). 10.9* Non-Qualified Stock Option Agreement dated July 31, 1995, between the Company and Wallace M. Mays (filed with the Company's Form S-8 Registration Statement No. 33-64481 on November 21, 1995).
E-1 67
Sequentially Exhibit Numbered Number Description Page 10.10* Contract dated as of November 17, 1987 and amended as of May 29, 1992 by Hydro Resources, Inc., a wholly-owned subsidiary of Uranium Resources, Inc., and Public Service of New Mexico (filed with the Company's Form 8 - Amendment to Application or Report as filed with the Securities and Exchange Commission on December 9, 1988).(1) 10.11* Contract for the Purchase of Natural Uranium Concentrates (U3O8) dated April 5, 1994 between Uranium Resources, Inc., URI, Inc. and Pacific Gas & Electric Company (filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1994).(1) 10.12* Agreement for the Sale of Uranium Concentrates dated as of August 23, 1990 between OES Fuel, Incorporated, Uranium Resources, Inc. and URI, Inc. (filed with Post-Effective Amendment No. 3 to the Company's Form S-1 Registration Statement as filed with the Securities and Exchange Commission on December 7, 1990).(1) 10.13* U3O8 Sales Agreement dated September 30, 1988 between GPU Nuclear Corporation and URI, Inc. guaranteed by Uranium Resources, Inc. (filed with the Company's Form 8 - Amendment to Application or Report as filed with the Securities and Exchange Commission on December 9, 1988)(1). 10.14* Summary of Supplemental Health Care Plan (filed with Amendment No. 1 to the Company's Form S-1 Registration Statement (File No. 33-32754) as filed with the Securities and Exchange Commission on February 20, 1990). 10.15* Note and Warrant Purchase Agreement entered into May 25, 1995 by and among Lindner Investments, Lindner Dividend Fund and the Company (filed with the Company's Current Report on Form 8-K dated May 25, 1995). 10.16* Loan Agreement entered into June 18, 1996 by and between Lindner Dividend Fund and the Company (filed with the Company's Annual Report on Form 10-K dated March 27, 1997). 10.17* Uranium Concentrates Sales Agreement dated August 28, 1996 by and between the Company and Georgia Power Company (filed with the Company's Quarterly Report on Form 10-Q/A-2 for the quarter ended September 30, 1996).(1) 10.18* Uranium Concentrates Sales Agreement dated August 21, 1996 by and between the Company and Commonwealth Edison Company (filed with the Company's Quarterly Report on Form 10-Q/A-2 for the quarter ended September 30, 1996).(1) 10.19* Agreement of Santa Fe Pacific Gold Corporation as Uranco, Inc. Shareholder with the Company and Guarantee of the Company dated as of March 25, 1997 (filed with the Company's Annual Report on Form 10-K dated March 27, 1997). (1) 10.20* Stock Exchange Agreement and Plan of Reorganization dated as of March 25, 1997 (filed with the Company's Annual Report on Form 10-K dated March 27, 1997).
E-2 68
Sequentially Exhibit Numbered Number Description Page 10.21* License to Explore and Option to Purchase dated March 21, 1997 between Santa Fe Pacific Gold Corporation and Uranco, Inc. (filed with the Company's Annual Report on Form 10-K dated March 27, 1997). (1) 10.22 Amendment #1 to Nonqualified Stock Option Agreement dated November 17, 1997 between the Company and Leland O. Erdahl. 10.23 Amendment #1 to Nonqualified Stock Option Agreement dated November 17, 1997 between the Company and George R. Ireland. 10.24 Amendment #1 to Nonqualified Stock Option Agreement dated November 17, 1997 between the Company and James B. Tompkins. 10.25 Compensation Agreement dated June 2, 1997 between the Company and Paul K. Willmott. 10.26 Compensation Agreement dated June 2, 1997 between the Company and Richard F. Clement, Jr. 10.27 Compensation Agreement dated June 2, 1997 between the Company and Joe H. Card. 10.28 Compensation Agreement dated June 2, 1997 between the Company and Richard A. Van Horn. 10.29 Compensation Agreement dated June 2, 1997 between the Company and Thomas H. Ehrlich. 10.30 Compensation Agreement dated June 2, 1997 between the Company and Mark S. Pelizza. 10.31 Note and Warrant Exchange Agreement dated March 23, 1998 between the Company and Lindner Investments. 10.32 6.5% Secured Convertible Note for $1,500,000 dated March 23, 1998 between the Company and Lindner Investments. 10.33 6.5% Secured Convertible Note for $4,500,000 dated March 23, 1998 between the Company and Lindner Investments. 10.34 Warrant to Purchase Common Stock for 625,000 shares dated March 23, 1998 between the Company and Lindner Investments. 10.35 Warrant to Purchase Common Stock for 325,000 shares dated March 23, 1998 between the Company and Lindner Investments. 21.1 Subsidiaries of the Company. 23.1 Consent of Arthur Andersen LLP. 27 Financial Data Schedule
*Incorporated by reference pursuant to Rule 12b-32 under the Securities and Exchange Act of 1934, as amended. (1)Certain provisions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. E-3 EX-10.22 2 AMENDMENT NO. 1 TO NONQUALIFIED STOCK OPTION 1 EXHIBIT 10.22 2 AMENDMENT #1 TO NONQUALIFIED STOCK OPTION AGREEMENT LELAND O. ERDAHL THIS AMENDED AND RESTATED NONQUALIFIED STOCK OPTION AGREEMENT is entered into November 17, 1997, between Uranium Resources, Inc., a Delaware corporation (the "the Company"), and Leland O. Erdahl, an individual (the "Optionee"). RECITALS: A. The Company and Optionee are parties to a Non-Qualified Stock Option Agreement dated May 25, 1997 (the "May 1995 Option"). B. The Company desires to amend the May 1995 option to extend the expiration date to May 24, 2001, to increase the exercise price by $.25 per share and to provide for substitute stock options in certain circumstances; and C. Optionee desires to accept such amendments to the May 1995 Option. NOW, THEREFORE, in consideration of the foregoing and the mutual promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Section 1 of the May 1995 Option is hereby amended by deleting "$4.50" and substituting in its place "$4.75." 2. Section 2 of the May 1995 Option is hereby amended by deleting from subsection (a) thereof "1998" and substituting in its place "2001". 3. Section 11 of the May 1995 Option is hereby amended to read in its entirety as follows: "1 1. Adjustments. (a) Stock Splits etc. The number of shares of Common Stock covered by the Option, as well as the price per share of Common Stock covered by the Option, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock of the Company. Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. (b) Mergers, etc. If, at any time subsequent to the hereof, shares of Common Stock are changed into or exchanged for a different number or kind of shares of stock or other securities of another entity (whether as a result of exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise): (i) there shall automatically be substituted for each Common Share subject to this option (in whole or in part), the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be changed or for which each such share of Common Stock shall be exchanged; and (ii) the option price per share of Common Stock or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to this option shall remain the same as immediately prior to such event. In addition to the foregoing, the Committee shall be entitled in the event of any such increase, decrease or exchange of Common Stock to make other adjustments to the securities subject this option (including adjustments which may provide for the elimination of fractional shares), where necessary to preserve the terms and conditions of this option. 3 (c) Liquidation. In the event of the dissolution or liquidation of the Company, the Board shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the option will terminate immediately prior to the consummation of such proposed action." 4. Except as expressly amended hereby the May 1995 Option shall remain in full force and effect. IN WITNESS WHEREOF, the Company and Optionee have executed this Amendment #1 to Non-Qualified Stock Option Agreement effective as of the date first set forth above. URANIUM RESOURCES, INC. /s/ Paul K. Willmott ---------------------------------------- President The Optionee /s/ Leland O. Erdahl ---------------------------------------- EX-10.23 3 AMENDMENT NO. 1 TO NONQUALIFIED STOCK OPTION AGMT 1 EXHIBIT 10.23 2 AMENDMENT #1 TO NONQUALIFIED STOCK OPTION AGREEMENT GEORGE R. IRELAND THIS AMENDED AND RESTATED NONQUALIFIED STOCK OPTION AGREEMENT is entered into November 17, 1997, between Uranium Resources, Inc., a Delaware corporation (the "the Company"), and George R. Ireland, an individual (the "Optionee"). RECITALS: A. The Company and Optionee are parties to a Non-Qualified Stock Option Agreement dated May 25, 1997 (the "May 1995 Option"). B. The Company desires to amend the May 1995 option to extend the expiration date to May 24, 2001, to increase the exercise price by $.25 per share and to provide for substitute stock options in certain circumstances; and C. Optionee desires to accept such amendments to the May 1995 Option. NOW, THEREFORE, in consideration of the foregoing and the mutual promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Section 1 of the May 1995 Option is hereby amended by deleting "$4.50" and substituting in its place "$4.75." 2. Section 2 of the May 1995 Option is hereby amended by deleting from subsection (a) thereof "1998" and substituting in its place "2001". 3. Section 11 of the May 1995 Option is hereby amended to read in its entirety as follows: "1 1. Adjustments. (a) Stock Splits etc. The number of shares of Common Stock covered by the Option, as well as the price per share of Common Stock covered by the Option, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock of the Company. Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. (b) Mergers, etc. If, at any time subsequent to the hereof, shares of Common Stock are changed into or exchanged for a different number or kind of shares of stock or other securities of another entity (whether as a result of exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise): (i) there shall automatically be substituted for each Common Share subject to this option (in whole or in part), the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be changed or for which each such share of Common Stock shall be exchanged; and (ii) the option price per share of Common Stock or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to this option shall remain the same as immediately prior to such event. In addition to the foregoing, the Committee shall be entitled in the event of any such increase, decrease or exchange of Common Stock to make other adjustments to the securities subject this option (including adjustments which may provide for the elimination of fractional shares), where necessary to preserve the terms and conditions of this option. 3 (c) Liquidation. In the event of the dissolution or liquidation of the Company, the Board shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the option will terminate immediately prior to the consummation of such proposed action." 4. Except as expressly amended hereby the May 1995 Option shall remain in full force and effect. IN WITNESS WHEREOF, the Company and Optionee have executed this Amendment #1 to Non-Qualified Stock Option Agreement effective as of the date first set forth above. URANIUM RESOURCES, INC. /s/ Paul K. Willmott ---------------------------------------- President The Optionee /s/ George R. Ireland ---------------------------------------- EX-10.24 4 AMENDMENT NO. 1 TO NONQUALIFIED STOCK OPTION AGMT 1 EXHIBIT 10.24 2 AMENDMENT #1 TO NONQUALIFIED STOCK OPTION AGREEMENT James B. Tompkins THIS AMENDED AND RESTATED NONQUALIFIED STOCK OPTION AGREEMENT is entered into November 17, 1997, between Uranium Resources, Inc., a Delaware corporation (the "the Company"), and James B. Tompkins, an individual (the "Optionee"). RECITALS: A. The Company and Optionee are parties to a Non-Qualified Stock Option Agreement dated May 25, 1997 (the "May 1995 Option"). B. The Company desires to amend the May 1995 option to extend the expiration date to May 24, 2001, to increase the exercise price by $.25 per share and to provide for substitute stock options in certain circumstances; and C. Optionee desires to accept such amendments to the May 1995 Option. NOW, THEREFORE, in consideration of the foregoing and the mutual promises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Section 1 of the May 1995 Option is hereby amended by deleting "$4.50" and substituting in its place "$4.75." 2. Section 2 of the May 1995 Option is hereby amended by deleting from subsection (a) thereof "1998" and substituting in its place "2001". 3. Section 11 of the May 1995 Option is hereby amended to read in its entirety as follows: "1 1. Adjustments. (a) Stock Splits etc. The number of shares of Common Stock covered by the Option, as well as the price per share of Common Stock covered by the Option, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock of the Company. Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. (b) Mergers, etc. If, at any time subsequent to the hereof, shares of Common Stock are changed into or exchanged for a different number or kind of shares of stock or other securities of another entity (whether as a result of exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or otherwise): (i) there shall automatically be substituted for each Common Share subject to this option (in whole or in part), the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be changed or for which each such share of Common Stock shall be exchanged; and (ii) the option price per share of Common Stock or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to this option shall remain the same as immediately prior to such event. In addition to the foregoing, the Committee shall be entitled in the event of any such increase, decrease or exchange of Common Stock to make other adjustments to the securities subject this option (including adjustments which may provide for the elimination of fractional shares), where necessary to preserve the terms and conditions of this option. 3 (c) Liquidation. In the event of the dissolution or liquidation of the Company, the Board shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the option will terminate immediately prior to the consummation of such proposed action." 4. Except as expressly amended hereby the May 1995 Option shall remain in full force and effect. IN WITNESS WHEREOF, the Company and Optionee have executed this Amendment #1 to Non-Qualified Stock Option Agreement effective as of the date first set forth above. URANIUM RESOURCES, INC. /s/ Paul K. Willmott ---------------------------------------- President The Optionee /s/ James B. Tompkins ---------------------------------------- EX-10.25 5 COMPENSATION AGMT DATED JUNE 2, 1997 1 EXHIBIT 10.25 2 URANIUM RESOURCES, INC. COMPENSATION AGREEMENT (Willmott) This Compensation Agreement (this "Agreement") made and entered into June 2, 1997 by and between Uranium Resources, Inc., a Delaware corporation (the "Company") and Paul K. Willmott, ("Executive"). R E C I T A L S: A. The Company's Board of Directors (the "Board") acknowledges the Executive's contributions to the success of the Company have been, and will continue to be substantial. As a publicly-held corporation, the Board recognizes that there exists a possibility of change in control of the Company. The Board also recognizes that the possibility of such a change in control may contribute to uncertainty on the part of senior management of the Company and may result in the departure or distraction of senior management from operating responsibilities. B. Further, the Board recognizes that a significant concern of senior managers is providing for their post- retirement years. This concern likewise may result in the departure or distraction of senior management. C. The Board recognizes that outstanding management of the Company is essential to advancing the best interests of the Company and its shareholders. The Board believes that the objectives of securing and retaining outstanding management will be achieved if the Company's key management employees are given assurances of employment and post- employment security, so that they will not be distracted by personal uncertainties and risks. D. The Compensation Committee (the "Committee") of the Board has recommended, and the Board has approved, entering into compensation agreements with certain of the Company's key management executives in order to achieve the foregoing objectives. The Company and the Executive enter into this Agreement to induce the Executive to remain an employee of the Company and to continue to devote full energy to the Company's affairs. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Term. The term of this Agreement (the "Term") shall commence upon a Change in Control (as hereinafter defined) and continue until the date that is thirty six (36) months after the date of such Change in Control. 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any of the following: (a) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the then outstanding securities of the Company; or (b) a change in the composition of a majority of the Board (after the date hereof) within twelve months after any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the then outstanding securities of the Company. 3. Termination of Employment Before Commencement of Term. This Agreement shall not in any way confer upon the Executive any rights with respect to the continuation of employment by the Company prior to commencement of the Term or interfere in any way with the right of the Company at any time to terminate such employment or adjust the compensation of the Executive prior to commencement of the Term. 3 4. Termination of Employment During Term. Except as provided in Section 8 hereof, the Company will provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof in the event that the Executive's employment by the Company is terminated at any time during the Term or in connection with a Change in Control either: (a) by the Company; or (b) by the Executive following the occurrence of any of the following events without the Executive's consent: (i) The Executive is assigned substantial duties or responsibilities that are materially inconsistent with the Executive's position, duties, responsibilities or status during the twelve-month period immediately prior to the commencement of the Term; (ii) The Executive's base compensation is reduced or the Executive experiences in any year a reduction in the ratio of the Executive's incentive compensation payment to the Executive's base compensation in such year which is greater than the average reduction in the ratio of incentive compensation payments to base compensation in such year experienced by all of the Company's other salaried officers; or (iii) The Executive is transferred to a location (other than Albuquerque, New Mexico) which is an unreasonable distance from the Executive's current principal work location. 