28/1/97-7 February 5, 1997
Dakota Mining Corporation
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxx
President and Chief Executive Officer
Dear Sirs:
Canaccord Capital Corporation, ScotiaMcLeod Inc. and Newcrest
Capital Inc. (collectively, the "Agents") understand that Dakota Mining
Corporation (the "Corporation") proposes to create, issue and offer for sale
25,000 special warrants of the Corporation (the "Special Warrants") at a price
of $1,000 per Special Warrant (the "Offering"). Each Special Warrant shall
entitle the holder thereof to acquire $1,000 principal amount unsecured
convertible debentures (each, a "Debenture" and collectively, the "Debentures")
of the Corporation upon the exercise of the Special Warrants in accordance with
the terms of the Special Warrant Indenture and the Debenture Indenture
hereinafter referred to, without payment of any further consideration to the
Corporation.
The Agents hereby offer to act, and upon its acceptance hereof
the Corporation hereby appoints the Agents, as the Corporation's exclusive
agents to offer the Special Warrants for sale, upon and subject to the terms and
conditions set forth herein. The Agents, if they so desire, may invite other
investment bankers to form a syndicate or offering and to participate in
soliciting of offers to purchase the Special Warrants.
In consideration of the services to be rendered to the
Corporation by the Agents pursuant to this agreement, the Corporation shall pay
to the Agents at the Time of Closing (as defined below), the Agents' Commission
(as hereinafter defined).
Terms and Conditions
The terms and conditions relating to the purchase and sale of
the Special Warrants are as follows:
1. Special Warrants - The material attributes and characteristics of the Special
Warrants shall be substantially as described herein and in the term sheet
attached hereto as Schedule "A".
The Special Warrants shall be issued pursuant to the
provisions of a warrant indenture (the "Special Warrant Indenture") to be
entered into between the Corporation and Montreal Trust Company of Canada as
trustee and warrant agent (the "Warrant Agent"). The Debentures underlying the
Special Warrants shall be issued pursuant to the provisions of a trust
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indenture (the "Debenture Indenture") also to be entered into between the
Corporation and the Warrant Agent. The terms and conditions of the Special
Warrant Indenture and the Debenture Indenture shall be satisfactory to the
Corporation and the Agents and consistent with the term of this Agreement.
The Debentures will mature on February 5, 2004 (the "Maturity
Date") and will accrue interest at a rate of 7.5% per annum, payable
semi-annually on June 30 and December 31, with the first payment for accrued
interest on and from the issue date of the Special Warrants being February 5,
1997. The Debentures are convertible into common shares of the Corporation (the
"Common Shares" or "Shares") at the option of the holders at any time at $2.00
per share. On maturity or redemption, the Corporation may elect, upon notice, to
repay the principal of the Debentures in common shares of the corporation. The
terms and conditions applicable to the Debentures are as more fully described in
the term sheet attached as Schedule "A" hereto. The Debentures issuable upon
exercise of the Special Warrants and the Shares issuable in exchange for the
Debentures may be referred to herein as the "Subject Securities". The Debentures
are issued in connection with the anticipated merger (the "Merger") of the
Corporation with USMX Inc. ("USMX"), pursuant to a letter agreement dated
January 3, 1997 (the "Letter Agreement") and a definitive merger agreement (the
"Merger Agreement") substantially in the form attached hereto as Schedule "E",
according to which the Corporation is to complete a statutory amalgamation,
merger or other business combination with USMX to form one surviving
corporation.
All of the aggregate net proceeds of the Offering (after
deducting the Agents' Commission) shall be escrowed (the "Original Escrowed
Proceeds") on Closing (as hereinafter defined). The Special Warrant Indenture
shall also provide that US$5,000,000 (the "Release Amount") of the Original
Escrowed Proceeds shall be released to the Corporation provided that the
conditions to making the USMX Loan (as hereinafter defined) under the Merger
Agreement (as hereinafter defined) have been satisfied including, without
limitation, that the Release Amount is being loaned to USMX, Inc. (the "USMX
Loan") on terms and conditions satisfactory to the Agents, acting reasonably.
The balance of the Original Escrowed Proceeds (the "Escrowed Proceeds") will
remain in escrow until the Shareholder Approval (as hereinafter defined) has
been obtained and the Merger has been completed. With respect to 16,126 Special
Warrants (the "Series "A" Special Warrants"), no Shareholder Approval shall be
required, and the Escrowed Proceeds shall remain in escrow pending the Merger.
With respect to the balance of the Special Warrants (the "Series "B" Special
Warrants"), in the event that the Shareholder Approval has not been obtained by
a date (the "Shareholder Approval Date") that occurs not later than April 30,
1997 unless extended to May 31, 1997 in accordance with the Merger Agreement,
(the "Shareholder Qualification Deadline", all Series B Special Warrants shall
be redeemed by the Corporation (the "Redemption Obligation"). The Escrowed
Proceeds of the Offering shall be released to the Corporation if and upon the
Merger occurring not later than the Qualification Deadline, provided that, in
the case of the Series "B" Special Warrants where Shareholder Approval is
required, such Approval is also obtained prior to the Shareholder Qualification
Deadline. If the Merger does not occur prior to the Qualification Deadline, the
holders of the Special Warrants shall have the option (the "Redemption Option")
for a period of five Business Days after the Qualification Deadline to cause the
Corporation to redeem their pro rata portion of the Special Warrants from the
Escrowed Proceeds together with interest earned thereon by giving notice to the
Corporation or otherwise tendering their Special Warrants to the
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Corporation. If the Escrowed Proceeds are insufficient for the redemption of all
of the Special Warrants to which such notice relates, or so tendered, then the
Special Warrants to be redeemed shall be redeemed pro rata.
The Series A Special Warrants will be exercisable at any time
after the date hereof until the Expiry Time (as hereinafter defined). The Series
B Special Warrants will be exercisable at any time after the Shareholder
Approval Date until the Expiry Time. The Expiry Time shall be on or before 5:00
p.m. (Vancouver time) on the earlier of: (a) February 5, 1998; and (b) the date
which is five Business Days after the day on which the last of the three
following dates occurs (i) the Shareholder Approval Date; (ii) the date of the
receipt issued by the last of the securities regulatory authorities in each of
the provinces of British Columbia, Ontario, Alberta and such other provinces of
Canada where holders of Special Warrants are resident (the "Qualifying
Provinces"), to issue a receipt for a (final) prospectus of the Corporation or
amendment thereof (the "Prospectus") qualifying the distribution of the
Debentures to be issued on the exercise of the Special Warrants (the "Prospectus
Qualification"); and (iii) the day on which the Merger is completed. Any Special
Warrants not exercised on or before the Expiry Time will be exercised by the
Warrant Agent as authorized agent and on behalf of the holders thereof
immediately prior thereto without further action by the holder thereof. For the
purpose of this Agreement, "Business Day" shall mean any day except Saturday,
Sunday or a statutory holiday in Vancouver, British Columbia and Toronto,
Ontario.
The Corporation agrees to file with all relevant securities
regulatory authorities in each Qualifying Province a preliminary prospectus (the
'Preliminary Prospectus") with respect to the distribution of the Debentures,
and to use its best efforts to file the Preliminary Prospectus in the Qualifying
Provinces not later than 30 days following the Closing Date, and, upon
resolution of all regulatory comments and deficiencies, to use its best efforts
to file the Prospectus and obtain receipts therefor, qualifying the distribution
of the Debentures underlying the Special Warrants no later than 5:00 p.m.
(Toronto time) on the date which is not later than 120 days from the Closing
Date (the "Qualification Deadline"). The Corporation and the Agents agree that
the Qualifying Provinces may include the Province of Quebec in circumstances
where there are subscriptions from residents in Quebec to purchase not less than
Cdn.$1,000,000 of Special Warrants in aggregate. The Corporation also agrees to
(iv) cause the Debentures to be listed on The Toronto Stock Exchange (the "TSE")
by the Qualification Date or as soon as possible thereafter and in any event not
later than the earlier of the date on which the Merger occurs and the
Qualification Date. In the event that receipts for the Prospectus (as defined
below) relating to the distribution of the Debentures are not received on or
before the Qualification Deadline from the securities regulatory authorities of
each of the Qualifying Provinces, the Debentures issuable upon the exercise of
the Special Warrants shall be convertible for 1.10 Shares for every Share that
would have been issued if the Qualification Date had occurred prior to the
Qualification Deadline.
The Corporation further agrees that it shall not cause the
Merger to occur prior to the occurrence of the Shareholder Approval, or the
Prospectus Qualification to occur prior to the Merger occurring, without the
prior consent of the Agents acting reasonably.
