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EXHIBIT 10.49
[GLAMIS GOLD LOGO] GLAMIS GOLD LTD.
0000 Xxxx Xxxx, Xxxxx 000 Xxxx, XX 00000
phone: (000) 000-0000 fax: (000) 000-0000
November 19, 1998
Rayrock Resources Inc.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
ATTENTION: Xxxxx X. Xxxxx, President & CEO
Dear Sirs:
Corporate Merger
The purpose of this Letter Agreement is to set out the offer of Glamis Gold Ltd.
("Glamis") to acquire all of the issued and outstanding shares of Rayrock
Resources Inc. ("Rayrock") through a statutory plan of arrangement. All dollar
amounts referred to herein are to Canadian dollars unless otherwise noted.
1. We understand that:
(a) As at November 16, 1998, Xxxxxxx had approximately 19,115,420
"Subordinate Voting shares" and 176,000 "Multiple Voting shares" issued
and outstanding (collectively the "Shares");
(b) As at November 16, 1998, Xxxxxxx had 1,779,600 Subordinate Voting
shares subject to share purchase options and share appreciation rights
based on 949,571 Subordinate Voting Shares (collectively, the "Rayrock
Share Rights") at prices ranging from $5.40 to $16.00 per share;
(c) As at September 30, 1998, Xxxxxxx had long-term debt of
approximately US$4,636,000, of which US$447,000 was classed as a
current liability;
(d) As at September 30, 1998, Xxxxxxx had positive working capital of
US$54,819,000;
(e) Xxxxxxx's corporate structure and share holdings in its
subsidiaries and other corporations in which Xxxxxxx has an interest
are as depicted on the chart attached hereto
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as Schedule R-A (such subsidiaries and other corporations in which
Rayrock has an interest are referred to herein as the "Subsidiaries");
(f) Save and except as described in Schedule R-B, Xxxxxxx and the
Subsidiaries have those interests, rights and obligations with respect
to mineral properties and other assets as are described in Xxxxxxx's
December 31, 1997 audited consolidated financial statements (the
"Financial Statements");
(g) The Financial Statements were prepared in accordance with generally
accepted Canadian accounting principles and fairly represent the status
and affairs of Rayrock on a consolidated basis as at the date of such
statements and, since December 31, 1997, Rayrock and the Subsidiaries
have carried on their respective businesses in the ordinary and usual
course and there have been no changes in the condition or operations of
such businesses or in their financial affairs which are, individually
or in the aggregate, materially adverse;
(h) Rayrock is up-to-date with applicable corporate and securities law
filings;
(i) With respect to any mineral or other properties in which Rayrock or
the Subsidiaries has, or has had an interest, neither Xxxxxxx nor the
Subsidiaries are contractually liable for any cash payments or the
issuance of Shares, save and except as described in the Financial
Statements;
(j) Save and except as described in Schedule R-C, Xxxxxxx and the
Subsidiaries have no employment or management contracts that contain
the requirement to make lump-sum cash payments or pay other
consideration upon the occurrence of a change of control of Rayrock or
upon the termination of the contract prior to the due date thereof; and
(k) Rayrock is unaware of any judicial or administrative actions,
suits, proceedings or investigations pending or threatened against
Rayrock or any of the Subsidiaries, which might result in any adverse
material change in the condition (financial or otherwise), properties,
assets, business or operations of Rayrock or any of the Subsidiaries
and is unaware of any basis exist for any such action, suit, proceeding
or investigation.