5. Rights and Benefits upon Termination. (a) Base Salary and Incentive Compensation. (i) After termination of the Executive's employment as provided in Section 4 above and until the expiration of the Term, the Company will pay to the Executive, as severance compensation and in lieu of any separation payments otherwise provided upon termination of employment under any other severance pay or similar plan or policy of the Company: (A) monthly payments equal to one-twelfth of the greater of (x) the Executive's annual base salary at the rate in effect immediately prior to the Executive's termination, or (y) if the termination shall have been effected pursuant to Paragraph 4(b)(ii), the Executive's annual base salary at the rate in effect immediately prior to the reduction described in such Paragraph 4(b)(ii) ("Base Salary"), and (B) annual incentive compensation payments (individually, an "Incentive Payment") in an amount determined by multiplying the Executive's annual Base Salary by the average of the percentages calculated by dividing the incentive compensation payment paid or committed to be paid to the Executive in each of the three calendar years (or such fewer calendar years as to which the Executive received or had a commitment to receive incentive compensation payments) immediately preceding the Executive's termination, by the Executive's Base Salary in each of such calendar years. (ii) The first Incentive Payment following termination of employment shall be made no later than one year from the date of the most recent payment to the Executive of incentive compensation preceding the Executive's termination or, if no such payment was made during the twelve-month period preceding such termination, on the date of such termination; and payments shall be made each year thereafter on the same calendar date until the expiration of the Term; provided, however, that if the Term expires on a date other than December 31 of any calendar year, payment of the Incentive Payment attributable to such partial calendar year shall be made on the date of expiration of the Term, and the amount of such Incentive Payment due to the Executive for such partial calendar year shall be prorated by multiplying the full amount of an annual Incentive Payment by a fraction, the numerator of which shall be the number of days from and including January 1 of the calendar year in which the Term expires through and including the date on which the expires, and the denominator of which shall be 365. 4 (iii) Compensation (including base compensation and incentive or bonus compensation) received by the Executive from a subsequent employer following the termination of the Executive's employment as provided in Section 4 above shall not reduce the amount of any compensation that the Executive is entitled to receive under this Section 5. (b) Welfare Benefit Plans. During the Term, the Company will maintain in full force and effect for the continued benefit of the Executive each employee welfare benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) in which the Executive was entitled to participate immediately prior to the date of the Executive's termination, unless an essentially equivalent and no less favorable benefit is provided by a subsequent employer at no additional cost to the Executive. If the terms of any welfare benefit plan of the Company do not permit continued participation by the Executive, then the Company (at its expense) will arrange to provide to the Executive a benefit substantially similar to and no less favorable than the benefit the Executive was entitled to receive under such plan at the end of the period of coverage. (c) Retirement Benefits. During the Term, the Company (i) will include or cause to be included the base salary received by the Executive in determining "Average Salary" and (ii) will treat the Executive for all purposes as an employee under all of the Company's retirement plans in which, the Executive was a participant at the time of the commencement of the Term or under which the Executive would become eligible during the Term (hereinafter referred to collectively as the "Plan"). Benefits due to the Executive under the Plan shall be computed as if the Executive had continued to be an employee of the Company for the entire Term receiving Average Salary until expiration of the Term. If under the terms of the Plan such continued coverage is not permitted, the Company will pay to the Executive, or the Executive's personal representative or the executor or administrator of the Executive's estate in the case of survivor benefits, a supplemental benefit in an amount which, when added to the benefits that the Executive is entitled to receive under the Plan, shall equal the amount that the Executive (or the Executive's personal representative or executor or administrator of the Executive's estate) would have received under the Plan had the Executive remained an employee of the Company during the Term. The Company shall fund its obligation to pay supplemental benefits hereunder through purchase of an annuity contract or otherwise; provided, however, that the Company shall be the sole legal and beneficial owner of any such funding mechanism and neither the Executive nor anyone else claiming under, by or through the Executive shall have any right, title or interest therein. The obligations of the Company contained in the second, third and fourth sentences of this Section 5(c) shall survive the expiration of the Term. (d) Plan Changes. The Company may, in its sole discretion, change, replace or eliminate any plan or policy described in Sections 5(b) or 5(c) hereof at any time, but shall not do so in a manner which would prevent the Executive from receiving any benefit which the Executive would otherwise have been entitled to receive either at the beginning of the Term or upon termination of the Executive's employment thereafter. (e) No Amendment to Disability Provisions of the Plan. Nothing herein shall be construed to amend any provision of the Plan applicable to disability of the Executive as defined in the Plan. 6. Indemnification. The Company shall pay all costs and expenses (including legal fees and expenses), if any, incurred by Executive as a result of any claim, action or proceeding arising out of, or challenging the validity, advisability or enforceability of, this Agreement or any other agreement between Executive and the Company, or any provision hereof or thereof. In addition, if any excise tax imposed under Internal Revenue Code Section 4999 or any successor provision, as amended after the date hereof, is provoked by any amount paid or payable to or for the benefit of the Executive under this Agreement or any other agreement between Executive and the Company, the Company shall indemnify the Executive and hold the Executive harmless against all claims, losses, damages, penalties, expenses and excise taxes. 7. Benefits Upon Death. In the event of the death of the Executive following the termination of the Executive's employment but prior to the expiration of the Term, for the balance of the Term the Company will pay all amounts required under Section 5 to the Executive's personal representative or the executor or administrator of the Executive's estate. 5 8. Conditions to the Obligations of the Company. The Company shall have no obligations to provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof if any of the following events shall occur: (a) The Company shall terminate the Executive's employment for "cause", which shall mean action by the Executive involving willful malfeasance or failure to act by the Executive involving willful nonfeasance, tending to have a material adverse effect on the Company. (b) The Executive shall not, promptly after termination of the Executive's employment and upon receiving a written request to do so, resign as a director and/or officer of each subsidiary and affiliate of the Company of which the Executive is then serving as a director and/or officer. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10. Amendment. This Agreement may not be amended except by written agreement of both the Company and the Executive. 11. Binding, Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and on the Executive and the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees, legatees, and trustees, provided, however, the Executive may not assign, alienate or otherwise encumber any rights, duties, or amounts which the Executive may be entitled to receive under this Agreement. 12. Notices. Any notice or filing required or permitted to be given to the Company shall be sufficient if in writing and hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to the principal office of the Company, directed to the attention of the Chairman of the Board. Any notice to the Executive must be in writing and shall be effective when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the Executive or the Executive's personal representatives at the Executive's last known address. 13. Severability. In the event any provision of this Agreement is held invalid, void or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Agreement. 14. Captions. The captions to the articles, sections, and paragraphs of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 15. Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. URANIUM RESOURCES, INC. /s/ Leland O. Erdahl ---------------------------------------- Chairman of the Compensation Committee EXECUTIVE: /s/ Paul K. Willmott ---------------------------------------- Name: Paul K. Willmott Title: Chairman, President and Chief Executive Officer EX-10.26 6 COMPENSATION AGMT DATED JUNE 2, 1997 1 EXHIBIT 10.26 2 URANIUM RESOURCES, INC. COMPENSATION AGREEMENT (Clement) This Compensation Agreement (this "Agreement") made and entered into June 2, 1997 by and between Uranium Resources, Inc., a Delaware corporation (the "Company") and Richard F. Clement, Jr., ("Executive"). R E C I T A L S: A. The Company's Board of Directors (the "Board") acknowledges the Executive's contributions to the success of the Company have been, and will continue to be substantial. As a publicly-held corporation, the Board recognizes that there exists a possibility of change in control of the Company. The Board also recognizes that the possibility of such a change in control may contribute to uncertainty on the part of senior management of the Company and may result in the departure or distraction of senior management from operating responsibilities. B. Further, the Board recognize that a significant concern of senior managers is providing for their post-retirement years. This concern likewise may result in the departure or distraction of senior management. C. The Board recognizes that outstanding management of the Company is essential to advancing the best interests of the Company and its shareholders. The Board believes that the objectives of securing and retaining outstanding management will be achieved if the Company's key management employees are given assurances of employment and post-employment security, so that they will not be distracted by personal uncertainties and risks. D. The Compensation Committee (the "Committee") of the Board has recommended, and the Board has approved, entering into compensation agreements with certain of the Company's key management executives in order to achieve the foregoing objectives. The Company and the Executive enter into this Agreement to induce the Executive to remain an employee of the Company and to continue to devote full energy to the Company's affairs. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Term. The term of this Agreement (the "Term") shall commence upon a Change in Control (as hereinafter defined) and continue until the date that is twenty four (24) months after the date of such Change in Control. 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any of the following: (a) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the then outstanding securities of the Company; or (b) a change in the composition of a majority of the Board (after the date hereof) within twelve months after any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the then outstanding securities of the Company. 3. Termination of Employment Before Commencement of Term. This Agreement shall not in any way confer upon the Executive any rights with respect to the continuation of employment by the Company prior to commencement of the Term or interfere in any way with the right of the Company at any time to terminate such employment or adjust the compensation of the Executive prior to commencement of the Term. 3 4. Termination of Employment During Term. Except as provided in Section 8 hereof, the Company will provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof in the event that the Executive's employment by the Company is terminated at any time during the Term or in connection with a Change in Control either: (a) by the Company; or (b) by the Executive following the occurrence of any of the following events without the Executive's consent: (i) The Executive is assigned substantial duties or responsibilities that are materially inconsistent with the Executive's position, duties, responsibilities or status during the twelve-month period immediately prior to the commencement of the Term; (ii) The Executive's base compensation is reduced or the Executive experiences in any year a reduction in the ratio of the Executive's incentive compensation payment to the Executive's base compensation in such year which is greater than the average reduction in the ratio of incentive compensation payments to base compensation in such year experienced by all of the Company's other salaried officers; or (iii) The Executive is transferred to a location (other than Albuquerque, New Mexico) which is an unreasonable distance from the Executive's current principal work location. 5. Rights and Benefits upon Termination. (a) Base Salary and Incentive Compensation. (i) After termination of the Executive's employment as provided in Section 4 above and until the expiration of the Term, the Company will pay to the Executive, as severance compensation and in lieu of any separation payments otherwise provided upon termination of employment under any other severance pay or similar plan or policy of the Company: (A) monthly payments equal to one-twelfth of the greater of (x) the Executive's annual base salary at the rate in effect immediately prior to the Executive's termination, or (y) if the termination shall have been effected pursuant to Paragraph 4(b)(ii), the Executive's annual base salary at the rate in effect immediately prior to the reduction described in such Paragraph 4(b)(ii) ("Base Salary"), and (B) annual incentive compensation payments (individually, an "Incentive Payment") in an amount determined by multiplying the Executive's annual Base Salary by the average of the percentages calculated by dividing the incentive compensation payment paid or committed to be paid to the Executive in each of the three calendar years (or such fewer calendar years as to which the Executive received or had a commitment to receive incentive compensation payments) immediately preceding the Executive's termination, by the Executive's Base Salary in each of such calendar years. (ii) The first Incentive Payment following termination of employment shall be made no later than one year from the date of the most recent payment to the Executive of incentive compensation preceding the Executive's termination or, if no such payment was made during the twelve-month period preceding such termination, on the date of such termination; and payments shall be made each year thereafter on the same calendar date until the expiration of the Term; provided, however, that if the Term expires on a date other than December 31 of any calendar year, payment of the Incentive Payment attributable to such partial calendar year shall be made on the date of expiration of the Term, and the amount of such Incentive Payment due to the Executive for such partial calendar year shall be prorated by multiplying the full amount of an annual Incentive Payment by a fraction, the numerator of which shall be the number of days from and including January 1 of the calendar year in which the Term expires through and including the date on which the expires, and the denominator of which shall be 365. 4 (iii) Compensation (including base compensation and incentive or bonus compensation) received by the Executive from a subsequent employer following the termination of the Executive's employment as provided in Section 4 above shall not reduce the amount of any compensation that the Executive is entitled to receive under this Section 5. (b) Welfare Benefit Plans. During the Term, the Company will maintain in full force and effect for the continued benefit of the Executive each employee welfare benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) in which the Executive was entitled to participate immediately prior to the date of the Executive's termination, unless an essentially equivalent and no less favorable benefit is provided by a subsequent employer at no additional cost to the Executive. If the terms of any welfare benefit plan of the Company do not permit continued participation by the Executive, then the Company (at its expense) will arrange to provide to the Executive a benefit substantially similar to and no less favorable than the benefit the Executive was entitled to receive under such plan at the end of the period of coverage. (c) Retirement Benefits. During the Term, the Company (i) will include or cause to be included the base salary received by the Executive in determining "Average Salary" and (ii) will treat the Executive for all purposes as an employee under all of the Company's retirement plans in which, the Executive was a participant at the time of the commencement of the Term or under which the Executive would become eligible during the Term (hereinafter referred to collectively as the "Plan"). Benefits due to the Executive under the Plan shall be computed as if the Executive had continued to be an employee of the Company for the entire Term receiving Average Salary until expiration of the Term. If under the terms of the Plan such continued coverage is not permitted, the Company will pay to the Executive, or the Executive's personal representative or the executor or administrator of the Executive's estate in the case of survivor benefits, a supplemental benefit in an amount which, when added to the benefits that the Executive is entitled to receive under the Plan, shall equal the amount that the Executive (or the Executive's personal representative or executor or administrator of the Executive's estate) would have received under the Plan had the Executive remained an employee of the Company during the Term. The Company shall fund its obligation to pay supplemental benefits hereunder through purchase of an annuity contract or otherwise; provided, however, that the Company shall be the sole legal and beneficial owner of any such funding mechanism and neither the Executive nor anyone else claiming under, by or through the Executive shall have any right, title or interest therein. The obligations of the Company contained in the second, third and fourth sentences of this Section 5(c) shall survive the expiration of the Term. (d) Plan Changes. The Company may, in its sole discretion, change, replace or eliminate any plan or policy described in Sections 5(b) or 5(c) hereof at any time, but shall not do so in a manner which would prevent the Executive from receiving any benefit which the Executive would otherwise have been entitled to receive either at the beginning of the Term or upon termination of the Executive's employment thereafter. (e) No Amendment to Disability Provisions of the Plan. Nothing herein shall be construed to amend any provision of the Plan applicable to disability of the Executive as defined in the Plan. 6. Indemnification. The Company shall pay all costs and expenses (including legal fees and expenses), if any, incurred by Executive as a result of any claim, action or proceeding arising out of, or challenging the validity, advisability or enforceability of, this Agreement or any other agreement between Executive and the Company, or any provision hereof or thereof. In addition, if any excise tax imposed under Internal Revenue Code Section 4999 or any successor provision, as amended after the date hereof, is provoked by any amount paid or payable to or for the benefit of the Executive under this Agreement or any other agreement between Executive and the Company, the Company shall indemnify the Executive and hold the Executive harmless against all claims, losses, damages, penalties, expenses and excise taxes. 