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2. Offering
(a) Sale on Exempt Basis - The Agents shall offer for sale and sell the
Special Warrants in the Qualifying Provinces, and the United States (as defined
in Schedule "B" hereto) (collectively the "Qualifying Jurisdictions") and
elsewhere in compliance with all applicable securities laws. The sale of the
Special Warrants to the Purchasers (as used herein, the "Purchasers" shall mean
all purchasers of the Special Warrants offered for sale or sold as contemplated
herein) in Ontario shall be effected in a manner exempt from the prospectus and
offering memorandum requirements of the Securities Act (Ontario) and the
Regulation thereunder and the analogous provisions of securities legislation of
any other Canadian provinces in which the Agents may solicit offers to purchase
Special Warrants. Each Purchaser of the Special Warrants resident in Ontario or
outside Canada (other than U.S. persons) shall purchase under subsection
72(1)(a), (c), (d) or (i) of the Securities Act (Ontario) as qualified in the
case of subsection 72(1)(d) by subsection 27(1) of the Regulation thereto, and
each Purchaser of Special Warrants resident in any province of Canada other than
Ontario shall purchase under the analogous provisions of securities legislation
of such province. With respect to offers and sales of the Special Warrants to
Purchasers in the United States, the Corporation and the Agents agree to be
governed by the representations, warranties terms and conditions set forth in
Schedule "B" attached hereto.
The Corporation agrees that the Agents will be permitted to
appoint other registered dealers (or other dealers duly qualified in their
respective jurisdictions) as its agent to assist in the Offering (as defined
below) and that the Agents may determine the remuneration payable to such other
dealers appointed by them.
(b) Agents' Commission - The Corporation agrees to pay to the Agents at
the Time of Closing (as defined below) a commission of $60 per Special Warrant,
equal to 6% of the purchase price of the Special Warrants (the "Agent's
Commission") in consideration of the services to be rendered by the Agent in
connection with the sale of the Special Warrants (the "Offering"), which
services shall include:
(i) endeavoring to arrange for Purchasers for the Special Warrants;
(ii) acting as fiscal advisors of the Corporation in the preparation of the
relevant documentation relating to the sale of the Special Warrants;
(iii)assisting in the preparation of the Prospectus and the Preliminary
Prospectus in respect of the Subject Securities, together with any
documents supplemental thereto or any amending or supplementary prospectus
or other supplemental documents or any similar document (collectively the
"Supplementary Material") required to be filed under the legislation of any
Qualifying Province;
(iv) assisting in respect of the Prospectus Qualification;
(v) assisting in the preparation of the form of subscription agreements in the
forms set forth in Schedule "C" hereto (the "Subscription Agreements") to
be entered into by the Purchasers of the Special Warrants;
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(vi) assisting in the preparation of the Special Warrant Indenture and the
Debenture Indenture; and
(vii) advising the Corporation with respect to the Offering.
(c) Covenants of Agents - The Agents severally covenant, represent and warrant
to the Corporation that: (i) they will comply with all applicable
securities legislation in connection with the Offering and the Prospectus
Qualification; (ii) they will not offer or sell Special Warrants so as to
require registration thereof, filing of a prospectus with respect thereto
or require the Corporation to become subject to ongoing reporting
requirements under the laws of any jurisdiction other than that of the
Qualifying Provinces or those to which the Corporation is already subject
or as otherwise agreed with the Corporation; (iii) they or their duly
appointed agent, are duly qualified in the Qualifying Provinces in which
they act as agent for the Corporation in connection with the Offering and
the Prospectus Qualification; (iv) they will obtain from each Purchaser an
executed Subscription Agreement in the appropriate form attached as
Schedule "C" or such other form reasonably acceptable to the Corporation
and to the Agents relating to the transactions herein contemplated; (v)
they will not solicit subscriptions for Special Warrants or otherwise do
any act in furtherance of a trade of the Special Warrants outside the
Qualifying Jurisdictions or elsewhere unless the Corporation and the Agents
agree; (vi) they will not make available to prospective Purchasers of the
Special Warrants any documents which would constitute an offering
memorandum as defined under the securities legislation of the Qualifying
Provinces except for the United States covering memorandum (the "Covering
Memorandum") of the Corporation which includes the annual report of the
Corporation for the fiscal year ended December 31, 1995 (containing the
audited consolidated annual financial statements of the Corporation for the
fiscal year ended December 31, 1995), the annual report on Form 20-F of the
Corporation for the year ended December 31, 1995, recent press releases of
the Corporation and the unaudited interim financial statements of the
Corporation for the nine-month period ended September 30, 1996, to be
provided to Purchasers in the United States, and not advertise the proposed
sale of the Special Warrants in printed media of general and regular paid
circulation, radio or television or otherwise; (vii) they will not make any
representations or warranties in respect of the Corporation as an agent or
otherwise except as permitted in writing by the Corporation; and (viii)
they will not solicit subscriptions for Special Warrants except in
accordance with the terms and conditions of this Agreement.
3. Representations of the Corporation - The Corporation represents and warrants
to the Agents and acknowledges that the Agents are relying upon such
representations and warranties, as follows:
(a) the Corporation has no operating subsidiaries other than Min Ven Gold (USA)
Corporation, Compass Mining Inc., Brohm Mining Corp., Helix Mining Inc.,
Stibnite Mine Inc., Barrier Reef Inc., and Dakota Gold Mining Inc. (the
"Subsidiaries") and the Corporation, either directly or indirectly, owns
all of the issued and outstanding shares of each such Subsidiary free and
clear of all mortgages, liens, charges, pledges, security interests,
encumbrances, claims or demands of any kind whatsoever and all of such
shares have been duly authorized and validly issued and are outstanding as
fully paid and non-assessable shares and no person has any right, agreement
or option, present or future, contingent or
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absolute, or any right capable of becoming a right, agreement or option, for the
purchase from the Corporation of any interest in any of such shares or to
the knowledge of the Corporation after due inquiry, for the issue or
allotment of any unissued shares in the capital of any Subsidiary or any
security convertible or exchangeable for any such shares;
(b) each of the Corporation and the Subsidiaries has been duly incorporated and
organized and is validly existing under the laws of the jurisdiction of its
incorporation and has all requisite corporate capacity, power and authority
to carry on its business as now conducted by it and as is presently
proposed to be conducted by it and to own, lease and operate its assets;
(c) each of the Corporation and the Subsidiaries possess all material
certificates, authority, permits or licenses issued by the appropriate
state, provincial, municipal or federal regulatory agencies or bodies
necessary to conduct the business now operated by it and neither the
Corporation nor the Subsidiaries have received any notice of proceedings
relating to the revocation or modification of any such certificate,
authority, permit or license which, if the subject of an unfavorable
decision, ruling or finding would materially and adversely affect the
conduct of the business, operations financial condition or income of the
Corporation or any of the Subsidiaries;
(d) except as disclosed in the 1996 Prospectus (as hereinafter defined) or in
the Public Record (as hereinafter defined), each of the Corporation and the
Subsidiaries has conducted and is conducting its business in compliance in
all material respects with all applicable laws, by-laws, rules and
regulations of each jurisdiction in which that business is carried on and
holds all material licenses, registrations, permits, consents or
qualifications required in order to enable that business to be carried on
as now conducted or as proposed to be conducted, and all such licenses,
registrations, permits, consents and qualifications are valid and
subsisting and in good standing;
(e) except as disclosed in the 1996 Prospectus (as hereinafter
defined) or in the Public Record (as hereinafter defined),
each of the Corporation and the Subsidiaries has conducted and
is conducting its business in compliance in all material
respects with all applicable licensing and environmental
protection, legislation, regulations or bylaws or other
similar legislation, laws, by-laws, rules and regulations or
the lawful requirements of any governmental or regulatory
bodies;
(f) the Corporation is not aware of any licensing or
environmental, legislation, regulation, by-law or lawful
requirement presently in force or proposed to be brought into
force which the Corporation anticipates that it or any of the
Subsidiaries will be unable to comply with without materially
adversely affecting its financial condition, results of
operations, business or prospects of each jurisdiction in
which its business is carried on and holds all material
licenses, certificates registrations, permits, consents or
qualifications required by the
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appropriate state, provincial, municipal or federal regulatory
agencies or bodies necessary in order to enable its business
to be carried on as now conducted and all such licenses
certificates, registrations, permits, consents and
qualifications are valid and subsisting and in good standing
and do not contain any unusual burdensome provision, condition
or limitation which has a material adverse effect on the
operation of the business of the Corporation or the
Subsidiaries as now conducted or as presently proposed to be
conducted and neither the Corporation nor any of the
Subsidiaries has received any notice of proceedings relating
to the revocation or modification of any such licenses,
certificates, registrations, permits, consents, or
qualifications which, if the subject of an unfavorable
decision, ruling or finding would materially and adversely
affect the conduct of the business, operations financial
condition or income of future prospects of the Corporation and
the Subsidiaries, taken as a whole;
(g) the Corporation is a reporting issuer in good standing under