2. Xxxxxxx understands that:
(a) As at November 16, 1998, Glamis had approximately 38,810,606
"Common shares" issued and outstanding (the "Glamis Shares");
(b) As at November 16, 1998, Glamis had 2,535,000 Common shares subject
to share purchase options at prices ranging from $0.50 to $12.625 per
share;
(c) As at September 30, 1998, Glamis had long-term debt of
approximately US$0 of which US$0 was classed as a current liability;
(d) As at September 30, 1998, Glamis had positive working capital of
US$36,803,000;
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(e) Glamis' corporate structure and share holdings in its subsidiaries
and other corporations in which Glamis has an interest are as depicted
on the chart attached hereto as Schedule G-A (such subsidiaries and
other corporations in which Glamis has an interest are referred to
herein as the "Glamis Subsidiaries");
(f) Save and except as described in Schedule G-B, Glamis and the Glamis
Subsidiaries have those interests, rights and obligations with respect
to mineral properties and other assets as are described in Glamis'
December 31, 1997 audited consolidated financial statements (the
"Glamis Financial Statements");
(g) The Glamis Financial Statements were prepared in accordance with
generally accepted Canadian accounting principles and fairly represent
the status and affairs of Glamis on a consolidated basis as at the date
of such statements and, since December 31, 1997, Glamis and the Glamis
Subsidiaries have carried on their respective businesses in the
ordinary and usual course and there have been no changes in the
condition or operations of such businesses or in their financial
affairs which are, individually or in the aggregate, materially
adverse;
(h) Glamis is up-to-date with applicable corporate and securities law
filings;
(i) With respect to any mineral or other properties in which Glamis or
the Glamis Subsidiaries has, or has had an interest, neither Glamis nor
the Glamis Subsidiaries are contractually liable for any cash payments
or the issuance of Glamis Shares, save and except as described in the
Glamis Financial Statements;
(j) Save and except as described in Schedule G-C, Glamis and the Glamis
Subsidiaries have no employment or management contracts that contain
the requirement to make lump-sum cash payments or pay other
consideration upon the occurrence of a change of control of Glamis or
upon the termination of the contract prior to the due date thereof; and
(k) Glamis is unaware of any judicial or administrative actions, suits,
proceedings or investigations pending or threatened against Glamis or
any of the Glamis Subsidiaries, which might result in any adverse
material change in the condition (financial or otherwise), properties,
assets, business or operations of Glamis or any of the Glamis
Subsidiaries and is unaware of any basis exist for any such action,
suit, proceeding or investigation.
3. Based upon the information in section 1, which is to be treated as
representations and warranties given by Xxxxxxx to Glamis as at the date of
Xxxxxxx's acceptance of the terms hereof, and subject to the Glamis Closing
Conditions (as hereinafter defined) and the other terms and conditions contained
herein, Glamis hereby offers (the "Offer") to acquire all of the issued and
outstanding Shares by way of an arrangement (the "Arrangement") under the
Ontario Business Corporations Act among Glamis, Rayrock and the holders of the
Shares. Under the Arrangement, subject to section 4, the Shares will be
exchanged, at the option of each holder of Shares, for Common shares of Glamis
(each a "Glamis Share") or a combination of Glamis
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Shares and cash for the Shares (such exchange being referred to hereinafter as
the "Share Exchange") as follows:
(a) 2.2 Glamis Shares for each Share (the "All Share Exchange Rate");
or
(b) 1.5 Glamis Shares and $3.00 for each Share (the "Cash/Share
Exchange Rate"). Holders of Shares who do not make a valid election
will be deemed to have elected to accept the All Share Exchange Rate.
4. Glamis will only be obligated to pay a maximum of $24,000,000 pursuant to the
elections made for the Cash/Share Exchange Rate. If such elections would
obligate Glamis to pay in excess of $24,000,000, the elections will be adjusted
on a pro-rata basis so that Glamis will pay only a maximum of $24,000,000
pursuant to the Cash/Share Exchange Rate elections. The Shares not accepted
under the Cash/Share Exchange Rate will be converted to the All Share Exchange
Rate.
5. No fractional Glamis Shares will be issued under the Arrangement, but rather
shareholders entitled to a fractional Glamis Share will receive cash in lieu
thereof based on a whole Glamis Share being valued at $3.91.