7. Benefits Upon Death. In the event of the death of the Executive following the termination of the Executive's employment but prior to the expiration of the Term, for the balance of the Term the Company will pay all amounts required under Section 5 to the Executive's personal representative or the executor or administrator of the Executive's estate. 5 8. Conditions to the Obligations of the Company. The Company shall have no obligations to provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof if any of the following events shall occur: (a) The Company shall terminate the Executive's employment for "cause", which shall mean action by the Executive involving willful malfeasance or failure to act by the Executive involving willful nonfeasance, tending to have a material adverse effect on the Company. (b) The Executive shall not, promptly after termination of the Executive's employment and upon receiving a written request to do so, resign as a director and/or officer of each subsidiary and affiliate of the Company of which the Executive is then serving as a director and/or officer. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10. Amendment. This Agreement may not be amended except by written agreement of both the Company and the Executive. 11. Binding, Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and on the Executive and the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees, legatees, and trustees, provided, however, the Executive may not assign, alienate or otherwise encumber any rights, duties, or amounts which the Executive may be entitled to receive under this Agreement. 12. Notices. Any notice or filing required or permitted to be given to the Company shall be sufficient if in writing and hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to the principal office of the Company, directed to the attention of the Chairman of the Board. Any notice to the Executive must be in writing and shall be effective when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the Executive or the Executive's personal representatives at the Executive's last known address. 13. Severability. In the event any provision of this Agreement is held invalid, void or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Agreement. 14. Captions. The captions to the articles, sections, and paragraphs of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 15. Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. URANIUM RESOURCES, INC. /s/ Leland O. Erdahl ---------------------------------------- Chairman of the Compensation Committee EXECUTIVE: /s/ Richard F. Clement, Jr. ---------------------------------------- Name: Richard F. Clement, Jr. Title: Senior Vice President - Exploration EX-10.27 7 COMPENSATION AGMT DATED JUNE 2, 1997 1 EXHIBIT 10.27 2 URANIUM RESOURCES, INC. COMPENSATION AGREEMENT (Card) This Compensation Agreement (this "Agreement") made and entered into June 2, 1997 by and between Uranium Resources, Inc., a Delaware corporation (the "Company") and Joe H. Card, ("Executive"). R E C I T A L S: A. The Company's Board of Directors (the "Board") acknowledges the Executive's contributions to the success of the Company have been, and will continue to be substantial. As a publicly-held corporation, the Board recognizes that there exists a possibility of change in control of the Company. The Board also recognizes that the possibility of such a change in control may contribute to uncertainty on the part of senior management of the Company and may result in the departure or distraction of senior management from operating responsibilities. B. Further, the Board recognizes that a significant concern of senior managers is providing for their post-retirement years. This concern likewise may result in the departure or distraction of senior management. C. The Board recognizes that outstanding management of the Company is essential to advancing the best interests of the Company and its shareholders. The Board believes that the objectives of securing and retaining outstanding management will be achieved if the Company's key management employees are given assurances of employment and post-employment security, so that they will not be distracted by personal uncertainties and risks. D. The Compensation Committee (the "Committee") of the Board has recommended, and the Board has approved, entering into compensation agreements with certain of the Company's key management executives in order to achieve the foregoing objectives. The Company and the Executive enter into this Agreement to induce the Executive to remain an employee of the Company and to continue to devote full energy to the Company's affairs. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Term. The term of this Agreement (the "Term") shall commence upon a Change in Control (as hereinafter defined) and continue until the date that is twenty four (24) months after the date of such Change in Control. 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any of the following: (a) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the then outstanding securities of the Company; or (b) a change in the composition of a majority of the Board (after the date hereof) within twelve months after any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the then outstanding securities of the Company. 3. Termination of Employment Before Commencement of Term. This Agreement shall not in any way confer upon the Executive any rights with respect to the continuation of employment by the Company prior to commencement of the Term or interfere in any way with the right of the Company at any time to terminate such employment or adjust the compensation of the Executive prior to commencement of the Term. 3 4. Termination of Employment During Term. Except as provided in Section 8 hereof, the Company will provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof in the event that the Executive's employment by the Company is terminated at any time during the Term or in connection with a Change in Control either: (a) by the Company; or (b) by the Executive following the occurrence of any of the following events without the Executive's consent: (i) The Executive is assigned substantial duties or responsibilities that are materially inconsistent with the Executive's position, duties, responsibilities or status during the twelve-month period immediately prior to the commencement of the Term; (ii) The Executive's base compensation is reduced or the Executive experiences in any year a reduction in the ratio of the Executive's incentive compensation payment to the Executive's base compensation in such year which is greater than the average reduction in the ratio of incentive compensation payments to base compensation in such year experienced by all of the Company's other salaried officers; or (iii) The Executive is transferred to a location (other than Albuquerque, New Mexico) which is an unreasonable distance from the Executive's current principal work location. 5. Rights and Benefits upon Termination. (a) Base Salary and Incentive Compensation. (i) After termination of the Executive's employment as provided in Section 4 above and until the expiration of the Term, the Company will pay to the Executive, as severance compensation and in lieu of any separation payments otherwise provided upon termination of employment under any other severance pay or similar plan or policy of the Company: (A) monthly payments equal to one-twelfth of the greater of (x) the Executive's annual base salary at the rate in effect immediately prior to the Executive's termination, or (y) if the termination shall have been effected pursuant to Paragraph 4(b)(ii), the Executive's annual base salary at the rate in effect immediately prior to the reduction described in such Paragraph 4(b)(ii) ("Base Salary"), and (B) annual incentive compensation payments (individually, an "Incentive Payment") in an amount determined by multiplying the Executive's annual Base Salary by the average of the percentages calculated by dividing the incentive compensation payment paid or committed to be paid to the Executive in each of the three calendar years (or such fewer calendar years as to which the Executive received or had a commitment to receive incentive compensation payments) immediately preceding the Executive's termination, by the Executive's Base Salary in each of such calendar years. (ii) The first Incentive Payment following termination of employment shall be made no later than one year from the date of the most recent payment to the Executive of incentive compensation preceding the Executive's termination or, if no such payment was made during the twelve-month period preceding such termination, on the date of such termination; and payments shall be made each year thereafter on the same calendar date until the expiration of the Term; provided, however, that if the Term expires on a date other than December 31 of any calendar year, payment of the Incentive Payment attributable to such partial calendar year shall be made on the date of expiration of the Term, and the amount of such Incentive Payment due to the Executive for such partial calendar year shall be prorated by multiplying the full amount of an annual Incentive Payment by a fraction, the numerator of which shall be the number of days from and including January 1 of the calendar year in which the Term expires through and including the date on which the expires, and the denominator of which shall be 365. 4 (iii) Compensation (including base compensation and incentive or bonus compensation) received by the Executive from a subsequent employer following the termination of the Executive's employment as provided in Section 4 above shall not reduce the amount of any compensation that the Executive is entitled to receive under this Section 5. (b) Welfare Benefit Plans. During the Term, the Company will maintain in full force and effect for the continued benefit of the Executive each employee welfare benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) in which the Executive was entitled to participate immediately prior to the date of the Executive's termination, unless an essentially equivalent and no less favorable benefit is provided by a subsequent employer at no additional cost to the Executive. If the terms of any welfare benefit plan of the Company do not permit continued participation by the Executive, then the Company (at its expense) will arrange to provide to the Executive a benefit substantially similar to and no less favorable than the benefit the Executive was entitled to receive under such plan at the end of the period of coverage. (c) Retirement Benefits. During the Term, the Company (i) will include or cause to be included the base salary received by the Executive in determining "Average Salary" and (ii) will treat the Executive for all purposes as an employee under all of the Company's retirement plans in which, the Executive was a participant at the time of the commencement of the Term or under which the Executive would become eligible during the Term (hereinafter referred to collectively as the "Plan"). Benefits due to the Executive under the Plan shall be computed as if the Executive had continued to be an employee of the Company for the entire Term receiving Average Salary until expiration of the Term. If under the terms of the Plan such continued coverage is not permitted, the Company will pay to the Executive, or the Executive's personal representative or the executor or administrator of the Executive's estate in the case of survivor benefits, a supplemental benefit in an amount which, when added to the benefits that the Executive is entitled to receive under the Plan, shall equal the amount that the Executive (or the Executive's personal representative or executor or administrator of the Executive's estate) would have received under the Plan had the Executive remained an employee of the Company during the Term. The Company shall fund its obligation to pay supplemental benefits hereunder through purchase of an annuity contract or otherwise; provided, however, that the Company shall be the sole legal and beneficial owner of any such funding mechanism and neither the Executive nor anyone else claiming under, by or through the Executive shall have any right, title or interest therein. The obligations of the Company contained in the second, third and fourth sentences of this Section 5(c) shall survive the expiration of the Term. (d) Plan Changes. The Company may, in its sole discretion, change, replace or eliminate any plan or policy described in Sections 5(b) or 5(c) hereof at any time, but shall not do so in a manner which would prevent the Executive from receiving any benefit which the Executive would otherwise have been entitled to receive either at the beginning of the Term or upon termination of the Executive's employment thereafter. (e) No Amendment to Disability Provisions of the Plan. Nothing herein shall be construed to amend any provision of the Plan applicable to disability of the Executive as defined in the Plan. 6. Indemnification. The Company shall pay all costs and expenses (including legal fees and expenses), if any, incurred by Executive as a result of any claim, action or proceeding arising out of, or challenging the validity, advisability or enforceability of, this Agreement or any other agreement between Executive and the Company, or any provision hereof or thereof. In addition, if any excise tax imposed under Internal Revenue Code Section 4999 or any successor provision, as amended after the date hereof, is provoked by any amount paid or payable to or for the benefit of the Executive under this Agreement or any other agreement between Executive and the Company, the Company shall indemnify the Executive and hold the Executive harmless against all claims, losses, damages, penalties, expenses and excise taxes. 7. Benefits Upon Death. In the event of the death of the Executive following the termination of the Executive's employment but prior to the expiration of the Term, for the balance of the Term the Company will pay all amounts required under Section 5 to the Executive's personal representative or the executor or administrator of the Executive's estate. 5 8. Conditions to the Obligations of the Company. The Company shall have no obligations to provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof if any of the following events shall occur: (a) The Company shall terminate the Executive's employment for "cause", which shall mean action by the Executive involving willful malfeasance or failure to act by the Executive involving willful nonfeasance, tending to have a material adverse effect on the Company. (b) The Executive shall not, promptly after termination of the Executive's employment and upon receiving a written request to do so, resign as a director and/or officer of each subsidiary and affiliate of the Company of which the Executive is then serving as a director and/or officer. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10. Amendment. This Agreement may not be amended except by written agreement of both the Company and the Executive. 11. Binding, Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and on the Executive and the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees, legatees, and trustees, provided, however, the Executive may not assign, alienate or otherwise encumber any rights, duties, or amounts which the Executive may be entitled to receive under this Agreement. 12. Notices. Any notice or filing required or permitted to be given to the Company shall be sufficient if in writing and hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to the principal office of the Company, directed to the attention of the Chairman of the Board. Any notice to the Executive must be in writing and shall be effective when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the Executive or the Executive's personal representatives at the Executive's last known address. 13. Severability. In the event any provision of this Agreement is held invalid, void or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Agreement. 14. Captions. The captions to the articles, sections, and paragraphs of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 15. Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. URANIUM RESOURCES, INC. /s/ Leland O. Erdahl ------------------------------------------- Chairman of the Compensation Committee EXECUTIVE: /s/ Joe H. Card ------------------------------------------- Name: Joe H. Card Title: Senior Vice President - Marketing EX-10.28 8 COMPENSATION AGMT DATED JUNE 2, 1997 1 EXHIBIT 10.28 2 URANIUM RESOURCES, INC. COMPENSATION AGREEMENT (Van Horn) This Compensation Agreement (this "Agreement") made and entered into June 2, 1997 by and between Uranium Resources, Inc., a Delaware corporation (the "Company") and Richard A. Van Horn, ("Executive"). R E C I T A L S: A. The Company's Board of Directors (the "Board") acknowledges the Executive's contributions to the success of the Company have been, and will continue to be substantial. As a publicly-held corporation, the Board recognizes that there exists a possibility of change in control of the Company. The Board also recognizes that the possibility of such a change in control may contribute to uncertainty on the part of senior management of the Company and may result in the departure or distraction of senior management from operating responsibilities. B. Further, the Board recognizes that a significant concern of senior managers is providing for their post-retirement years. This concern likewise may result in the departure or distraction of senior management. C. The Board recognizes that outstanding management of the Company is essential to advancing the best interests of the Company and its shareholders. The Board believes that the objectives of securing and retaining outstanding management will be achieved if the Company's key management employees are given assurances of employment and post-employment security, so that they will not be distracted by personal uncertainties and risks. D. The Compensation Committee (the "Committee") of the Board has recommended, and the Board has approved, entering into compensation agreements with certain of the Company's key management executives in order to achieve the foregoing objectives. The Company and the Executive enter into this Agreement to induce the Executive to remain an employee of the Company and to continue to devote full energy to the Company's affairs. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Term. The term of this Agreement (the "Term") shall commence upon a Change in Control (as hereinafter defined) and continue until the date that is twenty four (24) months after the date of such Change in Control. 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any of the following: (a) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the then outstanding securities of the Company; or (b) a change in the composition of a majority of the Board (after the date hereof) within twelve months after any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the then outstanding securities of the Company. 3. Termination of Employment Before Commencement of Term. This Agreement shall not in any way confer upon the Executive any rights with respect to the continuation of employment by the Company prior to commencement of the Term or interfere in any way with the right of the Company at any time to terminate such employment or adjust the compensation of the Executive prior to commencement of the Term. 3 4. Termination of Employment During Term. Except as provided in Section 8 hereof, the Company will provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof in the event that the Executive's employment by the Company is terminated at any time during the Term or in connection with a Change in Control either: (a) by the Company; or (b) by the Executive following the occurrence of any of the following events without the Executive's consent: (i) The Executive is assigned substantial duties or responsibilities that are materially inconsistent with the Executive's position, duties, responsibilities or status during the twelve-month period immediately prior to the commencement of the Term; (ii) The Executive's base compensation is reduced or the Executive experiences in any year a reduction in the ratio of the Executive's incentive compensation payment to the Executive's base compensation in such year which is greater than the average reduction in the ratio of incentive compensation payments to base compensation in such year experienced by all of the Company's other salaried officers; or (iii) The Executive is transferred to a location (other than Albuquerque, New Mexico) which is an unreasonable distance from the Executive's current principal work location. 5. Rights and Benefits upon Termination. (a) Base Salary and Incentive Compensation. (i) After termination of the Executive's employment as provided in Section 4 above and until the expiration of the Term, the Company will pay to the Executive, as severance compensation and in lieu of any separation payments otherwise provided upon termination of employment under any other severance pay or similar plan or policy of the Company: (A) monthly payments equal to one-twelfth of the greater of (x) the Executive's annual base salary at the rate in effect immediately prior to the Executive's termination, or (y) if the termination shall have been effected pursuant to Paragraph 4(b)(ii), the Executive's annual base salary at the rate in effect immediately prior to the reduction described in such Paragraph 4(b)(ii) ("Base Salary"), and (B) annual incentive compensation payments (individually, an "Incentive Payment") in an amount determined by multiplying the Executive's annual Base Salary by the average of the percentages calculated by dividing the incentive compensation payment paid or committed to be paid to the Executive in each of the three calendar years (or such fewer calendar years as to which the Executive received or had a commitment to receive incentive compensation payments) immediately preceding the Executive's termination, by the Executive's Base Salary in each of such calendar years. (ii) The first Incentive Payment following termination of employment shall be made no later than one year from the date of the most recent payment to the Executive of incentive compensation preceding the Executive's termination or, if no such payment was made during the twelve-month period preceding such termination, on the date of such termination; and payments shall be made each year thereafter on the same calendar date until the expiration of the Term; provided, however, that if the Term expires on a date other than December 31 of any calendar year, payment of the Incentive Payment attributable to such partial calendar year shall be made on the date of expiration of the Term, and the amount of such Incentive Payment due to the Executive for such partial calendar year shall be prorated by multiplying the full amount of an annual Incentive Payment by a fraction, the numerator of which shall be the number of days from and including January 1 of the calendar year in which the Term expires through and including the date on which the expires, and the denominator of which shall be 365. 4 (iii) Compensation (including base compensation and incentive or bonus compensation) received by the Executive from a subsequent employer following the termination of the Executive's employment as provided in Section 4 above shall not reduce the amount of any compensation that the Executive is entitled to receive under this Section 5. (b) Welfare Benefit Plans. During the Term, the Company will maintain in full force and effect for the continued benefit of the Executive each employee welfare benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) in which the Executive was entitled to participate immediately prior to the date of the Executive's termination, unless an essentially equivalent and no less favorable benefit is provided by a subsequent employer at no additional cost to the Executive. If the terms of any welfare benefit plan of the Company do not permit continued participation by the Executive, then the Company (at its expense) will arrange to provide to the Executive a benefit substantially similar to and no less favorable than the benefit the Executive was entitled to receive under such plan at the end of the period of coverage. (c) Retirement Benefits. During the Term, the Company (i) will include or cause to be included the base salary received by the Executive in determining "Average Salary" and (ii) will treat the Executive for all purposes as an employee under all of the Company's retirement plans in which, the Executive was a participant at the time of the commencement of the Term or under which the Executive would become eligible during the Term (hereinafter referred to collectively as the "Plan"). Benefits due to the Executive under the Plan shall be computed as if the Executive had continued to be an employee of the Company for the entire Term receiving Average Salary until expiration of the Term. If under the terms of the Plan such continued coverage is not permitted, the Company will pay to the Executive, or the Executive's personal representative or the executor or administrator of the Executive's estate in the case of survivor benefits, a supplemental benefit in an amount which, when added to the benefits that the Executive is entitled to receive under the Plan, shall equal the amount that the Executive (or the Executive's personal representative or executor or administrator of the Executive's estate) would have received under the Plan had the Executive remained an employee of the Company during the Term. The Company shall fund its obligation to pay supplemental benefits hereunder through purchase of an annuity contract or otherwise; provided, however, that the Company shall be the sole legal and beneficial owner of any such funding mechanism and neither the Executive nor anyone else claiming under, by or through the Executive shall have any right, title or interest therein. The obligations of the Company contained in the second, third and fourth sentences of this Section 5(c) shall survive the expiration of the Term. (d) Plan Changes. The Company may, in its sole discretion, change, replace or eliminate any plan or policy described in Sections 5(b) or 5(c) hereof at any time, but shall not do so in a manner which would prevent the Executive from receiving any benefit which the Executive would otherwise have been entitled to receive either at the beginning of the Term or upon termination of the Executive's employment thereafter. (e) No Amendment to Disability Provisions of the Plan. Nothing herein shall be construed to amend any provision of the Plan applicable to disability of the Executive as defined in the Plan. 6. Indemnification. The Company shall pay all costs and expenses (including legal fees and expenses), if any, incurred by Executive as a result of any claim, action or proceeding arising out of, or challenging the validity, advisability or enforceability of, this Agreement or any other agreement between Executive and the Company, or any provision hereof or thereof. In addition, if any excise tax imposed under Internal Revenue Code Section 4999 or any successor provision, as amended after the date hereof, is provoked by any amount paid or payable to or for the benefit of the Executive under this Agreement or any other agreement between Executive and the Company, the Company shall indemnify the Executive and hold the Executive harmless against all claims, losses, damages, penalties, expenses and excise taxes. 7. Benefits Upon Death. In the event of the death of the Executive following the termination of the Executive's employment but prior to the expiration of the Term, for the balance of the Term the Company will pay all amounts required under Section 5 to the Executive's personal representative or the executor or administrator of the Executive's estate. 5 8. Conditions to the Obligations of the Company. The Company shall have no obligations to provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof if any of the following events shall occur: (a) The Company shall terminate the Executive's employment for "cause", which shall mean action by the Executive involving willful malfeasance or failure to act by the Executive involving willful nonfeasance, tending to have a material adverse effect on the Company. (b) The Executive shall not, promptly after termination of the Executive's employment and upon receiving a written request to do so, resign as a director and/or officer of each subsidiary and affiliate of the Company of which the Executive is then serving as a director and/or officer. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10. Amendment. This Agreement may not be amended except by written agreement of both the Company and the Executive. 11. Binding, Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and on the Executive and the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees, legatees, and trustees, provided, however, the Executive may not assign, alienate or otherwise encumber any rights, duties, or amounts which the Executive may be entitled to receive under this Agreement. 12. Notices. Any notice or filing required or permitted to be given to the Company shall be sufficient if in writing and hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to the principal office of the Company, directed to the attention of the Chairman of the Board. Any notice to the Executive must be in writing and shall be effective when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the Executive or the Executive's personal representatives at the Executive's last known address. 13. Severability. In the event any provision of this Agreement is held invalid, void or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Agreement. 14. Captions. The captions to the articles, sections, and paragraphs of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 15. Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. URANIUM RESOURCES, INC. /s/ Leland O. Erdahl ---------------------------------------- Chairman of the Compensation Committee EXECUTIVE: /s/ Richard A. Van Horn ---------------------------------------- Name: Richard A. Van Horn Title: Senior Vice President-Operations EX-10.29 9 COMPENSATION AGMT DATED JUNE 2, 1997 1 EXHIBIT 10.29 2 URANIUM RESOURCES, INC. COMPENSATION AGREEMENT (Ehrlich) This Compensation Agreement (this "Agreement") made and entered into June 2, 1997 by and between Uranium Resources, Inc., a Delaware corporation (the "Company") and Thomas H. Ehrlich, ("Executive"). R E C I T A L S: A. The Company's Board of Directors (the "Board") acknowledges the Executive's contributions to the success of the Company have been, and will continue to be substantial. As a publicly-held corporation, the Board recognizes that there exists a possibility of change in control of the Company. The Board also recognizes that the possibility of such a change in control may contribute to uncertainty on the part of senior management of the Company and may result in the departure or distraction of senior management from operating responsibilities. B. Further, the Board recognizes that a significant concern of senior managers is providing for their post-retirement years. This concern likewise may result in the departure or distraction of senior management. C. The Board recognizes that outstanding management of the Company is essential to advancing the best interests of the Company and its shareholders. The Board believes that the objectives of securing and retaining outstanding management will be achieved if the Company's key management employees are given assurances of employment and post-employment security, so that they will not be distracted by personal uncertainties and risks. D. The Compensation Committee (the "Committee") of the Board has recommended, and the Board has approved, entering into compensation agreements with certain of the Company's key management executives in order to achieve the foregoing objectives. The Company and the Executive enter into this Agreement to induce the Executive to remain an employee of the Company and to continue to devote full energy to the Company's affairs. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Term. The term of this Agreement (the "Term") shall commence upon a Change in Control (as hereinafter defined) and continue until the date that is twenty four (24) months after the date of such Change in Control. 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any of the following: (a) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the then outstanding securities of the Company; or (b) a change in the composition of a majority of the Board (after the date hereof) within twelve months after any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the then outstanding securities of the Company. 3. Termination of Employment Before Commencement of Term. This Agreement shall not in any way confer upon the Executive any rights with respect to the continuation of employment by the Company prior to commencement of the Term or interfere in any way with the right of the Company at any time to terminate such employment or adjust the compensation of the Executive prior to commencement of the Term. 3 4. Termination of Employment During Term. Except as provided in Section 8 hereof, the Company will provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof in the event that the Executive's employment by the Company is terminated at any time during the Term or in connection with a Change in Control either: (a) by the Company; or (b) by the Executive following the occurrence of any of the following events without the Executive's consent: (i) The Executive is assigned substantial duties or responsibilities that are materially inconsistent with the Executive's position, duties, responsibilities or status during the twelve-month period immediately prior to the commencement of the Term; (ii) The Executive's base compensation is reduced or the Executive experiences in any year a reduction in the ratio of the Executive's incentive compensation payment to the Executive's base compensation in such year which is greater than the average reduction in the ratio of incentive compensation payments to base compensation in such year experienced by all of the Company's other salaried officers; or (iii) The Executive is transferred to a location (other than Albuquerque, New Mexico) which is an unreasonable distance from the Executive's current principal work location. 