the securities laws of British Columbia, Alberta and Ontario
only and no material change relating to the Corporation has
occurred with respect to which the requisite material change
report has not been filed under the securities laws of British
Columbia or Ontario and no such disclosure has been made on a
confidential basis;
(h) the Corporation has (and, in the case of the Prospectus
Qualification, will have) full corporate power and authority
to undertake the Offering, the Prospectus Qualification, the
Merger and all other transactions contemplated herein;
(i) the authorized capital of the Corporation consists of an
unlimited number of Shares and 20,000,000 Preference Shares
without nominal or par value, of which at the date hereof
35,479,742 Shares are issued and outstanding as fully paid and
nonassessable Shares;
(j) none of the materials filed by or on behalf of the Corporation
since June 7, 1996 (the "Prospectus Filing Date") with the
applicable securities commissions or the stock exchanges
contain a misrepresentation (as defined in the Securities Act
(Ontario)) as at the date of such filing which has not been
corrected;
(k) since the Prospectus Filing Date, the Corporation has not
become a party to and has not granted any agreement, warrant,
option or right or privilege capable of becoming an agreement,
for the purchase, subscription or issuance of any Shares or
securities convertible into or exchangeable for Shares except
for stock options issued to certain employees, directors and
consultants of the Corporation under the Corporation's Share
Incentive Plan which Shares, when issued, shall be issued as
fully paid and non-assessable shares;
(l) each of this Agreement, the Subscription Agreements, the
Special Warrant Indenture, the Debenture Indenture, the Merger
Agreement and the Debentures, has been, or will be upon
execution (and in the case of the Subscription Agreements,
acceptance) thereof, duly authorized, executed and delivered
by the Corporation and constitutes, or will constitute when
executed, a legal, valid and
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binding obligation of the Corporation enforceable in
accordance with their respective terms except that: (i) the
enforcement thereof may be limited by bankruptcy, insolvency
and other laws affecting the enforcement of creditors' rights
generally; (ii) rights of indemnity, contribution and waiver
of contribution thereunder may be limited under applicable
law; and (iii) equitable remedies, including, without
limitation, specific performance and injunctive relief, may be
granted only in the discretion of a court of competent
jurisdiction;
(m) the entering into of each of this Agreement, the Subscription Agreements,
the Special Warrant Indenture, the Debenture Indenture, the Merger
Agreement, the issuance of the Debentures upon exercise of the Special
Warrants and the issuance of the Shares issuable upon conversion of the
Debentures, the completion of the Merger and the other transactions
contemplated in the Merger Agreement in the manner contemplated therein and
the performance of the transactions contemplated hereby and thereby will
not result in a breach of, and do not create a state of facts which, after
notice or lapse of time or both, will result in a breach of, and do not and
will not conflict with, any of the material terms, conditions or provisions
of the constating documents or by-laws of the Corporation (or any of its
Subsidiaries) or any material trust indenture, agreement or instrument to
which the Corporation (or any of its Subsidiaries) is a party or by which
the Corporation (or any of its Subsidiaries) is or will be contractually
bound as of the Time of Closing, of which they have knowledge, after due
inquiry;
(n) except as publicly disclosed, no legal or governmental proceedings are
pending or, to the knowledge of the Corporation, are contemplated or
threatened to which the Corporation and/or any of its Subsidiaries is a
party or to which the property of the Corporation and/or any of its
Subsidiaries is subject that would result individually or in the aggregate
in any material adverse change in the operation, business or condition of
the Corporation, on a consolidated basis;
(o) the audited consolidated annual financial statements of the Corporation as
at and tor the period ended December 31, 1995 contained in the
Corporation's annual report for the year ended December 31, 1995:
(i) have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with those of preceding fiscal
periods;
(ii) represent fully, fairly and correctly the consolidated assets, liabilities
and financial condition of the Corporation as at December 31. 1995 and the
consolidated results of its operations and the changes in its financial
position for the year then ended;
(iii) are in accordance with the books and records of the Corporation; and
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(iv) contain and reflect all necessary adjustments for the fair presentation of
the results of operations and the financial condition of the business of
the Corporation on a consolidated basis for the period covered thereby, and
there has not been any material adverse change in the financial position of
the Corporation, or its business, assets, liabilities or undertaking since
December 31, 1995 other than as specified in the Public Record (defined
below);
(p) the unaudited consolidated interim financial statements of the Corporation
and its subsidiaries as at and for the nine month period ended September
30, 1996 previously publicly disclosed:
(i) have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with those of preceding interim
periods;
(ii) represent fully, fairly and correctly the consolidated assets, liabilities
and financial condition of the Corporation as at September 30, 1996 and the
consolidated results of its operations and the changes in its financial
position for the nine month period then ended;
(iii) are in accordance with the books and records of the Corporation; and
(iv) contain and reflect all necessary adjustments for the fair presentation of
the results of operations and the financial condition of the business of
the Corporation on a consolidated basis for the period covered thereby, and
there has not been any material adverse change in the financial position of
the Corporation, or its business, assets, liabilities or undertaking since
September 30, 1996 other than as specified in the Public Record (defined
below);
(q) the auditors of the Corporation who audited the consolidated financial
statements for the year ended December 31, 1995 and who provided their
audit report thereon are independent public accountants as required under
applicable Canadian securities laws;
(r) there has not in the last five fiscal years been any reportable
disagreement (within the meaning of National Policy Statement No. 31) with
the present or any former auditors of the Corporation;
(s) each of the Corporation and its Subsidiaries has filed all necessary tax
returns and notices and, to the knowledge of the Corporation after due
inquiry, has paid all applicable taxes of whatever nature for all tax years
to the date hereof to the extent such taxes have become due or have been
alleged to be due and neither the Corporation nor its Subsidiaries is aware
of any tax deficiencies or interest or penalties accrued or accruing, or
alleged to be accrued or accruing, thereon with respect to itself where, in
any of the above cases, it might reasonably be expected
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to result in a material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Corporation or its Subsidiaries taken as a whole;
(t) other than the Agents, there is no person, firm or corporation acting or
purporting to act at the request of the Corporation, who is entitled to any
brokerage or finder' s fee in connection with the transactions contemplated
herein. In the event that any person, firm or corporation acting or
purporting to act for the Corporation establishes a claim for any fee from
the Agents, the Corporation covenants to indemnify and hold harmless the
Agents with respect thereto and with respect to all costs reasonably
incurred in the defense thereof;
(u) the Corporation and each of its Subsidiaries is validly existing and is
current and up-to-date with all material filings required to be made by it
under the corporate laws of its jurisdiction of incorporation and the
securities laws of the provinces of Canada where it is a reporting issuer
or its equivalent, as applicable, and has all requisite corporate capacity,
power and authority to carry on its business as now conducted by it and as
is presently proposed to be conducted by it and to own its assets and to
carry out the provisions of this Agreement and the transactions
contemplated hereunder;
(v) all of the Corporation's issued and outstanding Shares and Shares reserved
or allotted for issue (except for the Shares issuable under the Debentures)
are listed for trading on the TSE and Amex;
(w) as a result of not listing the Debentures with Amex and not obtaining the
approval of Amex to list such Debentures, and the Shares issuable
thereunder, the Corporation will not be in default of any of the rules and
regulations of Amex;
(x) the prospectus (the "1996 Prospectus") dated June 7, 1996 of the
Corporation constitutes full, true and plain disclosure of all material
facts relating to the Corporation as at the date thereof and does not omit
to state any material fact that is required to be stated in light of the
circumstances in order to make the statements contained therein not
misleading as at the date thereof;
(y) all material changes relating to the business and affairs of the
Corporation and its Subsidiaries occurring on and after the Prospectus
Filing Date have been disclosed v press releases and material change
reports and in the interim financial statements prepared and filed with the
Securities Commissions (the "Public Record");
(z) the Corporation has not withheld, and will not withhold, from the Agents
any facts relating to the Corporation or to the Offering or the Merger that
would be material to a prospective purchaser of the Special Warrants;
(aa) the Corporation, directly or indirectly, owns all material right, title and
interest in its properties as disclosed in the 1996 Prospectus and the
Public Record and
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the properties are free and clear of any material liens,
charges or encumbrances and no royalty is payable in respect
of any of them except as set out in the 1996 Prospectus and
the Public Record. No other material property rights are
necessary for the conduct of the Corporation's or its
Subsidiaries business. There are no material restrictions on
the ability of the Corporation or its Subsidiaries to use,
transfer or otherwise exploit any such property rights except
as set out in the 1996 Prospectus and the Public Record, and
the Corporation and the Subsidiaries do not know of any
material claim or material basis for a claim that may
adversely affect such rights and is not aware of any fact or
circumstance that would or could materially adversely affect