6. Upon conclusion of the Arrangement:
(a) Rayrock will be a wholly-owned subsidiary of Glamis and will cease
to be a public company;
(b) the Subsidiaries will remain as subsidiaries and related
corporations of Rayrock;
(c) the officers and directors of Rayrock will be comprised of nominees
of Glamis and Xxxxxxx's nominees who are directors or officers of the
Subsidiaries will, at the election of Glamis, become nominees of
Glamis;
(d) Glamis' present intention is to keep most of the employees of
Rayrock and of the Subsidiaries for a minimum period of 6 months from
the closing of the Arrangement though certain reorganizational matters
to improve the operational efficiency of the Glamis organization
following the closing of the Arrangement will inevitably occur;
(e) the size and composition of the board of directors of Glamis will
be as set out in Schedule D; and
(f) subject to applicable regulatory and shareholder approvals, the
Rayrock Share Rights will be converted into rights to acquire Glamis
Shares on the basis of the All Share Exchange Rate with the same terms
as the Rayrock Share Rights with corresponding changes to the exercise
prices for the Rayrock Share Rights based upon the All Share Exchange
Rate, the net effect of which will be to place the holders of the
Rayrock Share Rights in the same position that they would have been in
had they exercised their Rayrock Share Rights prior to the conclusion
of the Arrangement and elected to convert the resulting Shares into
Glamis Shares on the basis of the All Share Exchange Rate.
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7. Glamis' obligation to complete the Arrangement described herein will be
subject to the following conditions ("Closing Conditions"):
(a) receipt by Xxxxxxx by no later than December 31, 1998 of acceptance
for filing from each of the Canadian Securities regulatory bodies under
which it is a reporting issuer of Rayrock's Annual Information Form for
the year ended December 31, 1997. Rayrock will use its best efforts to
obtain such receipt as soon as practicable.
(b) execution of an arrangement agreement and plan of arrangement
(collectively the "Arrangement Agreement") on the terms described
herein, together with such other terms as are customary in a
transaction of this nature;
(c) receipt by Glamis of all required regulatory approvals;
(d) Glamis being satisfied that no adverse material change in the
business or financial affairs of Rayrock, on a consolidated basis, has
occurred from the date of the Financial Statements to the date of
closing of the Arrangement;
(e) all of the representations and warranties of Rayrock set forth in
this Letter Agreement and in the Arrangement Agreement shall be true
and correct in all material respects as at the date made and as at the
date of closing of the Arrangement;
(f) receipt by Glamis, on or before 12:00 Noon Toronto time on the 19th
of November, 1998, of evidence of approval of the terms hereof by the
board of directors of Rayrock; and
(g) holders of less than 5% of the Shares exercising their right of
dissent under the Arrangement.
The Glamis Closing Conditions are for the exclusive benefit of Glamis and may be
waived in whole or in part by it at any time.
8. Xxxxxxx's obligation to complete the Arrangement will be subject to the
following conditions (the "Rayrock Closing Conditions"):
(a) execution of the Arrangement Agreement on the terms described
herein, together with such other terms as are customary in a
transaction of this nature;
(b) receipt by Xxxxxxx of all required shareholder and regulatory
approvals;
(c) Xxxxxxx being satisfied that no adverse material change in the
business or financial affairs of Glamis has occurred from the date of
the Glamis Financial Statements to the date of the closing of the
Arrangement;
(d) all of the representations and warranties of Glamis which are set
forth in this Letter Agreement and in the Arrangement Agreement shall
be true and correct in all material respects as at the date made and as
at the date of closing of the Arrangement; and
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(e) approval of the terms hereof by the board of directors of Rayrock.
The Rayrock Closing Conditions are for the exclusive benefit of Rayrock and may
be waived in whole or in part by it at any time.
9. If Xxxxxxx fails to complete the Arrangement (other than as a result of a
condition precedent in favour of Xxxxxxx not being satisfied) and within one
year from the date hereof, Rayrock or its shareholders enter into a transaction
that closes which is a merger, amalgamation, arrangement, take-over bid, sale of
all or substantially all of its assets (excluding Xxxxxxx's investment in
BlackRock Ventures Inc. ("BlackRock")) or similar transaction involving Rayrock
or any one or more of the Subsidiaries (excluding Rayrock's investment in
BlackRock) or whereby 50% or greater of the issued voting rights at a meetings
of the holders of Subordinate Voting shares or a similar number of treasury
shares of Rayrock are acquired by one or more persons, Rayrock shall pay a fee
to Glamis of $2,000,000.