5. Rights and Benefits upon Termination. (a) Base Salary and Incentive Compensation. (i) After termination of the Executive's employment as provided in Section 4 above and until the expiration of the Term, the Company will pay to the Executive, as severance compensation and in lieu of any separation payments otherwise provided upon termination of employment under any other severance pay or similar plan or policy of the Company: (A) monthly payments equal to one-twelfth of the greater of (x) the Executive's annual base salary at the rate in effect immediately prior to the Executive's termination, or (y) if the termination shall have been effected pursuant to Paragraph 4(b)(ii), the Executive's annual base salary at the rate in effect immediately prior to the reduction described in such Paragraph 4(b)(ii) ("Base Salary"), and (B) annual incentive compensation payments (individually, an "Incentive Payment") in an amount determined by multiplying the Executive's annual Base Salary by the average of the percentages calculated by dividing the incentive compensation payment paid or committed to be paid to the Executive in each of the three calendar years (or such fewer calendar years as to which the Executive received or had a commitment to receive incentive compensation payments) immediately preceding the Executive's termination, by the Executive's Base Salary in each of such calendar years. (ii) The first Incentive Payment following termination of employment shall be made no later than one year from the date of the most recent payment to the Executive of incentive compensation preceding the Executive's termination or, if no such payment was made during the twelve-month period preceding such termination, on the date of such termination; and payments shall be made each year thereafter on the same calendar date until the expiration of the Term; provided, however, that if the Term expires on a date other than December 31 of any calendar year, payment of the Incentive Payment attributable to such partial calendar year shall be made on the date of expiration of the Term, and the amount of such Incentive Payment due to the Executive for such partial calendar year shall be prorated by multiplying the full amount of an annual Incentive Payment by a fraction, the numerator of which shall be the number of days from and including January 1 of the calendar year in which the Term expires through and including the date on which the expires, and the denominator of which shall be 365. 4 (iii) Compensation (including base compensation and incentive or bonus compensation) received by the Executive from a subsequent employer following the termination of the Executive's employment as provided in Section 4 above shall not reduce the amount of any compensation that the Executive is entitled to receive under this Section 5. (b) Welfare Benefit Plans. During the Term, the Company will maintain in full force and effect for the continued benefit of the Executive each employee welfare benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) in which the Executive was entitled to participate immediately prior to the date of the Executive's termination, unless an essentially equivalent and no less favorable benefit is provided by a subsequent employer at no additional cost to the Executive. If the terms of any welfare benefit plan of the Company do not permit continued participation by the Executive, then the Company (at its expense) will arrange to provide to the Executive a benefit substantially similar to and no less favorable than the benefit the Executive was entitled to receive under such plan at the end of the period of coverage. (c) Retirement Benefits. During the Term, the Company (i) will include or cause to be included the base salary received by the Executive in determining "Average Salary" and (ii) will treat the Executive for all purposes as an employee under all of the Company's retirement plans in which, the Executive was a participant at the time of the commencement of the Term or under which the Executive would become eligible during the Term (hereinafter referred to collectively as the "Plan"). Benefits due to the Executive under the Plan shall be computed as if the Executive had continued to be an employee of the Company for the entire Term receiving Average Salary until expiration of the Term. If under the terms of the Plan such continued coverage is not permitted, the Company will pay to the Executive, or the Executive's personal representative or the executor or administrator of the Executive's estate in the case of survivor benefits, a supplemental benefit in an amount which, when added to the benefits that the Executive is entitled to receive under the Plan, shall equal the amount that the Executive (or the Executive's personal representative or executor or administrator of the Executive's estate) would have received under the Plan had the Executive remained an employee of the Company during the Term. The Company shall fund its obligation to pay supplemental benefits hereunder through purchase of an annuity contract or otherwise; provided, however, that the Company shall be the sole legal and beneficial owner of any such funding mechanism and neither the Executive nor anyone else claiming under, by or through the Executive shall have any right, title or interest therein. The obligations of the Company contained in the second, third and fourth sentences of this Section 5(c) shall survive the expiration of the Term. (d) Plan Changes. The Company may, in its sole discretion, change, replace or eliminate any plan or policy described in Sections 5(b) or 5(c) hereof at any time, but shall not do so in a manner which would prevent the Executive from receiving any benefit which the Executive would otherwise have been entitled to receive either at the beginning of the Term or upon termination of the Executive's employment thereafter. (e) No Amendment to Disability Provisions of the Plan. Nothing herein shall be construed to amend any provision of the Plan applicable to disability of the Executive as defined in the Plan. 6. Indemnification. The Company shall pay all costs and expenses (including legal fees and expenses), if any, incurred by Executive as a result of any claim, action or proceeding arising out of, or challenging the validity, advisability or enforceability of, this Agreement or any other agreement between Executive and the Company, or any provision hereof or thereof. In addition, if any excise tax imposed under Internal Revenue Code Section 4999 or any successor provision, as amended after the date hereof, is provoked by any amount paid or payable to or for the benefit of the Executive under this Agreement or any other agreement between Executive and the Company, the Company shall indemnify the Executive and hold the Executive harmless against all claims, losses, damages, penalties, expenses and excise taxes. 7. Benefits Upon Death. In the event of the death of the Executive following the termination of the Executive's employment but prior to the expiration of the Term, for the balance of the Term the Company will pay all amounts required under Section 5 to the Executive's personal representative or the executor or administrator of the Executive's estate. 5 8. Conditions to the Obligations of the Company. The Company shall have no obligations to provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof if any of the following events shall occur: (a) The Company shall terminate the Executive's employment for "cause", which shall mean action by the Executive involving willful malfeasance or failure to act by the Executive involving willful nonfeasance, tending to have a material adverse effect on the Company. (b) The Executive shall not, promptly after termination of the Executive's employment and upon receiving a written request to do so, resign as a director and/or officer of each subsidiary and affiliate of the Company of which the Executive is then serving as a director and/or officer. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10. Amendment. This Agreement may not be amended except by written agreement of both the Company and the Executive. 11. Binding, Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and on the Executive and the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees, legatees, and trustees, provided, however, the Executive may not assign, alienate or otherwise encumber any rights, duties, or amounts which the Executive may be entitled to receive under this Agreement. 12. Notices. Any notice or filing required or permitted to be given to the Company shall be sufficient if in writing and hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to the principal office of the Company, directed to the attention of the Chairman of the Board. Any notice to the Executive must be in writing and shall be effective when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the Executive or the Executive's personal representatives at the Executive's last known address. 13. Severability. In the event any provision of this Agreement is held invalid, void or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Agreement. 14. Captions. The captions to the articles, sections, and paragraphs of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 15. Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. URANIUM RESOURCES, INC. /s/ Leland O. Erdahl ---------------------------------------- Chairman of the Compensation Committee EXECUTIVE: /s/ Thomas H. Ehrlich ---------------------------------------- Name: Thomas H. Ehrlich Title: Vice President, Secretary, Treasurer and Chief Financial Officer EX-10.30 10 COMPENSATION AGMT DATED JUNE 2, 1997 1 EXHIBIT 10.30 2 URANIUM RESOURCES, INC. COMPENSATION AGREEMENT (Pelizza) This Compensation Agreement (this "Agreement") made and entered into June 2, 1997 by and between Uranium Resources, Inc., a Delaware corporation (the "Company") and Mark S. Pelizza, ("Executive"). R E C I T A L S: A. The Company's Board of Directors (the "Board") acknowledges the Executive's contributions to the success of the Company have been, and will continue to be substantial. As a publicly-held corporation, the Board recognizes that there exists a possibility of change in control of the Company. The Board also recognizes that the possibility of such a change in control may contribute to uncertainty on the part of senior management of the Company and may result in the departure or distraction of senior management from operating responsibilities. B. Further, the Board recognizes that a significant concern of senior managers is providing for their post-retirement years. This concern likewise may result in the departure or distraction of senior management. C. The Board recognizes that outstanding management of the Company is essential to advancing the best interests of the Company and its shareholders. The Board believes that the objectives of securing and retaining outstanding management will be achieved if the Company's key management employees are given assurances of employment and post-employment security, so that they will not be distracted by personal uncertainties and risks. D. The Compensation Committee (the "Committee") of the Board has recommended, and the Board has approved, entering into compensation agreements with certain of the Company's key management executives in order to achieve the foregoing objectives. The Company and the Executive enter into this Agreement to induce the Executive to remain an employee of the Company and to continue to devote full energy to the Company's affairs. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Term. The term of this Agreement (the "Term") shall commence upon a Change in Control (as hereinafter defined) and continue until the date that is twenty four (24) months after the date of such Change in Control. 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any of the following: (a) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the then outstanding securities of the Company; or (b) a change in the composition of a majority of the Board (after the date hereof) within twelve months after any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the then outstanding securities of the Company. 3. Termination of Employment Before Commencement of Term. This Agreement shall not in any way confer upon the Executive any rights with respect to the continuation of employment by the Company prior to commencement of the Term or interfere in any way with the right of the Company at any time to terminate such employment or adjust the compensation of the Executive prior to commencement of the Term. 3 4. Termination of Employment During Term. Except as provided in Section 8 hereof, the Company will provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof in the event that the Executive's employment by the Company is terminated at any time during the Term or in connection with a Change in Control either: (a) by the Company; or (b) by the Executive following the occurrence of any of the following events without the Executive's consent: (i) The Executive is assigned substantial duties or responsibilities that are materially inconsistent with the Executive's position, duties, responsibilities or status during the twelve-month period immediately prior to the commencement of the Term; (ii) The Executive's base compensation is reduced or the Executive experiences in any year a reduction in the ratio of the Executive's incentive compensation payment to the Executive's base compensation in such year which is greater than the average reduction in the ratio of incentive compensation payments to base compensation in such year experienced by all of the Company's other salaried officers; or (iii) The Executive is transferred to a location (other than Albuquerque, New Mexico) which is an unreasonable distance from the Executive's current principal work location. 5. Rights and Benefits upon Termination. (a) Base Salary and Incentive Compensation. (i) After termination of the Executive's employment as provided in Section 4 above and until the expiration of the Term, the Company will pay to the Executive, as severance compensation and in lieu of any separation payments otherwise provided upon termination of employment under any other severance pay or similar plan or policy of the Company: (A) monthly payments equal to one-twelfth of the greater of (x) the Executive's annual base salary at the rate in effect immediately prior to the Executive's termination, or (y) if the termination shall have been effected pursuant to Paragraph 4(b)(ii), the Executive's annual base salary at the rate in effect immediately prior to the reduction described in such Paragraph 4(b)(ii) ("Base Salary"), and (B) annual incentive compensation payments (individually, an "Incentive Payment") in an amount determined by multiplying the Executive's annual Base Salary by the average of the percentages calculated by dividing the incentive compensation payment paid or committed to be paid to the Executive in each of the three calendar years (or such fewer calendar years as to which the Executive received or had a commitment to receive incentive compensation payments) immediately preceding the Executive's termination, by the Executive's Base Salary in each of such calendar years. (ii) The first Incentive Payment following termination of employment shall be made no later than one year from the date of the most recent payment to the Executive of incentive compensation preceding the Executive's termination or, if no such payment was made during the twelve-month period preceding such termination, on the date of such termination; and payments shall be made each year thereafter on the same calendar date until the expiration of the Term; provided, however, that if the Term expires on a date other than December 31 of any calendar year, payment of the Incentive Payment attributable to such partial calendar year shall be made on the date of expiration of the Term, and the amount of such Incentive Payment due to the Executive for such partial calendar year shall be prorated by multiplying the full amount of an annual Incentive Payment by a fraction, the numerator of which shall be the number of days from and including January 1 of the calendar year in which the Term expires through and including the date on which the expires, and the denominator of which shall be 365. 4 (iii) Compensation (including base compensation and incentive or bonus compensation) received by the Executive from a subsequent employer following the termination of the Executive's employment as provided in Section 4 above shall not reduce the amount of any compensation that the Executive is entitled to receive under this Section 5. (b) Welfare Benefit Plans. During the Term, the Company will maintain in full force and effect for the continued benefit of the Executive each employee welfare benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) in which the Executive was entitled to participate immediately prior to the date of the Executive's termination, unless an essentially equivalent and no less favorable benefit is provided by a subsequent employer at no additional cost to the Executive. If the terms of any welfare benefit plan of the Company do not permit continued participation by the Executive, then the Company (at its expense) will arrange to provide to the Executive a benefit substantially similar to and no less favorable than the benefit the Executive was entitled to receive under such plan at the end of the period of coverage. (c) Retirement Benefits. During the Term, the Company (i) will include or cause to be included the base salary received by the Executive in determining "Average Salary" and (ii) will treat the Executive for all purposes as an employee under all of the Company's retirement plans in which, the Executive was a participant at the time of the commencement of the Term or under which the Executive would become eligible during the Term (hereinafter referred to collectively as the "Plan"). Benefits due to the Executive under the Plan shall be computed as if the Executive had continued to be an employee of the Company for the entire Term receiving Average Salary until expiration of the Term. If under the terms of the Plan such continued coverage is not permitted, the Company will pay to the Executive, or the Executive's personal representative or the executor or administrator of the Executive's estate in the case of survivor benefits, a supplemental benefit in an amount which, when added to the benefits that the Executive is entitled to receive under the Plan, shall equal the amount that the Executive (or the Executive's personal representative or executor or administrator of the Executive's estate) would have received under the Plan had the Executive remained an employee of the Company during the Term. The Company shall fund its obligation to pay supplemental benefits hereunder through purchase of an annuity contract or otherwise; provided, however, that the Company shall be the sole legal and beneficial owner of any such funding mechanism and neither the Executive nor anyone else claiming under, by or through the Executive shall have any right, title or interest therein. The obligations of the Company contained in the second, third and fourth sentences of this Section 5(c) shall survive the expiration of the Term. (d) Plan Changes. The Company may, in its sole discretion, change, replace or eliminate any plan or policy described in Sections 5(b) or 5(c) hereof at any time, but shall not do so in a manner which would prevent the Executive from receiving any benefit which the Executive would otherwise have been entitled to receive either at the beginning of the Term or upon termination of the Executive's employment thereafter. (e) No Amendment to Disability Provisions of the Plan. Nothing herein shall be construed to amend any provision of the Plan applicable to disability of the Executive as defined in the Plan. 6. Indemnification. The Company shall pay all costs and expenses (including legal fees and expenses), if any, incurred by Executive as a result of any claim, action or proceeding arising out of, or challenging the validity, advisability or enforceability of, this Agreement or any other agreement between Executive and the Company, or any provision hereof or thereof. In addition, if any excise tax imposed under Internal Revenue Code Section 4999 or any successor provision, as amended after the date hereof, is provoked by any amount paid or payable to or for the benefit of the Executive under this Agreement or any other agreement between Executive and the Company, the Company shall indemnify the Executive and hold the Executive harmless against all claims, losses, damages, penalties, expenses and excise taxes. 