that right, title and interest;
(bb) except as described in the 1996 Prospectus and the Public
Record and except as contemplated under the Merger Agreement,
there are no material contracts or arrangements to which
either the Corporation (or any of its Subsidiaries) is a party
to or by which it is bound or to which the Corporation expects
to become a party or bound before the Prospectus
Qualification;
(cc) no order ceasing or suspending trading in securities of the
Corporation or prohibiting the sale of securities by the
Corporation has been issued and, to the knowledge of the
Corporation, no proceedings for this purpose have been
instituted, are pending, contemplated or threatened since the
Prospectus Filing Date;
(dd) the Corporation has not, directly or indirectly, declared or
paid any dividend or declared or made any other distribution
on any of its Shares or securities or, directly or indirectly,
redeemed, purchased or otherwise acquired any of its Shares or
securities or agreed to do any of the foregoing since the
Prospectus Filing Date;
(ee) there is not in the constating documents of the Corporation or
in any material agreement, mortgage, note, debenture,
indenture or other instrument or document to which the
Corporation is a party, except certain credit arrangements
with Xxxxxx Xxxxxx Inc. and as described in the 1996
Prospectus and the Public Record, any restriction upon or
impediment to the declaration or payment of dividends by the
directors of the Corporation or the payment of dividends by
the Corporation to the holders of its Shares;
(ff) the Warrant Agent, at its offices in Vancouver and Toronto,
has been duly appointed as the transfer agent and registrar
for all of the outstanding common shares of the Corporation
and as at the Closing will have been duly appointed as warrant
agent in respect of the Special Warrants;
(gg) the Corporation is a "reporting issuer" within the meaning of
Regulation S "Regulation S") under the United States
Securities Act of 1933, as amended (the "1933 Act") and
neither the Corporation nor, to the knowledge of the
Corporation, any persons (other than the Agents) acting on its
behalf has engaged or will engage in any directed selling
efforts in the United States within the
144554\0514777.WP
- 11 -
meaning of Regulation S with respect to the securities
relating to the Offering, it and they have complied and will
comply with the offering restriction requirements of
Regulation S, neither the Corporation nor, to the knowledge of
the Corporation, any person acting on its behalf has offered
or will offer to sell any of the securities by means of any
form of general solicitation or general advertising (as those
terms are used in Regulation D under the 1933 Act) or in any
manner involving a public offering with the meaning of Section
4(2) of the 1933 Act;
(hh) other than the Merger Agreement, the Corporation has not
entered into, nor is a party to, any agreement or
understanding relating to any acquisition, merger or other
similar transaction; and
(ii) the Merger Agreement is the only agreement, document or other
writing reflecting the agreement or understanding between the
Corporation and USMX as to the terms and conditions of the
Merger.
4. Covenants of the Corporation - In addition to any other covenants of the
Corporation set forth herein, the Corporation hereby covenants to and with the
Agents that it shall:
(a) use its best efforts to complete the Merger in accordance with the terms of
the Merger Agreement and herein;
(b) fulfill all legal requirements to permit the creation, issuance, offering
and sale of the Special Warrants and the issuance of the Debentures
underlying the Special Warrants and the Shares issuable on conversion of
the Debentures including, without limitation, compliance with all
applicable securities legislation to enable the Special Warrants to be
offered for sale and sold without the necessity of filing a prospectus to
Purchasers in the Qualifying Jurisdictions through, in the case of the
Qualifying Provinces, registrants registered under the applicable
legislation of such Qualifying Provinces who have complied with the
relevant provisions of such legislation;
(c) use its best efforts to obtain the necessary regulatory consents from Amex
and the TSE to the Offering on such terms as are mutually acceptable to the
Agents and the Corporation, acting reasonably;
(d) use its best efforts to arrange for conditional listing approval from the
TSE with respect to the listing of the Debentures on the TSE and will seek
to obtain conditional listing approval therefor as soon as possible after
the Closing Date;
(e) use its best efforts to maintain the listing of its Common Shares on the
TSE and Amex, and the listing of Debentures on the TSE and its status as
reporting issuer and its equivalent under the securities legislation of the
Qualifying Provinces from the date hereof until one year after the Expiry
Time;
144554\0514777.WP
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(f) call a meeting of shareholders of the Corporation for a date no later than
the Shareholder Qualification Deadline to obtain the approval of not less
than 50% of the votes attached to all shares represented at such meeting
for the issue of the Shares issuable under the Debentures (the "Shareholder
Approval") issuable upon exercise of the Special Warrants, all in
compliance with the requirements of the TSE and to fulfill the requirements
for listing the Debentures on the TSE and the Shares issuable on conversion
of the Debentures on AMEX and the TSE.
(g) use its best efforts, to prepare and file in each of the Qualifying
Provinces the Preliminary Prospectus and other related documents relating
to the proposed distribution of Subject Securities to holders of Special
Warrants as soon as reasonably practicable following the Closing Date;
(h) use its best efforts to obtain receipts for the Preliminary Prospectus in
each of the Qualifying Provinces as soon as reasonably practicable;
(i) resolve as soon as reasonably practicable any regulatory deficiencies in
respect of the Preliminary Prospectus on a basis acceptable to the Agent,
acting reasonably, and, as soon as reasonably practicable after such
deficiencies have been resolved or satisfied, prepare, file and use its
best efforts to obtain receipts under the applicable legislation of each of
the Qualifying Provinces for the Prospectus and take all other reasonable
steps and proceedings that may be necessary in order to complete the
Prospectus Qualification no later than by 5:00 p.m. (Toronto time) on the
Qualification Deadline;
(j) prior to the filing of the Preliminary Prospectus and thereafter and prior
to the filing of the Prospectus and any Supplementary Material, permit the
Agents and their counsel to participate fully in the preparation of such
documents and allow the Agents and their counsel to conduct all due
diligence which the Agents may at its own unfettered discretion require to
conduct in order to fulfill its obligations under applicable securities
legislation and in order to enable the Agents responsibly to execute any
certificate required to be executed by the Agents in connection with the
Preliminary Prospectus, the Prospectus or any Supplementary Material;
(k) ensure that at the respective times of filing and at all times subsequent
to the filing thereof until completion of the distribution of the Subject
Securities, the Preliminary Prospectus, Prospectus and any Supplementary
Material it will fully comply with the requirements of applicable
securities legislation, provided that the foregoing shall not apply with
respect to statements contained in such documents relating solely to or
provided by the Agents;
(l) deliver one copy of the Prospectus and any Supplementary Material to each
holder of Special Warrants, and deliver in Toronto, within three (3)
Business Days of the issue of a receipt for the Preliminary Prospectus and
the Prospectus, as the case may be, and within three Business Days of
execution of any Supplementary Material, without charge to the Agent as
many copies of the
144554\0514777.WP
- 13 -
Preliminary Prospectus, the Prospectus and any Supplementary Material as the
Agents may reasonably request for the purposes contemplated hereunder and
contemplated by the Securities Act (Ontario), and such delivery shall
constitute: (A) the consent of the Corporation to use such documents in
connection with the distribution or the distribution to the public, as the
case may be, of the Subject Securities subject to the provisions of the
securities legislation of the Qualifying Provinces; and (B) the
Corporation's representation and warranty to the Agent that, at the time of
delivery, the information and statements contained therein (except
information and statements relating solely to or provided by the Agent)
contain no misrepresentation and constitute full, true and plain disclosure
of all material facts (as defined in the Securities Act (Ontario)) relating
to the Offering, the Corporation, the Special Warrants and the Subject
Securities;
(m) cause to be delivered to the Agents concurrently with the filing of the
Prospectus and any Supplementary Material, comfort letters of the auditors
of the Corporation in each case dated the date of the Prospectus or the
Supplementary Material to which such letter relates (as the case may be)
addressed to the Agents and to the directors of the Corporation in form and
substance satisfactory to the Agents acting reasonably, relating to the
financial statements to be included in the Prospectus and ny Supplementary
Material and verifying in accordance with the Canadian Institute of
Chartered Accountants Handbook the financial information, accounting data
and other numerical data contained in the Prospectus or any Supplementary
Material and matters involving changes or developments since the respective
dates as of which specified financial information is given in the
Prospectus or the Supplementary Material to a date not more than two (2)
Business Days prior to the date of such letter;
(n) use its reasonable best efforts to ensure that until the Expiry Time the
Debentures and the Shares do not constitute "foreign property" within the
meaning of the Income Tax Act (Canada) or any amendments thereto publicly
announced by the Minister of Finance from time to time;
(o) not, without the Agents' prior written approval, amend the attributes of
the Special Warrants, the Debentures or the Shares until the Expiry Time;
(p) not, without the Agents' prior written approval, issue any Shares or other
financial instruments convertible or exercisable into Shares of the
Corporation, other than for purposes of employee or director stock options
or to satisfy any prior outstanding obligations of the Corporation to issue
shares as disclosed in the 1996 Prospectus or the Public Record or as
contemplated herein, for a period of 90 days from the Qualification Date;
(q) use the net proceeds of the Offering for the purposes set forth in the
terms described in the term sheet attached hereto as Schedule "A"; and
(r) comply with the provisions of the term sheet attached hereto as Schedule
"A".