10. The Arrangement Agreement will contain representations and warranties by
Glamis and Rayrock, each on a consolidated basis, with respect to its mineral
interests, corporate affairs and financial status as are usual in an arrangement
agreement and as recommended by the respective legal counsel of Glamis and
Xxxxxxx acting reasonably.
11. From the date of approval of the terms hereof by the board of directors of
Rayrock, Xxxxxxx, its officers and directors will, except as may be required for
the directors and officers of Xxxxxxx to meet their fiduciary duties to the
holders of Shares:
(a) not discuss any merger, amalgamation, arrangement, take-over, sale
of all or substantially all of its assets or joint venture proposals or
similar transactions or the issuance of any of its treasury shares or
the sale of any of the Subsidiaries or of its or their mineral
properties or other assets and it will not solicit or assist others in
making a proposal to do so;
(b) support the arrangement and recommend to the holders of shares that
they vote in favour of the Arrangement at a special meeting of the
holders of shares convened to approve such;
(c) act in good faith (i) in finalizing and executing the Arrangement
Agreement, (ii) in finalizing an information circular for special
meetings of the holders of the various classes of Shares, (iii) in
finalizing material for applications to the Ontario Court of Justice
(General Division) in respect of the Arrangement, and (iv) in
soliciting shareholder approval for the Arrangement;
(d) not enter into any material transactions or, except for shares
issued upon the exercise of options granted prior to the date hereof,
issue or agree to issue any shares of Rayrock, whether by option or
otherwise, without the prior approval of Glamis and will carry on the
operations of Rayrock and of the Subsidiaries in the usual and normal
course;
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(e) permit Glamis' officers, directors, employees, consultants and
advisors, at all reasonable times, access to the books, records and
data, including drill core and other samples, of Rayrock and the
Subsidiaries;
(f) notwithstanding the terms of the confidentiality agreement dated as
of May 21, 1998 (the "Confidentiality Agreement") between Glamis and
Xxxxxxx, permit Glamis' officers, directors, employees, consultants and
advisors to solicit acceptance of the Arrangement from the shareholders
of Rayrock; and
(g) not make an application to the Ontario Court of Justice (General
Division) for an order granting BlackRock, as the holder of all of the
issued Multiple Voting Shares, the right to a separate vote on the
Arrangement.
12. From the date of approval of the terms hereof by the board of directors of
Rayrock, to the closing of the Arrangement or to the terminating of the
transaction contained herein contemplating the Arrangement, whichever occurs
first, Glamis, its officers and directors will, except as may be required for
the directors and officers of Glamis to meet their fiduciary duties to the
holders of Glamis Shares:
(a) not discuss any merger, amalgamation, arrangement, take-over, sale
of all or substantially all of its assets or joint venture proposals or
similar transactions or the issuance of any of its treasury shares or
the sale of any of the Glamis Subsidiaries or of its or their mineral
properties or other assets and it will not solicit or assist others in
making a proposal to do so;
(b) act in good faith (i) in finalizing and executing the Arrangement
Agreement, (ii) in finalizing an information circular for special
meetings of the holders of the various classes of Shares and (iii) in
soliciting shareholder approval for the Arrangement;
(c) not enter into any material transactions or, except for shares
issued upon the exercise of options granted prior to the date hereof,
issue or agree to issue any shares of Glamis, whether by option or
otherwise, without the prior approval of Rayrock and will carry on the
operations of Glamis and of the Glamis Subsidiaries in the usual and
normal course; and
(d) permit Xxxxxxx's officers, directors, employees, consultants and
advisors, at all reasonable times, access to the books, records and
data, including drill core and other samples, of Glamis and the Glamis
Subsidiaries.