7. Benefits Upon Death. In the event of the death of the Executive following the termination of the Executive's employment but prior to the expiration of the Term, for the balance of the Term the Company will pay all amounts required under Section 5 to the Executive's personal representative or the executor or administrator of the Executive's estate. 5 8. Conditions to the Obligations of the Company. The Company shall have no obligations to provide or cause to be provided to the Executive the rights and benefits described in Section 5 hereof if any of the following events shall occur: (a) The Company shall terminate the Executive's employment for "cause", which shall mean action by the Executive involving willful malfeasance or failure to act by the Executive involving willful nonfeasance, tending to have a material adverse effect on the Company. (b) The Executive shall not, promptly after termination of the Executive's employment and upon receiving a written request to do so, resign as a director and/or officer of each subsidiary and affiliate of the Company of which the Executive is then serving as a director and/or officer. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10. Amendment. This Agreement may not be amended except by written agreement of both the Company and the Executive. 11. Binding, Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and on the Executive and the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees, legatees, and trustees, provided, however, the Executive may not assign, alienate or otherwise encumber any rights, duties, or amounts which the Executive may be entitled to receive under this Agreement. 12. Notices. Any notice or filing required or permitted to be given to the Company shall be sufficient if in writing and hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to the principal office of the Company, directed to the attention of the Chairman of the Board. Any notice to the Executive must be in writing and shall be effective when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the Executive or the Executive's personal representatives at the Executive's last known address. 13. Severability. In the event any provision of this Agreement is held invalid, void or unenforceable, the same shall not affect in any respect whatsoever the validity of any other provision of this Agreement. 14. Captions. The captions to the articles, sections, and paragraphs of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 15. Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. URANIUM RESOURCES, INC. /s/ Leland O. Erdahl ---------------------------------------- Chairman of the Compensation Committee EXECUTIVE: /s/ Mark S. Pelizza ---------------------------------------- Name: Mark S. Pelizza Title: Vice President-Health Safety and Environmental Affairs EX-10.31 11 NOTE & WARRANT EXCHANGE AGMT DATED MARCH 23, 1998 1 EXHIBIT 10.31 2 NOTE AND WARRANT EXCHANGE AGREEMENT This Note and Warrant Exchange Agreement (the "Exchange Agreement") is made between URANIUM RESOURCES, INC., a Delaware corporation (the "Company") and LINDNER INVESTMENTS, a Massachusetts business trust, on behalf of its series known as "Lindner Dividend Fund" and "Lindner Bulwark Fund" (collectively, the "Purchaser"), as of March 23, 1998. RECITALS: A. Purchaser, through its various separate investment portfolios, owns 2,219,525 shares of Common Stock of the Company, par value $0.001 per share. Purchaser also owns warrants (the "Old Warrants") to acquire 1,000,000 additional shares of Common Stock of the Company at the price of $4.00 per share of Common Stock. The Old Warrants expire at 5:00 p.m., Dallas, Texas, time on May 31, 1998. B. Purchaser, through the two of its investment portfolios identified above, holds the Company's 6.5% Secured Convertible Notes Due May 31, 1998, which have an aggregate principal amount owing thereunder of $6,000,000 (the "Old Notes"). The Old Notes are convertible into shares of Common Stock of the Company at the conversion price of $4.00 per share of Common Stock. C. The Company has requested Purchaser to extend the maturity date of the Notes and the Purchaser has agreed to do so on the condition that the conversion price for shares of Common Stock of the Company be reduced, the price payable upon exercise of the Old Warrants be reduced and the expiration date of the Old Warrants be extended, all as provided hereafter. Capitalized terms not defined herein shall have the meanings set forth in the Note and Warrant Purchase Agreement, dated May 25, 1995, entered into by and among the Company, the Purchaser and Lindner Dividend Fund, Inc., a Missouri corporation (the "Agreement"). 1. Exchange of Notes and Warrants. The Company has authorized and proposes to issue and sell to the Purchaser two replacement notes (the "Replacement Notes") in exchange for the surrender by the Purchaser of the Old Notes. The Replacement Notes shall be dated their date of issue, shall mature and bear interest and shall have such other terms and conditions as are set forth in Exhibit A attached hereto. The Company has also authorized and proposes to issue and sell to the Purchaser two replacement warrants (the "Replacement Warrants") in exchange for the surrender by the Purchaser of the Old Warrants. The Replacement Warrants shall be dated their date of issue and shall have such other terms and conditions as are set forth in Exhibit B attached hereto. 2. Amendment of Conversion Price. Section 3.1 of the Agreement is hereby amended to read in its entirety as follows: "3.1 Conversion Privilege. A Holder of a Note may convert the unpaid principal balance of the Note into Common Stock of the Company at any time. To determine the number of shares issuable upon conversion of a Note, divide the principal amount to be converted by the conversion price in effect on the conversion date and round the result to the nearest 1/100 of a share. The conversion price shall initially be $3.00 per share of Common Stock. A Holder may convert a portion of a Note. Provisions of this Agreement that apply to conversion of all of a Note also apply to conversion of a portion of it." 3. Reaffirmation of the Agreement. Except as provided above and in the Exhibits hereto, all of the terms and conditions of the Agreement and the covenants and undertaking of the parties, are hereby reaffirmed and confirmed. This Exchange Agreement shall constitute a supplement to the Agreement. 3 4. Counterparts. This Exchange Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The execution and delivery of this Exchange Agreement shall be deemed effective upon receipt by each party hereto of a facsimile copy of this Exchange Agreement executed by the other party hereto. IN WITNESS WHEREOF, the parties have executed this Exchange Agreement. URANIUM RESOURCES, INC. By: ------------------------------ Its: ------------------------------ LINDNER INVESTMENTS, on behalf of its series LINDNER DIVIDEND FUND and LINDNER BULWARK FUND By: ------------------------------ Its: ------------------------------ 4 EXHIBIT A URANIUM RESOURCES, INC. 6.5% SECURED CONVERTIBLE NOTE $__,000,000.00 March __, 1998 Note No. R-_____ FOR VALUE RECEIVED, the undersigned URANIUM RESOURCES, INC., a Delaware corporation (the "Obligor" or "Uranium Resources"), hereby promises to pay to ____________________ or its registered assigns (the "Purchaser") on May 31, 2000, the principal sum of ____________________________, and to pay interest on the unpaid principal balance hereof from the date hereof at a rate of 6.5% per annum, payable quarterly in arrears. This Note and any interest thereon may not be transferred only as provided in the Note and Warrant Purchase Agreement dated May 25, 1995, between Obligor and Purchaser, as supplemented by the Note and Warrant Exchange Agreement, dated March 23, 1998 (the "Note and Warrant Purchase Agreement"). This Note is issued pursuant to the Note and Warrant Purchase Agreement and this Note and the holder hereof is entitled, equally and ratably with the holders of all other Notes outstanding under the Note and Warrant Purchase Agreement, to all of the benefits provided for thereby, including, but not limited to the security granted to the Purchaser therein, and the benefits under the Guaranty executed by the Mortgaging Subsidiary in connection therewith, and shall be bound by all of the provisions set forth therein, to which Note Purchase and Warrant Agreement reference is hereby made for a statement thereof. This Note is supported by the Guaranty of the Mortgaging Subsidiary, which Guaranty will be secured by a lien and security interest in and upon the Mortgaging Subsidiary's interest in the Collateral and the Texas Real Property Subject to and upon compliance with the provisions of the Note and Warrant Purchase Agreement, the Holder of this Note is entitled, at its option, at any time, to convert this Note into fully paid and non-assessable shares of Common Stock of the Obligor at the initial Conversion Price of $3.00 per share, subject to such adjustment or adjustments, if any, of such Conversion Price and the Common Stock issuable upon conversion, as may be required by the Note and Warrant Purchase Agreement, upon surrender of this Note, duly endorsed or assigned to the Obligor or in blank, to the Obligor, with the conversion notice attached hereto, or accompanied by a separate written notice substantially in the form of such conversion notice, duly executed by the Holder and stating that the Holder hereof elects to convert this Note, or if less than the entire principal amount hereof is to be converted, the portion hereof to be converted, all in accordance with the provisions of the Note and Warrant Purchase Agreement. Except as otherwise provided in the Note and Warrant Purchase Agreement, no payment or adjustment is to be made on conversion for interest accrued hereon or for dividends issued on securities issued on conversion. No fractional shares will be issued on conversion, but instead of any fractional interest, the Obligor shall pay a cash adjustment as provided in the Note and Warrant Purchase Agreement. A-1 5 In the event any action is taken to collect or enforce the indebtedness evidenced by this Note (the "Indebtedness") or any part thereof, the Obligor and each endorser hereof agrees to pay, in addition to the principal and interest due and payable hereon, all costs of collecting this Note, including reasonable attorneys' fees and expenses. These costs shall include any expenses incurred by the Purchaser in any bankruptcy, reorganization, or other insolvency proceeding. Acceptance by the Purchaser of any payment in an amount less than the amount then due and owing shall be deemed an acceptance on account only, and the failure to pay the entire amount then due and owing shall cause the Purchaser and endorsers to remain in default. The liability of the Obligor and any endorsers hereof, shall be joint and several, absolute and unconditional, without regard to the liability of any other party hereunder or under any other document or instrument executed in connection with this Note. No delay or omission of any holder in exercising any right or rights, shall operate as a waiver of such right or any other rights. Waiver on one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. The liability of the Obligor under this Note (and the liability of any endorsers and/or Guarantors of this Note) shall not be discharged, diminished or in any way impaired by: (a) the release, impairment, discharge, substitution, exchange, modification of or failure to obtain foreclose or realize on any guaranty or any security granted Purchaser by any party for the Indebtedness; (b) any waiver by Purchaser or failure to enforce or exercise rights under any of the terms, covenants or conditions of this Note or any guaranty; (c) the granting of any renewal, indulgence, extension of time to Obligor, or any other obligors of the Indebtedness; or (d) the addition or release of any person or entity primarily or secondarily liable for the Indebtedness. In no event shall the interest rate charged or received hereunder at any time exceed the maximum interest rate permitted under applicable law. Payments of interest received by Purchaser hereunder which would otherwise cause the interest rate hereunder to exceed such maximum interest rate shall, to the extent of such excess, be deemed to be (and deemed to have been contracted as being) prepayments of principal and applied as such. Under certain circumstances, as specified in the Note and Warrant Purchase Agreement, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Note and Warrant Purchase Agreement. This Note shall be binding upon the undersigned and its successors and assigns and shall inure to the benefit of Purchaser, its successors and assigns. Every person and entity at any time liable for the payment of this Note hereby waives demand, presentment, protest, notice of protest, note of nonpayment due and all other requirements otherwise necessary to hold them immediately liable for payment hereunder. A-2 6 This Note and the Note and Warrant Purchase Agreement are governed by and shall be construed and enforced in accordance with Missouri law. URANIUM RESOURCES, INC. By: ------------------------------ Its: ------------------------------ THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS NOTE MAY NOT BE PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE 1933 ACT PROVIDED, HOWEVER, THAT THIS NOTE MAY BE PLEDGED OR OTHERWISE TRANSFERRED PURSUANT TO AN EXEMPTION FROM REGISTRATION, INCLUDING, BUT NOT LIMITED TO, THOSE PROVIDED IN RULE 144, 144A OR 145 OR REGULATION S UNDER THE 1933 ACT. TRANSFER OF THIS NOTE IS ALSO SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS SET FORTH IN THAT CERTAIN NOTE AND WARRANT PURCHASE AGREEMENT DATED MAY 25, 1995, AMONG URANIUM RESOURCES, INC., LINDNER INVESTMENTS AND LINDNER FUND, INC., A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICE OF URANIUM RESOURCES, INC., AND WILL BE MADE AVAILABLE BY URANIUM RESOURCES, INC. UPON WRITTEN REQUEST. ASSIGNMENT I/we assign and transfer $_______________ principal amount of this Note No. R-___, to ____________________________________________________________________ _________________________________________ ___________________________ (Print or type name, address and zip code of assignee) Insert social security or other identifying number of assignee:_____________________ and irrevocably appoint _____________________________ as my/our agent and attorney-in-fact to transfer this Note, or the portion hereof which has been so assigned, on the books of the Company. The agent may substitute another to act for him or her. Dated: Signed: --------------- ------------------------------------ Signature Guaranteed By: [Name of Noteholder--Sign exactly as name appears on the first page of this Note] By: - ------------------------------ ------------------------------ Its: ----------------------------- A-3 7 NOTICE OF CONVERSION To Uranium Resources, Inc.: The undersigned owner of this Secured Convertible Note hereby irrevocably exercises the option to convert $_____________ principal amount of this Secured Convertible Note, into shares of Common Stock of Uranium Resources, Inc., in accordance with its terms, and directs that the shares of Common Stock issuable and deliverable upon conversion be issued and delivered to the undersigned unless a different name has been indicated below. If shares of Common Stock are to be registered in the name of a person other than the undersigned, the undersigned will pay any transfer taxes payable with respect thereto. Dated: ----------------------- Signed: ---------------------------------- [Name of Noteholder] By: ------------------------------ Its: ------------------------------ Fill in for registration of shares of Common Stock only if otherwise than in name and address of the above named Noteholder: - ------------------------------ ------------------------------ (Name) (Address) - ------------------------------ ------------------------------ (City and State) (Tax Identification Number) (Please print name and address including zip code number) A-4 8 EXHIBIT B THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT AND LAWS OR THE RULES AND REGULATIONS THEREUNDER VOID AFTER 5:00 P.M., DALLAS, TEXAS TIME, ON MAY 31, 2000 URANIUM RESOURCES, INC. URIW- _________ WARRANT TO PURCHASE COMMON STOCK This certifies that, FOR VALUE RECEIVED, ___________________________, or its registered assigns ("Holder"), is entitled, subject to the terms of this Warrant, to purchase from URANIUM RESOURCES, INC., a Delaware corporation (the "Company"), at any time after the date of issuance hereof and prior to 5:00 p.m., Dallas, Texas time, on May 31, 2000 (the "Warrant Expiration Date"), up to _________ fully paid and nonassessable shares of the Common Stock, $0.001 par value, of the Company (the "Common Stock"), at an initial purchase price of $3.00 per share, payable in lawful money of the United States. This Warrant may be exercised in whole or in part by presentation hereof with the Notice of Exercise contained herein duly executed and with simultaneous payment of the applicable aggregate Purchase Price (subject to adjustment) at the office of the Company in Dallas, Texas. Payment of such Purchase Price shall be made, at the option of the Holder hereof, by certified check or bank draft payable in United States currency. This Warrant is one of a duly authorized issue of common stock purchase warrants issued under and in accordance with that certain Note and Warrant Purchase Agreement), dated as of May 25, 1995, by and among Uranium Resources, Inc., Lindner Investments (on behalf of its Lindner Bulwark Fund series), and Lindner Dividend Fund, Inc., as supplemented by that certain Note and Warrant Exchange Agreement, dated March 23, 1998 (the "Purchase Agreement"), and is subject to the terms and provisions contained in the Purchase Agreement, to all of which the Holder hereof, by acceptance hereof, hereby consents. A copy of the Purchase Agreement may be obtained for inspection upon written request to the Company by a Holder of this Warrant. This Warrant does not entitle any Holder to any rights of a shareholder of the Company. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for a share of Common Stock may be adjusted from time to time as set forth in the Purchase Agreement. The shares of Common Stock deliverable upon such exercise, as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Stock" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Purchase Price". As soon as practicable after any exercise of this Warrant and payment of the sum payable upon such exercise, and in any event within 10 days thereafter, the Company, at its expense (including the payment by it of any applicable taxes), will cause to be issued in the name of and delivered to the holder hereof, or in the name of such other person as such holder may direct, a certificate or certificates for the number of fully paid and nonassessable shares of Warrant Stock, or other securities or property to which such holder shall be entitled upon such exercise, plus, in lieu of any fractional share of Warrant Stock to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the Market Price (as defined in the Purchase Agreement). Issuance and delivery of Warrant Stock deliverable on the due exercise of this Warrant may be postponed by the Company and its transfer agent during any period, not B-1 9 exceeding thirty (30) days, for which the transfer books of the Company for the Common Stock are closed between (1) the record date set by the Board of Directors for the determination of shareholders entitled to vote at or to receive notice of any shareholders meeting, or entitled to receive payment of any dividends or to any allotment of rights or to exercise rights in respect of any change, conversion or exchange of capital stock, and (2) the date of such meeting of shareholders, the date for the payment of such dividends, the date for such allotment of rights, or the date when any such change or conversion or exchange of capital stock shall go into effect, as the case may be. Upon surrender for exchange of this Warrant (in negotiable form, if not surrendered by the holder named on the face hereof) to the Company, the Company, at its expense, will issue and deliver new Warrants of like tenor, calling in the aggregate for the same amount of Warrant Stock, in the denomination or denominations requested, to or on the order of such holder and in the name of such holder as such holder may direct. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder of this Warrant as absolute owner for all purposes without being affected by any notice to the contrary. Transfer of this Warrant is restricted as provided in the Purchase Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by the manual signatures of its Chairman or President or one of its Vice Presidents, thereunto duly authorized, and its corporate seal to be impressed or imprinted hereon, attested by the manual signature of its Secretary or an Assistant Secretary. Dated: , 1998 URANIUM RESOURCES, INC. --------------- By: --------------------------- ATTEST: Its: ------------------------- By: ------------------------------ Secretary [SEAL] B-2 10 ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell, assigns and transfers the within Warrant, and irrevocably appoints __________________ as agent and attorney-in-fact to transfer such Warrant on the books of the Company, with full power of substitution in the premises, to the following assignee(s): - ------------------------------ ------------------------------ Name Address - --------------- SSN or EIN ---------------------------- [Name of Warrant holder] By: ------------------------------ Its: ------------------------------ B-3 11 NOTICE OF EXERCISE The undersigned hereby exercises the right to purchase ________ shares of Common Stock covered by this Warrant according to the conditions thereof and herewith makes payment of the Purchase Price of such shares in full. Date: ------------------- --------------------------------- [Name of Warrant holder] By: ----------------------------- Its: ----------------------------- The Company is requested to issue certificates for the Warrant Shares acquired upon exercise of this Warrant as follows: - ------------------------------ ------------------------------ Name Address - --------------- SSN or EIN B-4 EX-10.32 12 6.5% SECURED CONVERTIBLE NOTE FOR $1,500,000 1 EXHIBIT 10.32 2 URANIUM RESOURCES, INC. 6.5% SECURED CONVERTIBLE NOTE $1,500,000.00 March 23, 1998 Note No.____ FOR VALUE RECEIVED, the undersigned URANIUM RESOURCES, INC., a Delaware corporation (the "Obligor" or "Uranium Resources"), hereby promises to pay to LINDNER BULWARK FUND, a series of LINDNER INVESTMENTS, a Massachusetts business trust, or its registered assigns (the "Purchaser") on May 31, 2000, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND and 00/100 Dollars ($1,500,000.00), and to pay interest on the unpaid principal balance hereof from the date hereof at a rate of 6.5% per annum, payable quarterly in arrears. This Note and any interest thereon may not be transferred only as provided in the Note and Warrant Purchase Agreement dated May 25, 1995, between Obligor and Purchaser, as supplemented by the Note and Warrant Exchange Agreement, dated March 23, 1998 (the "Note and Warrant Purchase Agreement"). This Note is issued pursuant to the Note and Warrant Purchase Agreement and this Note and the holder hereof is entitled, equally and ratably with the holders of all other Notes outstanding under the Note and Warrant Purchase Agreement, to all of the benefits provided for thereby, including, but not limited to the security granted to the Purchaser therein, and the benefits under the Guaranty executed by the Mortgaging Subsidiary in connection therewith, and shall be bound by all of the provisions set forth therein, to which Note Purchase and Warrant Agreement reference is hereby made for a statement thereof. This Note is supported by the Guaranty of the Mortgaging Subsidiary, which Guaranty will be secured by a lien and security interest in and upon the Mortgaging Subsidiary's interest in the Collateral and the Texas Real Property Subject to and upon compliance with the provisions of the Note and Warrant Purchase Agreement, the Holder of this Note is entitled, at its option, at any time, to convert this Note into fully paid and non-assessable shares of Common Stock of the Obligor at the initial Conversion Price of $3.00 per share, subject to such adjustment or adjustments, if any, of such Conversion Price and the Common Stock issuable upon conversion, as may be required by the Note and Warrant Purchase Agreement, upon surrender of this Note, duly endorsed or assigned to the Obligor or in blank, to the Obligor, with the conversion notice attached hereto, or accompanied by a separate written notice substantially in the form of such conversion notice, duly executed by the Holder and stating that the Holder hereof elects to convert this Note, or if less than the entire principal amount hereof is to be converted, the portion hereof to be converted, all in accordance with the provisions of the Note and Warrant Purchase Agreement. Except as otherwise provided in the Note and Warrant Purchase Agreement, no payment or adjustment is to be made on conversion for interest accrued hereon or for dividends issued on securities issued on conversion. No fractional shares will be issued on conversion, but instead of any fractional interest, the Obligor shall pay a cash adjustment as provided in the Note and Warrant Purchase Agreement. In the event any action is taken to collect or enforce the indebtedness evidenced by this Note (the "Indebtedness") or any part thereof, the Obligor and each endorser hereof agrees to pay, in addition to the principal and interest due and payable hereon, all costs of collecting this Note, including reasonable attorneys' fees and expenses. These costs shall include any expenses incurred by the Purchaser in any bankruptcy, reorganization, or other insolvency proceeding. Acceptance by the Purchaser of any payment in an amount less than the amount then due and owing shall be deemed an acceptance on account only, and the failure to pay the entire amount then due and owing shall cause the Purchaser and endorsers to remain in default. 3 The liability of the Obligor and any endorsers hereof, shall be joint and several, absolute and unconditional, without regard to the liability of any other party hereunder or under any other document or instrument executed in connection with this Note. No delay or omission of any holder in exercising any right or rights, shall operate as a waiver of such right or any other rights. Waiver on one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. The liability of the Obligor under this Note (and the liability of any endorsers and/or Guarantors of this Note) shall not be discharged, diminished or in any way impaired by: (a) the release, impairment, discharge, substitution, exchange, modification of or failure to obtain foreclose or realize on any guaranty or any security granted Purchaser by any party for the Indebtedness; (b) any waiver by Purchaser or failure to enforce or exercise rights under any of the terms, covenants or conditions of this Note or any guaranty; (c) the granting of any renewal, indulgence, extension of time to Obligor, or any other obligors of the Indebtedness; or (d) the addition or release of any person or entity primarily or secondarily liable for the Indebtedness. In no event shall the interest rate charged or received hereunder at any time exceed the maximum interest rate permitted under applicable law. Payments of interest received by Purchaser hereunder which would otherwise cause the interest rate hereunder to exceed such maximum interest rate shall, to the extent of such excess, be deemed to be (and deemed to have been contracted as being) prepayments of principal and applied as such. Under certain circumstances, as specified in the Note and Warrant Purchase Agreement, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Note and Warrant Purchase Agreement. This Note shall be binding upon the undersigned and its successors and assigns and shall inure to the benefit of Purchaser, its successors and assigns. Every person and entity at any time liable for the payment of this Note hereby waives demand, presentment, protest, notice of protest, note of nonpayment due and all other requirements otherwise necessary to hold them immediately liable for payment hereunder. 2 4 This Note and the Note and Warrant Purchase Agreement are governed by and shall be construed and enforced in accordance with Missouri law. URANIUM RESOURCES, INC. By: /s/ Paul K. Willmott ------------------------------- Its: President ------------------------------ THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS NOTE MAY NOT BE PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE 1933 ACT PROVIDED, HOWEVER, THAT THIS NOTE MAY BE PLEDGED OR OTHERWISE TRANSFERRED PURSUANT TO AN EXEMPTION FROM REGISTRATION, INCLUDING, BUT NOT LIMITED TO, THOSE PROVIDED IN RULE 144, 144A OR 145 OR REGULATIONS UNDER THE 1933 ACT. TRANSFER OF THIS NOTE IS ALSO SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS SET FORTH IN THAT CERTAIN NOTE AND WARRANT PURCHASE AGREEMENT DATED MAY 25, 1995, AMONG URANIUM RESOURCES, INC., LINDNER INVESTMENTS AND LINDNER FUND, INC., A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICE OF URANIUM RESOURCES, INC., AND WILL BE MADE AVAILABLE BY URANIUM RESOURCES, INC. UPON WRITTEN REQUEST. ASSIGNMENT I/we assign and transfer $________ principal amount of this Note No. R-____, to ________________________________________________________________________________ (Print or type name, address and zip code of assignee) Insert social security or other identifying number of assignee:______________ and irrevocably appoint ______________________ as my/our agent and attorney-in- fact to transfer this Note, or the portion hereof which has been so assigned, on the books of the Company. The agent may substitute another to act for him or her. Dated: Signed: ----------------------------- --------------------------- Signature Guaranteed By: [Name of Noteholder--Sign exactly as name appears on the first page of this Note] By: - ----------------------------------- ------------------------------- Its: ------------------------------ 3 5 NOTICE OF CONVERSION To Uranium Resources, Inc.: The undersigned owner of this Secured Convertible Note hereby irrevocably exercises the option to convert $_____________ principal amount of this Secured Convertible Note, into shares of Common Stock of Uranium Resources, Inc., in accordance with its terms, and directs that the shares of Common Stock issuable and deliverable upon conversion be issued and delivered to the undersigned unless a different name has been indicated below. If shares of Common Stock are to be registered in the name of a person other than the undersigned, the undersigned will pay any transfer taxes payable with respect thereto. Dated: Signed: ----------------------------- --------------------------- [Name of Noteholder] By: ------------------------------- Its: ------------------------------ Fill in for registration of shares of Common Stock only if otherwise than in name and address of the above named Noteholder: - ----------------------------------- ----------------------------------- (Name) (Address) - ----------------------------------- ----------------------------------- (City and State) (Tax Identification Number) (Please print name and address including zip code number) 4 EX-10.33 13 6.5% SECURED CONVERTIBLE NOTE FOR $4,500,000 1 EXHIBIT 10.33 2 URANIUM RESOURCES, INC. 6.5% SECURED CONVERTIBLE NOTE $4,500,000.00 March 23, 1998 Note No.____ FOR VALUE RECEIVED, the undersigned URANIUM RESOURCES, INC., a Delaware corporation (the "Obligor" or "Uranium Resources"), hereby promises to pay to LINDNER BULWARK FUND, a series of LINDNER INVESTMENTS, a Massachusetts business trust, or its registered assigns (the "Purchaser") on May 31, 2000, the principal sum of FOUR MILLION FIVE HUNDRED THOUSAND and 00/100 Dollars ($4,500,000.00), and to pay interest on the unpaid principal balance hereof from the date hereof at a rate of 6.5% per annum, payable quarterly in arrears. This Note and any interest thereon may not be transferred only as provided in the Note and Warrant Purchase Agreement dated May 25, 1995, between Obligor and Purchaser, as supplemented by the Note and Warrant Exchange Agreement, dated March 23, 1998 (the "Note and Warrant Purchase Agreement"). This Note is issued pursuant to the Note and Warrant Purchase Agreement and this Note and the holder hereof is entitled, equally and ratably with the holders of all other Notes outstanding under the Note and Warrant Purchase Agreement, to all of the benefits provided for thereby, including, but not limited to the security granted to the Purchaser therein, and the benefits under the Guaranty executed by the Mortgaging Subsidiary in connection therewith, and shall be bound by all of the provisions set forth therein, to which Note Purchase and Warrant Agreement reference is hereby made for a statement thereof. This Note is supported by the Guaranty of the Mortgaging Subsidiary, which Guaranty will be secured by a lien and security interest in and upon the Mortgaging Subsidiary's interest in the Collateral and the Texas Real Property Subject to and upon compliance with the provisions of the Note and Warrant Purchase Agreement, the Holder of this Note is entitled, at its option, at any time, to convert this Note into fully paid and non-assessable shares of Common Stock of the Obligor at the initial Conversion Price of $3.00 per share, subject to such adjustment or adjustments, if any, of such Conversion Price and the Common Stock issuable upon conversion, as may be required by the Note and Warrant Purchase Agreement, upon surrender of this Note, duly endorsed or assigned to the Obligor or in blank, to the Obligor, with the conversion notice attached hereto, or accompanied by a separate written notice substantially in the form of such conversion notice, duly executed by the Holder and stating that the Holder hereof elects to convert this Note, or if less than the entire principal amount hereof is to be converted, the portion hereof to be converted, all in accordance with the provisions of the Note and Warrant Purchase Agreement. Except as otherwise provided in the Note and Warrant Purchase Agreement, no payment or adjustment is to be made on conversion for interest accrued hereon or for dividends issued on securities issued on conversion. No fractional shares will be issued on conversion, but instead of any fractional interest, the Obligor shall pay a cash adjustment as provided in the Note and Warrant Purchase Agreement. In the event any action is taken to collect or enforce the indebtedness evidenced by this Note (the "Indebtedness") or any part thereof, the Obligor and each endorser hereof agrees to pay, in addition to the principal and interest due and payable hereon, all costs of collecting this Note, including reasonable attorneys' fees and expenses. These costs shall include any expenses incurred by the Purchaser in any bankruptcy, reorganization, or other insolvency proceeding. Acceptance by the Purchaser of any payment in an amount less than the amount then due and owing shall be deemed an acceptance on account only, and the failure to pay the entire amount then due and owing shall cause the Purchaser and endorsers to remain in default. 