144554\0514777.WP
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(s) use its reasonable best efforts to provide to the Agents and to the Agents'
counsel copies of all documents and other materials obtained or reviewed by
the Corporation in connection with its due diligence examination of the
business and affairs of USMX in anticipation of the Merger, and promptly to
inform the Agents and the Agents' counsel of all matters and developments
relating to the progress of the Merger, including without limitation the
Prospectus Qualification, the Shareholder Approval, and all legal and
regulatory matters pertaining thereto and to the Merger;
(t) use its reasonable best efforts to provide the certificates and legal
opinions pertaining to USMX as required under Section 5 hereof;
(u) provide to the Agents forthwith upon completion of the Merger a certificate
of the Corporation and USMX signed by the Chief Executive Officer.and the
Chief Financial Officer of the Corporation and USMX, as applicable,
certifying as to the date of the Merger (the "Merger Date"), and the
completion of the Merger in accordance with the provisions of the Merger
Agreement, that:
(i) the Corporation and USMX, as applicable, has complied with all
covenants and satisfied all terms and conditions of the Merger
Agreement on its part to be complied with and satisfied as at the
Merger Date;
(ii) the Merger Agreement has not been materially amended or modified; and
(iii)arrangements satisfactory to the Corporation and to the Agent have
been made with respect to obtaining the consent and cooperation of
N.M. Rothschilds & Sons Limited (the "Lender") with respect to the
Merger;
(v) provide to the Agents forthwith upon completion of the Merger a copy of the
opinions delivered pursuant to the Merger Agreement, which shall also be
addressed to the Agents, and a legal opinion of the Corporation's counsel and to
use its reasonable best efforts to provide a legal opinion of USMX's counsel, as
applicable, confirming that:
(i) the Merger was completed in accordance with the provisions
of the Merger Agreement;
(ii) the Merger Agreement constitutes a valid and binding
obligation of the Corporation, enforceable against the
Corporation in accordance with the terms;
(iii)all necessary approvals and actions having been obtained or
taken by the Corporation and USMX in respect of the Merger;
(iv) the corporation created by the completion of the Merger
("Amalco") is a corporation validly existing under the laws
of its jurisdiction of incorporation and is qualified to
carry on business and own its assets
144554\0514777.WP
- 15 -
underthe laws of each jurisdiction in which it carries on
business and owns its assets;
(v) Amalco has all requisite corporate capacity, power and
authority to carry on its business as previously
conducted by USMX and to own the assets of USMX;
(vi) the registered holder of 100% of the issued and
outstanding shares in the capital of Amalco is the
Corporation; and
(vii)as to the authorized and issued shares of the
Corporation and the shares issuable following the
Merger;
(w) provide to the Agents prior to the earlier of the
Qualification Deadline and the Merger Date a favorable legal
opinion of the USMX's local Alaska counsel, addressed to the
Agents and to the Purchasers, acceptable to counsel to the
Agents, with respect to certain matters affecting USMX and
USMX of Alaska, Inc. in connection with the Offering and the
Merger, including:
(i) the status of the credit arrangements with the Lender
and the adequacy and enforceability of the consent
given by them to the Merger; and
(ii) the status of the lease arrangements with North Pacific
Mining Corporation and the requirement, if any, as to
their consent to the Merger;
(x) use its reasonable best efforts to provide to the Agents prior to the
earlier of the Qualification Deadline and the Merger Date a favorable legal
opinion of USMX' s United States counsel. addressed to the Agents and to
the Purchasers, acceptable to counsel to the Agents acting reasonably. with
respect to the operating subsidiaries of USMX other than the USMX
Subsidiaries (as defined below) the "Other USMX Subsidiaries") and such
other matters as the Agents may reasonably request in connection with the
Offering and the Merger, substantially to the effect that:
(i) the Other USMX Subsidiary has been duly incorporated and is existing under
the laws of its jurisdiction of incorporation;
(ii) the Other USMX Subsidiary has all necessary corporate capacity to own,
lease and operate their respective properties and assets and to conduct
their respective businesses at and in the places where such properties and
assets are now owned, leased or operated or such businesses are now
conducted;
(iii)the Other USMX Subsidiary has full and undisputed title to all of the
material mineral resource properties over which it is conducting or will
conduct surveying, exploration, testing or mining activities;
144554\0514777.WP
- 16 -
(iv) USMX is shown on the share register of each Other USMX Subsidiary as the
registered holder of all the issued and outstanding shares in the capital
of the Other USMX Subsidiary (with any modification necessary to reflect
the actual holdings of the Corporation); In giving the opinions
contemplated above, such counsel shall be entitled to rely, where
appropriate, as to matters of fact, upon certificates of fact of the
Corporation and USMX signed by officers of each such corporation in a
position to have knowledge of such facts and their accuracy, and
certificates of such public officials and other persons as are necessary or
desirable.
(y) comply fully with all relevant statutory and regulatory requirements
required by Amex to be complied with in connection with the Offering prior
to the earlier of the Qualification Deadline and the Merger Date;
(z) use its best efforts to receive prior to the earlier of the Qualification
Deadline and the Merger Date the approval of Amex to proceed with the
Offering, and to list the Shares issuable upon conversion of the Debentures
for trading on Amex, subject to the usual conditions;
(aa) provide to the Agents a certified copy of documents as to the
following matters prior to the earlier of the Qualification
Deadline and the Merger Date unless otherwise indicated below:
(i) materials respecting the meeting of shareholders of
the Corporation held to obtain the Shareholder
Approval and approval of the Merger, and the
resolutions of the shareholders of each of the
Corporation and USMX providing the Shareholder
Approval and approval of the Merger, as applicable,
and a certificate of the Transfer Agent as to such
approvals;
(ii) the loan documentation respecting the USMX Loan,
forthwith upon the execution of such documentation;
and
(iii) any agreement or documentation with the Lender
amending the terms of the credit arrangements between
the Lender and USMX, or waiver of any default
thereunder, or standstill agreement of the Lender, or
other arrangement between either or both of USMX and
the Corporation on the one hand and the Lender on the
other hand.
With respect to the covenants at (u), (v), (w), (y) (z), and
(aa) above, failure of the Corporation to fulfill such covenants or to deliver
such certificates shall entitle the Agents at their unfettered discretion to
refuse to sign the certificate of the Agents required by the Special Warrant
Indenture to be executed as a pre-condition for the release any of the Escrowed
Proceeds, and refuse to sign the certificate required to be executed by the
Agents in connection with the (final) Prospectus qualifying the Special Warrants
and the Subject Securities, as the Agents may see fit.
144554\0514777.WP
- 17 -
5. Conditions of Closing - The obligations of the Agents hereunder and the
Purchasers to complete the purchase of the Special Warrants contemplated hereby
shall be conditional upon the fulfillment at or before the Time of Closing (as
defined below) of the following conditions:
(a) the Corporation having obtained all requisite regulatory
approvals required to be obtained by the Corporation in
respect of the Offering on terms mutually acceptable to the
Corporation and the Agent acting reasonably;
(b) the Corporation and the Agents having complied fully with all
relevant statutory and regulatory requirements required to be
complied with prior to the Time of Closing (including without
limitation those of the TSE in connection with the Offering);
(c) the Corporation having received the approval of the TSE to
proceed with the Offering, and to list the Shares issuable
upon conversion of the Debentures for trading on the TSE,
subject to the usual conditions;
(d) the Corporation having taken all necessary corporate action to
authorize and approve this Agreement, the Subscription
Agreements, the Special Warrant Indenture, the Debenture
Indenture and the issuance of the Special Warrants, the
Subject Securities and all other matters relating thereto;
(e) the Agents having received at Closing a favorable legal opinion
of the Corporation' s United States counsel and of McCarthy,
Tetrault, Canadian counsel to the Corporation, addressed to the
Agents and to the Purchasers, acceptable in all reasonable
respects to counsel to the Agents, to the effect, in the case of
the Corporation's United States counsel, that no registration of
the Special Warrants, Debentures or Shares is required under the
United States Securities Act of 1933, as amended, and, in the
case of the Corporation's Canadian counsel in the form set forth
in Schedule "D" attached hereto, and with respect to such other
matters as the Agents may reasonably request in connection with
the Offering.