13. Glamis represents and warrants to Rayrock that the Board of Directors of
Glamis (i) has approved the terms of this offer and the terms and delivery of it
to Rayrock and (ii) has passed resolutions placing X. Xxx Xxxxx on the board of
directors of Glamis and electing him as Chairman of the Board of Glamis, such to
be effective upon the Board of Directors of Rayrock approving the Offer.
14. If you accept the Offer contained in this Letter Agreement, you agree that
we will have all documents in respect to the Transaction prepared, such to
include an arrangement agreement and plan of arrangement, material for a special
meeting of holders of Shares and
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material to support an application to the Ontario Court of Justice (General
Division). You and your counsel will co-operate fully with us and our counsel in
preparing such material as quickly and expeditiously as possible. Each of us
will pay our own counsel fees, all required regulatory fees, fees of our
advisors and other service providers with respect to the Transaction.
15. Xxxxxxx may accept the Offer by executing and returning to Glamis or its
financial advisors on or before 12:00 Noon Toronto time on November 19th, 1998,
the enclosed copy of this Letter Agreement.
16. Glamis and Xxxxxxx shall keep the terms hereof confidential until the
provisions of subparagraph 7(e) have been met and thereafter Glamis and Rayrock
will each co-operate in preparing and publishing a joint news release concerning
the Arrangement. Each of Glamis and Xxxxxxx agree, to the extent reasonably
practicable, to consult with the other party prior to the release of any other
press releases in relation to the Arrangement or any matter contemplated by this
Letter Agreement.
17. This Letter Agreement may be terminated by either party if the Arrangement
has not been completed on or before February 26, 1999, provided that no such
termination shall relieve any party from liability for any breach of any
provision of this Letter Agreement.
18. This Letter Agreement constitutes, together with the Confidentiality
Agreement previously entered into between the parties, the entire agreement
between the parties and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
19. This Letter Agreement shall be governed, including as to validity,
interpretation and effect, by the laws of the Province of Ontario and the
federal laws of Canada applicable therein.
Yours very truly,
GLAMIS GOLD LTD.
Per: /s/ C. Xxxxx XxXxxxxx
C. Xxxxx XxXxxxxx, President and
Chief Executive Officer
Based upon the representations and warranties of Glamis in section 2, and
subject to the Rayrock Closing Conditions and other terms and conditions
contained herein, Xxxxxxx hereby accepts the Offer by Glamis set out herein on
November 19, 1998.
RAYROCK RESOURCES INC.
Per: /s/ Xxxxx Xxxxx
Xxxxx Xxxxx, President and
Chief Executive Officer
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SCHEDULE R-A
RAYROCK'S CORPORATE STRUCTURE
[This schedule is a graphic which depicts Xxxxxxx's Corporate Structure]
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SCHEDULE R-B
MATERIAL MINERAL PROPERTIES AND OTHER ASSETS DISPOSED OF
BY RAYROCK AND THE SUBSIDIARIES SINCE DECEMBER 31, 1997
(1) investment in shaker portfolio and other investments (approximately
US$6.9 million total)
(2) airplane (approximately US$500,000)
(3) lapse or abandonment of exploration mining claims in the normal course,
none of which were material
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SCHEDULE R-C
EMPLOYMENT AND MANAGEMENT CONTRACTS
OF RAYROCK AND THE SUBSIDIARIES WHICH
CONTAIN PROVISIONS FOR LUMP SUM PAYMENTS
OR OTHER CONSIDERATION UPON TERMINATION
The following officers and employees of Rayrock and subsidiary companies
(including Cordex) have employment contracts or benefits which fall under the
above description:
Xxxxx X. Xxxxx
Xxxxx X. Xxxxxxxxxx
X. Xxxxx Xxxxxx
Xxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxx
Xxxx X. Xxxxxxx
Xxxxxx X. Xxxxxx
Details are not currently available but there may be employment contracts with
certain ex-pat employees in Chile, for instance:
Xxxxx Xxxxxxx
Xxxxxxx Xxxxxxxxxx
Fixed term contracts exist with:
Xxxx X. X. Xxxx Consultants Inc.