3 The liability of the Obligor and any endorsers hereof, shall be joint and several, absolute and unconditional, without regard to the liability of any other party hereunder or under any other document or instrument executed in connection with this Note. No delay or omission of any holder in exercising any right or rights, shall operate as a waiver of such right or any other rights. Waiver on one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. The liability of the Obligor under this Note (and the liability of any endorsers and/or Guarantors of this Note) shall not be discharged, diminished or in any way impaired by: (a) the release, impairment, discharge, substitution, exchange, modification of or failure to obtain foreclose or realize on any guaranty or any security granted Purchaser by any party for the Indebtedness; (b) any waiver by Purchaser or failure to enforce or exercise rights under any of the terms, covenants or conditions of this Note or any guaranty; (c) the granting of any renewal, indulgence, extension of time to Obligor, or any other obligors of the Indebtedness; or (d) the addition or release of any person or entity primarily or secondarily liable for the Indebtedness. In no event shall the interest rate charged or received hereunder at any time exceed the maximum interest rate permitted under applicable law. Payments of interest received by Purchaser hereunder which would otherwise cause the interest rate hereunder to exceed such maximum interest rate shall, to the extent of such excess, be deemed to be (and deemed to have been contracted as being) prepayments of principal and applied as such. Under certain circumstances, as specified in the Note and Warrant Purchase Agreement, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Note and Warrant Purchase Agreement. This Note shall be binding upon the undersigned and its successors and assigns and shall inure to the benefit of Purchaser, its successors and assigns. Every person and entity at any time liable for the payment of this Note hereby waives demand, presentment, protest, notice of protest, note of nonpayment due and all other requirements otherwise necessary to hold them immediately liable for payment hereunder. 2 4 This Note and the Note and Warrant Purchase Agreement are governed by and shall be construed and enforced in accordance with Missouri law. URANIUM RESOURCES, INC. By: /s/ Paul K. Willmott ------------------------------- Its: President ------------------------------ THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS NOTE MAY NOT BE PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER THE 1933 ACT PROVIDED, HOWEVER, THAT THIS NOTE MAY BE PLEDGED OR OTHERWISE TRANSFERRED PURSUANT TO AN EXEMPTION FROM REGISTRATION, INCLUDING, BUT NOT LIMITED TO, THOSE PROVIDED IN RULE 144, 144A OR 145 OR REGULATION S UNDER THE 1933 ACT. TRANSFER OF THIS NOTE IS ALSO SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS SET FORTH IN THAT CERTAIN NOTE AND WARRANT PURCHASE AGREEMENT DATED MAY 25, 1995, AMONG URANIUM RESOURCES, INC., LINDNER INVESTMENTS AND LINDNER FUND, INC., A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICE OF URANIUM RESOURCES, INC., AND WILL BE MADE AVAILABLE BY URANIUM RESOURCES, INC. UPON WRITTEN REQUEST. ASSIGNMENT I/we assign and transfer $________ principal amount of this Note No. R-____, to ________________________________________________________________________________ (Print or type name, address and zip code of assignee) Insert social security or other identifying number of assignee:_______________ and irrevocably appoint ______________________ as my/our agent and attorney-in- fact to transfer this Note, or the portion hereof which has been so assigned, on the books of the Company. The agent may substitute another to act for him or her. Dated: Signed: --------------------------- ------------------------------- Signature Guaranteed By: [Name of Noteholder--Sign exactly as name appears on the first page of this Note] By: - --------------------------------- ----------------------------------- Its: ---------------------------------- 3 5 NOTICE OF CONVERSION To Uranium Resources, Inc.: The undersigned owner of this Secured Convertible Note hereby irrevocably exercises the option to convert $_____________ principal amount of this Secured Convertible Note, into shares of Common Stock of Uranium Resources, Inc., in accordance with its terms, and directs that the shares of Common Stock issuable and deliverable upon conversion be issued and delivered to the undersigned unless a different name has been indicated below. If shares of Common Stock are to be registered in the name of a person other than the undersigned, the undersigned will pay any transfer taxes payable with respect thereto. Dated: Signed: ----------------------------- --------------------------- [Name of Noteholder] By: ------------------------------- Its: ------------------------------ Fill in for registration of shares of Common Stock only if otherwise than in name and address of the above named Noteholder: - ----------------------------------- ----------------------------------- (Name) (Address) - ----------------------------------- ----------------------------------- (City and State) (Tax Identification Number) (Please print name and address including zip code number) 4 EX-10.34 14 WARRANT TO PURCHASE COMMON STOCK FOR 625,000 1 EXHIBIT 10.34 2 THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT AND LAWS OR THE RULES AND REGULATIONS THEREUNDER VOID AFTER 5:00 P.M., DALLAS, TEXAS TIME, ON MAY 31, 2000 URANIUM RESOURCES, INC. URIW-______ WARRANT TO PURCHASE COMMON STOCK This certifies that, FOR VALUE RECEIVED, LINDNER DIVIDEND FUND, a series of LINDNER INVESTMENTS, a Massachusetts business trust, or its registered assigns ("Holder"), is entitled, subject to the terms of this Warrant, to purchase from URANIUM RESOURCES, INC., a Delaware corporation (the "Company"), at any time after the date of issuance hereof and prior to 5:00 p.m., Dallas, Texas time, on May 31, 2000 (the "Warrant Expiration Date"), up to 625,000 fully paid and nonassessable shares of the Common Stock, $0.001 par value, of the Company (the "Common Stock"), at an initial purchase price of $3.00 per share, payable in lawful money of the United States. This Warrant may be exercised in whole or in part by presentation hereof with the Notice of Exercise contained herein duly executed and with simultaneous payment of the applicable aggregate Purchase Price (subject to adjustment) at the office of the Company in Dallas, Texas. Payment of such Purchase Price shall be made, at the option of the Holder hereof, by certified check or bank draft payable in United States currency. This Warrant is one of a duly authorized issue of common stock purchase warrants issued under and in accordance with that certain Note and Warrant Purchase Agreement), dated as of May 25, 1995, by and among Uranium Resources, Inc., Lindner Investments (on behalf of its Lindner Bulwark Fund series), and Lindner Dividend Fund, Inc., as supplemented by that certain Note and Warrant Exchange Agreement, dated March 23, 1998 (the "Purchase Agreement"), and is subject to the terms and provisions contained in the Purchase Agreement, to all of which the Holder hereof, by acceptance hereof, hereby consents. A copy of the Purchase Agreement may be obtained for inspection upon written request to the Company by a Holder of this Warrant. This Warrant does not entitle any Holder to any rights of a shareholder of the Company. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for a share of Common Stock may be adjusted from time to time as set forth in the Purchase Agreement. The shares of Common Stock deliverable upon such exercise, as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Stock" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Purchase Price". As soon as practicable after any exercise of this Warrant and payment of the sum payable upon such exercise, and in any event within 10 days thereafter, the Company, at its expense (including the payment by it of any applicable taxes), will cause to be issued in the name of and delivered to the holder hereof, or in the name of such other person as such holder may direct, a certificate or certificates for the number of fully paid and nonassessable shares of Warrant Stock, or other securities or property to which such holder shall be entitled upon such exercise, plus, in lieu of any fractional share of Warrant Stock to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the Market Price (as defined in the Purchase Agreement). Issuance and delivery of Warrant Stock deliverable on the due exercise of this Warrant may be postponed by the Company and its transfer agent during any period, not exceeding thirty (30) days, for which the transfer books of the Company for the Common Stock are closed between (1) the record date set by the Board of Directors for the determination of shareholders entitled to vote at or to receive notice of any shareholders meeting, or entitled to 3 receive payment of any dividends or to any allotment of rights or to exercise rights in respect of any change, conversion or exchange of capital stock, and (2) the date of such meeting of shareholders, the date for the payment of such dividends, the date for such allotment of rights, or the date when any such change or conversion or exchange of capital stock shall go into effect, as the case may be. Upon surrender for exchange of this Warrant (in negotiable form, if not surrendered by the holder named on the face hereof) to the Company, the Company, at its expense, will issue and deliver new Warrants of like tenor, calling in the aggregate for the same amount of Warrant Stock, in the denomination or denominations requested, to or on the order of such holder and in the name of such holder as such holder may direct. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder of this Warrant as absolute owner for all purposes without being affected by any notice to the contrary. Transfer of this Warrant is restricted as provided in the Purchase Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by the manual signatures of its Chairman or President or one of its Vice Presidents, thereunto duly authorized, and its corporate seal to be impressed or imprinted hereon, attested by the manual signature of its Secretary or an Assistant Secretary. Date: , 1998 URANIUM RESOURCES, INC. ------------------- ATTEST: By: /s/ Paul K. Willmott ------------------------------- Its: President ------------------------------ By: ----------------------------- Secretary [SEAL] ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell, assigns and transfers the within Warrant, and irrevocably appoints _________________ as agent and attorney-in-fact to transfer such Warrant on the books of the Company, with full power of substitution in the premises, to the following assignee(s): - ------------------------------ ------------------------------ Name Address - -------------------- SSN or EIN [Name of Warrant holder] By: ------------------------------ Its: ----------------------------- 2 4 NOTICE OF EXERCISE The undersigned hereby exercises the right to purchase____________ shares of Common Stock covered by this Warrant according to the conditions thereof and herewith makes payment of the Purchase Price of such shares in full. Dated: Signed: ----------------------------- --------------------------- [Name of Noteholder] By: ------------------------------- Its: ------------------------------ The Company is requested to issue certificates for the Warrant Shares acquired upon exercise of this Warrant as follows: - ------------------------------ ------------------------------ Name Address - -------------------- SSN or EIN 3 EX-10.35 15 WARRANT TO PURCHASE COMMON STOCK FOR 325,000 1 EXHIBIT 10.35 2 THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT AND LAWS OR THE RULES AND REGULATIONS THEREUNDER VOID AFTER 5:00 P.M., DALLAS, TEXAS TIME, ON MAY 31, 2000 URANIUM RESOURCES, INC. URIW-______ WARRANT TO PURCHASE COMMON STOCK This certifies that, FOR VALUE RECEIVED, LINDNER BULWARK FUND, a series of LINDNER INVESTMENTS, a Massachusetts business trust, or its registered assigns ("Holder"), is entitled, subject to the terms of this Warrant, to purchase from URANIUM RESOURCES, INC., a Delaware corporation (the "Company"), at any time after the date of issuance hereof and prior to 5:00 p.m., Dallas, Texas time, on May 31, 2000 (the "Warrant Expiration Date"), up to 375,000 fully paid and nonassessable shares of the Common Stock, $0.001 par value, of the Company (the "Common Stock"), at an initial purchase price of $3.00 per share, payable in lawful money of the United States. This Warrant may be exercised in whole or in part by presentation hereof with the Notice of Exercise contained herein duly executed and with simultaneous payment of the applicable aggregate Purchase Price (subject to adjustment) at the office of the Company in Dallas, Texas. Payment of such Purchase Price shall be made, at the option of the Holder hereof, by certified check or bank draft payable in United States currency. This Warrant is one of a duly authorized issue of common stock purchase warrants issued under and in accordance with that certain Note and Warrant Purchase Agreement), dated as of May 25, 1995, by and among Uranium Resources, Inc., Lindner Investments (on behalf of its Lindner Bulwark Fund series), and Lindner Dividend Fund, Inc., as supplemented by that certain Note and Warrant Exchange Agreement, dated March 23, 1998 (the "Purchase Agreement"), and is subject to the terms and provisions contained in the Purchase Agreement, to all of which the Holder hereof, by acceptance hereof, hereby consents. A copy of the Purchase Agreement may be obtained for inspection upon written request to the Company by a Holder of this Warrant. This Warrant does not entitle any Holder to any rights of a shareholder of the Company. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for a share of Common Stock may be adjusted from time to time as set forth in the Purchase Agreement. The shares of Common Stock deliverable upon such exercise, as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Stock" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Purchase Price". As soon as practicable after any exercise of this Warrant and payment of the sum payable upon such exercise, and in any event within 10 days thereafter, the Company, at its expense (including the payment by it of any applicable taxes), will cause to be issued in the name of and delivered to the holder hereof, or in the name of such other person as such holder may direct, a certificate or certificates for the number of fully paid and nonassessable shares of Warrant Stock, or other securities or property to which such holder shall be entitled upon such exercise, plus, in lieu of any fractional share of Warrant Stock to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the Market Price (as defined in the Purchase Agreement). Issuance and delivery of Warrant Stock deliverable on the due exercise of this Warrant may be postponed by the Company and its transfer agent during any period, not exceeding thirty (30) days, for which the transfer books of the Company for the Common Stock are closed between (1) the record date set by the Board of Directors for the determination of shareholders entitled to vote at or to receive notice of any shareholders meeting, or entitled to 3 receive payment of any dividends or to any allotment of rights or to exercise rights in respect of any change, conversion or exchange of capital stock, and (2) the date of such meeting of shareholders, the date for the payment of such dividends, the date for such allotment of rights, or the date when any such change or conversion or exchange of capital stock shall go into effect, as the case may be. Upon surrender for exchange of this Warrant (in negotiable form, if not surrendered by the holder named on the face hereof) to the Company, the Company, at its expense, will issue and deliver new Warrants of like tenor, calling in the aggregate for the same amount of Warrant Stock, in the denomination or denominations requested, to or on the order of such holder and in the name of such holder as such holder may direct. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder of this Warrant as absolute owner for all purposes without being affected by any notice to the contrary. Transfer of this Warrant is restricted as provided in the Purchase Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by the manual signatures of its Chairman or President or one of its Vice Presidents, thereunto duly authorized, and its corporate seal to be impressed or imprinted hereon, attested by the manual signature of its Secretary or an Assistant Secretary. Date: , 1998 URANIUM RESOURCES, INC. ----------------- ATTEST: By: /s/ Paul K. Willmott -------------------------------- Its: ------------------------------- By: ------------------------------ Secretary [SEAL] ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sell, assigns and transfers the within Warrant, and irrevocably appoints _________________ as agent and attorney-in-fact to transfer such Warrant on the books of the Company, with full power of substitution in the premises, to the following assignee(s): - ------------------------------ ------------------------------ Name Address - -------------------- SSN or EIN ------------------------------ [Name of Warrant holder] By: --------------------------- Its: -------------------------- 2 4 NOTICE OF EXERCISE The undersigned hereby exercises the right to purchase____________ shares of Common Stock covered by this Warrant according to the conditions thereof and herewith makes payment of the Purchase Price of such shares in full. Dated: Signed: ----------------------------- --------------------------- [Name of Noteholder] By: ------------------------------- Its: ------------------------------ The Company is requested to issue certificates for the Warrant Shares acquired upon exercise of this Warrant as follows: - ------------------------------ ------------------------------ Name Address - -------------------- SSN or EIN 3 EX-21.1 16 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 2 EXHIBIT 21.1 SUBSIDIARIES OF THE COMPANY URI, Inc., a Delaware Corporation URI Minerals, Inc., a Delaware Corporation Beltline Resources, Inc., a Texas Corporation Hydro Restoration Corporation, a Delaware Corporation Hydro Resources, Inc., a Delaware Corporation Uranco, Inc., a Delaware Corporation EX-23.1 17 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 2 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTS As independent public accountants, we hereby consent to the incorporation of our report dated February 23, 1998, included in the Company's 1997 Form 10-K, into the Company's previously filed Registration Statements on Form S-8 File Nos. 333-05617, 333-00403 and 333-00349, and the company's previously filed Registration Statements on Form S-3 File Nos. 333-05619 and 333-01371. /s/ ARTHUR ANDERSEN LLP Dallas, Texas March 30, 1998 EX-27 18 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1997 DEC-31-1997 2,325,158 3,304,195 4,507,090 0 2,260,200 12,741,600 97,100,015 (36,235,274) 74,863,969 6,742,410 6,462,343 0 0 12,205 51,892,584 74,863,969 29,740,417 29,740,417 29,209,282 32,206,014 0 0 168,789 (1,598,096) (273,225) (1,324,871) 0 0 0 (1,324,871) (.11) (0.11)
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