(f) the Agents having received at Closing a favorable legal
opinion of USMX's United States counsel, addressed to the
Agents and to the Purchasers, acceptable to counsel to the
Agents acting reasonably, with respect to USMX and to its
subsidiaries USMX of Utah, Inc. and Southern Gold Resources
Ltd. (the "USMX Subsidiaries") and such other matters as the
Agents may reasonably request in connection with the Offering
and the Merger, substantially to the effect that:
(i) USMX has been duly incorporated and is existing under the laws o
Delaware;
(ii) each USMX Subsidiary has been duly incorporated and is existing
under the laws of its jurisdiction of incorporation;
144554\0514777.WP
- 18 -
(iii)USMX and each USMX Subsidiary have all necessary corporate
capacity to own, lease and operate their respective properties
and assets and to conduct their respective businesses at and in
the places where such properties and assets are now owned, leased
or operated or such businesses are now conducted;
(iv) the USMX Subsidiary has full and undisputed title to all of the
material mineral resource properties over which it is conducting
or will conduct surveying, exploration, testing or mining
activities;
(v) USMX is shown on the share register of each USMX Subsidiary as
the registered holder of all the issued and outstanding shares in
the capital of the USMX Subsidiary (with any modification
necessary to reflect the actual holdings of the Corporation);
(vi) the authorized capital of USMX consists of 65,000,000 shares,
divided into 45,000,000 Shares and 20,000 preferred shares of
which, as at the Closing Date, 16,184,182 Shares are issued and
outstanding (relying solely on a certificate of the Trustee);
(vii)the Merger Agreement and all documents or agreements relating
thereto (the "Agreements") have been duly authorized by all
necessary corporate action on the part of USMX, and will upon due
execution and delivery by and on behalf of USMX constitute legal,
valid and binding obligations of USMX enforceable in accordance
with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally, except that specific
performance and injunction are equitable remedies which may only
be granted in the discretion of a court of competent jurisdiction
and except as rights to indemnity, contribution and waiver of
contribution may be limited under applicable law; and
(viii) the execution and delivery of the Agreements, and the
fulfillment of the terms thereof, does not and will not conflict
with and does not and will not result in a breach of, any of the
terms, conditions or provisions of the constating documents of
USMX.
(g) the Agents having received at Closing favorable legal opinions of the
Corporation's local counsel with respect to each subsidiary of the
Corporation holding an interest in a material mining property of the
Corporation (each, a "Subsidiary") addressed to the Agents, and each of the
Purchasers, acceptable to counsel to the Agents, to the effect that:
(i) the Subsidiary is a corporation validly existing under the laws of its
jurisdiction of incorporation and is qualified to carry on business
and own its assets under the laws of each jurisdiction in which it
carries on business and owns its assets;
144554\0514777.WP
- 19 -
(ii) the Subsidiary has all requisite corporate capacity, power and
authority to carry on its business as is now conducted by it and to
own its assets;
(iii)the registered holder of 100% of the issued and outstanding shares in
the capital of the Subsidiary is the Corporation, adjusted to reflect
actual ownership, as necessary; and
(iv) the Subsidiary has full and undisputed title to all of the mineral
resource properties over which it is conducting or will conduct
surveying, exploration, testing or mining activities. In giving the
opinions contemplated in (e), (f) and (g), above, counsel to the
Corporation and to USMX shall be entitled to rely, where appropriate,
as to matters of fact, upon the representations and warranties of
Purchasers contained in the executed Subscription Agreements, a
certificate of fact of the Corporation or USMX, where applicable,
signed by officers in a position to have knowledge of such facts and
their accuracy, a certificate from the Corporation's registrar and
transfer agent with respect to the number of Shares issued and
outstanding and certificates of such public officials and other
persons as are necessary or desirable.
(h) the Agents and each of the Purchasers having received a certificate of the
Corporation dated the Closing Date signed by the Chief Executive Officer of
the Corporation and the Chief Financial Officer of the Corporation or by
such other executive officers acceptable to the Agents certifying as to
certain matters reasonably requested by the Agents including certification
that:
(i) the Corporation has complied with all covenants and satisfied all
terms and conditions of this Agreement on its part to be complied with
and satisfied up to the Time of Closing;
(ii) since September 30, 1996, there has been no material adverse change
(actual, proposed or prospective, whether financial or otherwise) in
the business, affairs, operations, assets, liabilities (contingent or
otherwise) or capital of the Corporation and its subsidiaries taken as
a whole, except a disclosed in the Public Record;
(iii)no order, ruling or determination having the effect of ceasing or
suspending trading in any securities of the Corporation (including the
Special Warrants and the Subject Securities) has been issued and no
proceedings for such purposes, or, to the knowledge of such officers,
are pending, contemplated or threatened;
(iv) the Corporation is a "reporting issuer" not in default under the
securities laws of each of the provinces in which it is a reporting
issuer and no material change relating to the Corporation has occurred
with respect to which the requisite material change statement has not
been filed, unless
144554\0514777.WP
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the Offering contemplated hereby constitutes a material change, and
currently no disclosure of any material change has been made on a
confidential basis; and
(v) the execution and delivery of this Agreement, the Subscription
Agreements and the Special Warrant Indenture, the Debenture Indenture,
and the performance of the transactions contemplated thereby do not
and will not result in a breach of, and do not create a state of facts
which, after notice, or lapse of time or both, will result in a breach
of, and do not and will not conflict with, any of the terms,
conditions or provisions of the constating documents or by-laws of the
Corporation or any trust indenture, agreement, or instrument to which
the Corporation is contractually bound on the Closing Date (as defined
below);
(i) the Agents and each of the Purchasers having received a
certificate of USMX dated the Closing Date signed by the Chief
Executive Officer of USMX and the Chief Financial Officer of USMX
or by such other executive officers acceptable to the Agents
certifying as to certain matters reasonably requested by the
Agents including certification that:
(i) USMX has complied with all covenants and satisfied all terms and
conditions of the Merger Agreement on its part to be complied
with and satisfied up to the Time of Closing (as defined below)
to the extent that such covenants, terms and conditions could be
satisfied as at the Closing Date using the best efforts of USMX;
and
(ii) all of the representations and warranties of USMX contained in
the Merger Agreement are true and correct as of the Closing Date
with the same force and effect as if made at and as of the Merger
Date, after giving effect to the transactions contemplated
thereby;
(iii)since November 1, 1996, there has been no material adverse change
(actual, proposed or prospective, whether financial or otherwise)
in the business, affairs, operations, assets, liabilities
(contingent or otherwise) or capital of the USMX and its
subsidiaries taken as a whole;
(iv) no order, ruling or determination having the effect of ceasing or
suspending trading in any securities of USMX has been issued and
no proceedings for such purposes are pending, or, to the
knowledge of such officers, pending, contemplated or threatened;
(v) USMX is a "reporting issuer" not in default under the securities
laws of each of the jurisdictions in which it is a reporting
issuer and no material change relating to USMX has occurred with
respect to which the requisite material change statement or its
equivalent has not been filed unless the Offering contemplated
hereby or the Merger constitutes a material change
144554\0514777.WP
- 21 -
and currently no disclosure of any material change has been made on a
confidential basis; and
(vi) the execution and delivery of the Merger Agreement, and the
performance of the transactions contemplated thereby will not
result in a breach of, and will not create a state of facts
which, after notice, or lapse of time or both, will result in a
breach of, and do not and will not conflict with, any of the
terms, conditions or provisions of the constating documents or
by-laws of USMX or any trust indenture, agreement, or instrument
to which USMX is contractually bound on the Closing Date;
(j) the Corporation shall have delivered to the Agents a certificate of the
Warrant Agent as registrar and transfer agent which certifies the issued
and outstanding Shares s at the Closing Date (as hereinafter defined);
(k) the Special Warrant Indenture and the Debenture Indenture, each in form
acceptable to the Agents, shall have been executed and delivered by the
Corporation and the Warrant Agent for the holders of the Special Warrants;
(l) the Corporation shall have delivered opinions of local counsel for the
Corporation pertaining to the material mineral properties owned or held by
the Corporation directly or indirectly and with respect to such additional
properties of the Company as the Agents may reasonably request;
(m) the Corporation shall have delivered opinions of local counsel for USMX
pertaining to the material mineral properties owned or held by USMX
directly or indirectly and with respect to such additional properties of
the Company as the Agents may reasonably request
(n) the Agents being satisfied as to the reasonable likelihood that the
Shareholder Approval shall be obtained prior to the Shareholder
Qualification Deadline; and
(o) the Agents shall be satisfied in their sole discretion with such due
diligence of the Corporation as the Agent or their representatives deem
appropriate.