Xxxxxx Xxxxxxxxx
Terms of contracts with the following could have other consideration or residual
payments on early termination:
Xxxx X. Xxxx
Xxxxxxx X. X'Xxxxx
Xxxxxxx Xxxxxx
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SCHEDULE D
BOARD OF DIRECTORS
SIZE OF BOARD 9 PERSONS AS FOLLOWS
Chairman & Director X. Xxx Xxxxx
President & CEO & Director X. Xxxxx XxXxxxxx
Director Xxxxxxx X. Xxxxxx
Director Xxxxx X. Xxxxxxxxxxx
Director Xxx X. Xxxxxxxx
Director Xxxx Xxxxxxx
Director Xxxxx X. X'Xxxxx
Director Hons xxx Xxxxxxxxx
Director Xxxxx X. Xxxxxxx
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SCHEDULE G-A
GLAMIS' CORPORATE STRUCTURE
[This is a graphic which depicts Xxxxxx' Corporate Structure]
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SCHEDULE G-B
MATERIAL MINERAL PROPERTIES AND OTHER ASSETS ACQUIRED OR DISPOSED OF
BY GLAMIS AND THE GLAMIS SUBSIDIARIES SINCE DECEMBER 31, 1997
On October 19,1998, Glamis acquired all of the issued and outstanding shares of
Mar-West Resources Inc. which has mineral exploration and exploitation
concessions in the Central American countries of Honduras, Guatemala and El
Salvador.
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SCHEDULE G-C
EMPLOYMENT AND MANAGEMENT CONTRACTS
OF GLAMIS AND THE GLAMIS SUBSIDIARIES WHICH
CONTAIN PROVISIONS FOR LUMP SUM PAYMENTS
OR OTHER CONSIDERATION UPON TERMINATION
By an agreement dated March 1, 1998, Xxxxxx X. Xxxxxxx was engaged by
the Company to act as its Treasurer and Chief Financial Officer. The Agreement
had a month-to-month term subject to termination in accordance with the terms of
the Agreement. In addition Xx. Xxxxxxx was entitled to share purchase option
under the Agreement.
By an agreement dated January 1, 1998, X. Xxxxx XxXxxxxx was engaged by
the Company to act as a director and President and Chief Executive Officer of
the Company. The Agreement had a month-to-month term subject to termination in
accordance with the terms of the Agreement. In addition Xx. XxXxxxxx was
entitled to share purchase options under the Agreement.
Each of the above employment agreements provide that upon notice of
termination, the Executive Officer would be entitled to be paid an amount up to
two times his yearly salary and value of benefits.
Pursuant to a Service Agreement dated as of January 1, 1991, as amended
August 18, 1994, made between the Company and Xxxxxxx X. Xxxxxx, the Company
engaged Xx. Xxxxxx to serve as a director of the Company and to perform the
duties of the office of Chairman of the Board of Directors. Under the agreement
Xx. Xxxxxx receives no salary but is entitled to share purchase options. The
engagement of Xx. Xxxxxx will be terminated if he is removed as a member of or
as Chairman of the Board of Directors. Additionally, if a majority of
management's nominees to the Board of Directors are not elected at a
shareholders' meeting or are otherwise replaced or if the Company amalgamates or
otherwise merges or disposes of substantially all of its properties and such
occurs without the concurrence of Xx. Xxxxxx, Xx. Xxxxxx may, at any time during
the ensuing 12 month period, treat his engagement as terminated. In the case of
termination of the engagement Xx. Xxxxxx will be entitled to receive three times
the then current salary of the President of the Company. Xx. Xxxxxx'x Service
Agreement was amended solely to reduce the number of options to which he is
entitled to from 250,000 shares to 200,000 shares in order to bring the
agreement into line with the parties understanding of the arrangement.