6. Closing - The purchase and sale of the Special Warrants (the "Closing") shall
be completed at the offices of McCarthy, Xxxxxxxx, Xxxxx 0000, Xxxxxxx-Xxxxxxxx
Xxxxx, Xxxxxxx-Dominion Centre, Toronto, Ontario M5K 1E6, at 10:00 a.m. (Toronto
time) (the "Time of Closing") on February 5, 1997 or at such other time or on
such other date prior to February 21, 1997 as the Corporation and the Agents may
agree upon (the "Closing Date").
At or before the Time of Closing, the Corporation shall
deliver to the Agent:
(a) certificates representing the Special Warrants duly registered as the
Purchasers may direct;
144554\0514777.WP
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(b) the requisite legal opinions and certificates as contemplated in section 5
hereof; and
(c) such further documentation as may be contemplated herein or as counsel to
the Agents or the applicable regulatory authorities may reasonably require;
against delivery by the Agents to the Corporation or the Warrant Agent, as
applicable, of certified cheques or bank drafts payable to the Corporation
in an aggregate amount of Cdn.$25 million representing Cdn.$1,000 per
Special Warrant (subject to deduction of the Agents' Commission as noted
herein). The Corporation further agrees that it shall provide to the Agents
at such addresses as they may specify including Toronto, Ontario
certificates representing the Special Warrants sufficiently in advance of
the Closing, to be held in escrow by the Agents pending the Closing, in
order to allow the Agents to effect proper delivery thereof to the
Purchasers at the Time of Closing.
7. Expenses - Whether or not Closing occurs, the Corporation shall pay all
costs, fees and expenses of or incidental to the performance of the obligations
under this Agreement including, without limitation: (i) the cost of qualifying
the Subject Securities for distribution in the Qualifying Provinces, (ii) the
cost of printing the Preliminary Prospectus, the Prospectus, an Supplementary
Material and certificates for the Special Warrants and the Subject Securities,
(iii) registration, countersignature and delivery of the Special Warrants and
Subject Securities, (iv) the tees and expenses of the Corporation's auditors,
counsel and any local counsel, (v) the fees and expenses of the Agents' counsel
(to a maximum, exclusive of disbursements and GST of Canadian 575,000) and (vi)
the Agents' reasonable out-of-pocket expenses (including marketing expenses).
Such amounts payable to the Agents shall be paid by the Corporation at the Time
of Closing to the Agents in respect of expenses and fees incurred to such date
and supported by invoices and as and when invoices are rendered in respect of
expenses and fees incurred after the Time of Closing.
8. Material Changes - If after the date hereof until the Expiry Time:
(a) there occurs any material change or material changes (actual, proposed
or prospective) in respect of the Corporation or any of its
subsidiaries;
(b) there occurs any change in any material fact contained in the
Preliminary Prospectus, Prospectus or any Supplementary Material; or
(c) any new material fact arises which would, under the securities
legislation of any of the Qualifying Provinces, require an amendment
to the Preliminary Prospectus, Prospectus or any Supplementary
Material, the Corporation shall:
(i) promptly notify the Agents, in writing, providing full
particulars of any such change;
144554\0514777.WP
- 23 -
(ii) if required by applicable law, prepare and deliver to each
Purchaser an amendment to the Preliminary Prospectus or
Prospectus, as the case may be;
(iii)file or cause to be filed with reasonable promptness, and in any
event within any statutory limitation period therefor, any
document required to be filed with any regulatory body having
jurisdiction and comply with all requirements of any applicable
securities legislation of such jurisdiction; and
(iv) comply with all legal requirements necessary to continue to
qualify the Subject Securities for distribution in the Qualifying
Provinces.
The Corporation shall in good faith discuss with the Agents
any change in circumstances (actual, proposed or prospective) in respect of
which there is reasonable doubt whether written notice should be given to the
Agents pursuant to this section and shall consult with the Agent with respect to
the form and content of any Supplementary Material proposed to be issued or
filed by the Corporation as a result of such change prior to the issuance or
filing thereof.
In this Agreement, the terms "material change", "material
fact", "misrepresentation" and "distribution" include the respective meanings
ascribed thereto in the Securities Act (Ontario).
9. Indemnities - In addition to any other indemnities given to the Agents by the
Corporation, the Corporation hereby covenants and agrees to protect, indemnify
and hold harmless each of the Agents and their respective directors, officers
and employees, solicitors and agents (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties" from and against all losses (except for
loss of profits), claims, costs, damages or liabilities which they may suffer or
incur caused by or arising directly or indirectly by reason of:
(i) any information or statement (except any information or statement
relating solely to or provided by the Agents) contained in the
Preliminary Prospectus, Prospectus or any Supplementary Material
being or being alleged to be a misrepresentation;
(ii) the omission to state in the Preliminary Prospectus, Prospectus
or any Supplementary Material a material fact required to be
stated therein or necessary to make the statements therein not
misleading (except the omission to state a material fact relating
solely to the Agent);
(iii)the Corporation not complying with any requirement of any
securities legislation or regulatory requirements of any
Qualifying Province in connection with the Offering or the
Prospectus Qualification;
(iv) any order made or any inquiry, investigation or proceeding
commenced or threatened by any regulatory authority based upon an
allegation that
144554\0514777.WP
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any untrue statement or alleged omission or any misrepresentation or
alleged misrepresentation in the Preliminary Prospectus, the
Prospectus or any Supplementary Material exists (except any
information or statement relating solely to or provided by the
Agents) which prevents or restricts the trading in or
distribution of the Special Warrants or the Subject Securities;
or
(v) The Corporation's failure to comply with any of its obligations
hereunder.
If any action or claim shall be asserted against an
Indemnified Party in respect of which indemnity may be sought from the
Corporation pursuant to the provisions hereof, or if any potential claim
contemplated by this section shall come to the knowledge of an Indemnified
Party, the Indemnified Party shall promptly notify the Corporation in writing of
the nature of such action or claim (provided that any failure to so notify shall
not affect the Corporation's liability under this paragraph unless such delay
has prejudiced the defense to such claim). The Corporation shall be entitled but
not obliged to participate in or assume the defense thereof, provided, however
that the defense shall be through legal counsel acceptable to the Indemnified
Party, acting reasonably. In addition, the Indemnified Party shall also have the
right to employ separate counsel in any such action and participate in the
defense thereof, and the fees and expense of such counsel shall be borne by the
Indemnified Party, unless (i) the employment thereof has been specifically
authorized in writing by the Corporation; (ii) the Indemnified Party has been
advised by counsel acceptable to the Corporation, acting reasonably, that
representation of the Corporation and the Indemnified Party by the same counsel
would be inappropriate due to actual or potential differing interests between
them; or (iii) the Corporation has failed within a reasonable time after receipt
of such written notice to assume the defense of such action or claim. It is
understood and agreed that the Corporation shall not, in connection with any
suit in the same jurisdiction, be liable for the legal fees and expenses of more
than one separate legal firm to represent the Indemnified Parties. Neither party
shall effect any settlement of any such action or claim or make any admission of
liability without the written consent of the other party, such consent not to be
unreasonably withheld or delayed. The indemnity hereby provided for shall remain
in full force and effect and shall not be limited to or affected by any other
indemnity in respect of any matters specified in this section obtained by the
Indemnified Party from any other person.
To the extent that any Indemnified Party is not a party to
this Agreement the Agents shall obtain and hold the right and benefit of this
section in trust for and on behalf of such Indemnified Party.
The Corporation hereby waives its right to recover
contribution from the Agents with respect to any liability of the Corporation by
reason of or arising out of any misrepresentation contained in the Preliminary
Prospectus, the Prospectus or in any Supplementary Material; provided, however,
that such waiver shall not apply in respect of liability caused or incurred by
reason of or arising out of any misrepresentation which is based upon or results
from information relating solely to and provided by the Agents contained in such
document.
144554\0514777.WP
- 25 -
The Corporation hereby consents to personal jurisdiction and
service and venue in any court in which any claim which is subject to
indemnification hereunder is brought against the Agents or any Indemnified Party
and to the assignment of the benefit of this section to any Indemnified Party
for the purpose of enforcement provided that nothing herein shall limit the
Corporation's right or ability to contest the appropriate jurisdiction or forum
for the determination of any such claims.
10. Contribution - In the event that, for any reason, the indemnity provided for
in section 9 hereof is illegal or unenforceable, the Agents and the Corporation
shall contribute to the aggregate of all losses, claims, costs, damages,
expenses or liabilities (except loss of profits in connection with the sale of
Special Warrants) of the nature provided for in section 9 hereof such that the
Agents shall be responsible for that portion represented by the percentage that
the Agents' Commission bears to the gross proceeds from the Offering and the
Corporation shall be responsible for the balance. The Agents shall not in any
event be liable to contribute, in the aggregate, any amounts in excess of the
Agents' Commission or any portion thereof actually received. Notwithstanding the
foregoing, a person guilty of fraudulent misrepresentation shall not be entitled
to contribution from any other party. Any party entitled to contribution will,
promptly after receiving notice of commencement of any claim, action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this section, notify such party
or parties from whom contribution may be sought. In no case shall such party
from whom contribution may be sought be liable under this contribution agreement
unless such notice shall have been provided, but the omission to so notify such
party shall not relieve the party from whom contribution may be sought from any
other obligation it may have otherwise than under this section. The right to
contribution provided in this section shall be in addition and not in derogation
of any other right to contribution which the Agents may have by statute or
otherwise by law.
11. Termination Rights - If any time prior to the Closing:
(i) there shall occur or come into effect any event, condition or
circumstance which, in the sole opinion of the Agents,
constitutes a material change, financial or otherwise in the
business, affairs or condition of the Corporation or its
subsidiaries, taken as a whole, or there arises or there is
disclosure of a material fact or a change in a material fact
which in the sole opinion of the Agent might be expected to
prevent or restrict the Offering or Prospectus Qualification; or
(ii) any order or ruling is issued, any inquiry, investigation or
other proceeding (whether formal or informal) in relation to the
Corporation is made, threatened or announced by any officer or
official of any stock exchange, securities commission or other
regulatory authority, or any law or regulation is promulgated or
changed which, in the Agent' sole opinion, would or could operate
to prevent or restrict trading in or the distribution of the
Special Warrants or Subject Securities or would or could
materially and adversely affect the marketability or sale of the
Special Warrants or Subject Securities as contemplated hereby; or
144554\0514777.WP
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(iii)the Agents should determine in their sole opinion that the
Special Warrants or Subject Securities cannot be profitably
marketed or sold; or
(iv) there should develop, occur or come into effect any occurrence,
catastrophe, crisis or accident of national or international
consequence or any other event, action, governmental regulation,
inquiry or other occurrence of any nature whatsoever including
any outbreak of war, rebellion or armed hostilities which, in the
sole opinion of the Agents, would or could materially and
adversely affect the marketability or sale of the Special
Warrants or Subject Securities, the financial markets in Canada
or elsewhere where the Special Warrants are marketed or proposed
to be marketed or the business of the Corporation or its
subsidiaries; the determination of the occurrence of any of such
events may be made by any Agent, and shall entitle that Agent to
terminate the obligations of that Agent hereunder. In the event
that such termination should occur by any Agent, the other Agents
may, but are not obligated to, fulfill the obligations of that
Agent hereunder. In the event of such termination by the Agents,
there shall be no further liability of the Corporation or the
Agents to one another hereunder, except in respect of any
liability which may have arisen or may thereafter arise pursuant
to sections 7, 9 or 10.
The right of the Agents to terminate their obligations under
this Agreement is in addition to such other remedies as they may have in respect
of any default, act or failure to act of the Corporation in respect of any of
the matters contemplated by this Agreement.
12. Breach of Agreement - Any breach of, or failure by the Corporation to comply
with, any term or condition of this Agreement shall entitle the Agents, on
behalf of the Purchasers, of the Special Warrants, to terminate its obligations
to sell the Special Warrants by notice to that effect given to the Corporation
prior to the Time of Closing. In the event of any such termination, there shall
be no further liability on the part of the Corporation or the Agents except in
respect of any liability which may have arisen or may thereafter arise under
sections 7, 9 or 10 hereof. The Agents may waive, in whole or in part, or extend
the time for compliance with, any terms and conditions without prejudice to its
rights in respect of any other terms and conditions or any other or subsequent
breach or non-compliance provided, however, that any waiver or extension must be
in writing and signed by the Agents in order to be binding upon them.
13. Obligations of the Agents - The Agents' obligation to offer the Special
Warrants for sale shall be several and not joint and each of the Agents shall
offer for sale the percentage of Special Warrants set forth opposite its name
below, namely:
Canaccord Capital Corporation 40%
ScotiaMcLeod Inc. 30%
Newcrest Capital Inc. 30%
144554\0514777.WP
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In the event that one of the Agents shall fail to arrange for
purchasers, at the Closing, up to its applicable percentage of Special Warrants,
the other Agents shall have the right, but shall not be obligated, to offer for
sale all of the percentage of the Special Warrants which would otherwise have
been offered for sale by that Agent who fails to meet its allotted percentage.
In the event that such right is not exercised, the other Agents, if not in
default hereunder, shall be relieved of all obligations to the Corporation
Nothing in this paragraph shall oblige the Corporation to sell to the Purchasers
less than all of the Special Warrants subscribed for or relieve from liability
to the Corporation any Purchaser which shall be so in default. In the event of a
termination by the Corporation of its obligations under this Agreement, there
shall be no further liability on the part of the Corporation to the Agents
except in respect of any liability which may have arisen or may thereafter arise
pursuant to Sections 7, 9 or 10.
ScotiaMcLeod Inc. and Newcrest Capital Inc. irrevocably
appoint Canaccord Capital Corporation as their agent to: (i) grant any consents
to be granted, make any determinations to be made and exercise any discretion to
be exercised by the Agents pursuant hereto, excluding the rights of termination
contained in sections 11 and 12; (ii) settle the contents of any term sheet used
by the Agents and relating to the Special Warrants and the contents of the
Preliminary Prospectus and the Prospectus; and (iii) negotiate and settle the
final terms of the Special Warrant Indenture and the Debenture Indenture.
Canaccord Capital Corporation shall consult with the other Agents in making any
determination or settlement or in respect of any negotiation relating to the
foregoing and shall use its reasonable best efforts to act in the best interests
of all the Agents and use its reasonable best efforts to discuss the actions
Canaccord Capital Corporation proposes to take under this subsection with the
other Agents.
14. Notices - Any notice under this Agreement shall be given in writing and
either delivered or telecopied to the party to receive such notice at the
address or telecopy numbers indicated below:
to the Corporation:
Dakota Mining Corporation
000 Xxxxxxxxxxx Xxxxxx .
Suite 2450
Denver, Colorado 80202
Attention: Xx. Xxxx X. Xxxx
President & Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
XxXxxxxx Xxxxxxxx
Barristers and Solicitors
P.O. Box 10424, Pacific Centre
0000 - 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
144554\0514777.WP
- 28 -
Attention: Xx. Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
to the Agents or any Indemnified Party:
Canaccord Capital Corporation
Suite 0000
000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxxx Xxxxxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxxxx
Barristers and Solicitors
Scotia Plaza
Suite 0000
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xx. Xxxxx Xxxxxxx
Fax: (000) 000-0000
or such other address or telecopy number as such party may hereafter designate
by notice in writing to the other party. If a notice is delivered, it shall be
effective from the date of delivery; if such notice is telecopied (with receipt
confirmed), it shall be effective on the Business Day following the date such
notice is telecopied.
15. Survival - All representations, warranties, and agreements of the
Corporation contained herein or contained in any document submitted pursuant to
this Agreement or in connection with the purchase of the Special Warrants shall
survive the purchase of the Special Warrants by the Purchasers and shall
continue in full force and effect unaffected by any subsequent disposition or
conversion of the Special Warrants and the Subject Securities, for a period of
seven years from the Closing Date, and the Agents shall not be limited or
prejudiced by any investigation made by or on behalf of the Agents in the course
of the preparation of the Preliminary Prospectus, the Prospectus or any
Supplementary Material or the distribution of the Special Warrants or the
Subject Securities.
16. Entire Agreement - The provisions herein contained constitute the entire
agreement between the parties hereto and supersede all previous communications,
representations, understandings and agreements between the parties with respect
to the subject
144554\0514777.WP
- 29 -
matter hereof, whether verbal or written, including without limitation the
engagement letter between the Corporation and the Agent dated and accepted by
the Corporation on December 16, 1996.
17. Counterparts - The execution of this Agreement may be executed in any number
of counterparts all of which when taken together shall be deemed to be one and
the same document and not withstanding their actual date of execution shall be
deemed to be dated as of the date first above written.
18. General - The Agreement shall be governed by and interpreted in accordance
with the laws of Ontario and the laws of Canada applicable therein and time
shall be of the essence hereof.
If the above is in accordance with your understanding, please
sign and return to the Agent a copy of this letter, whereupon this letter and
your acceptance shall constitute a binding agreement between the Corporation and
the Agent.
CANACCORD CAPITAL CORPORATION SCOTIAMcLEOD INC.
Per: Per:
NEWCREST CAPITAL INC.
Per:
The above offer is hereby accepted and agreed to as of the date first above
written.
DAKOTA MINING CORPORATION
Per:
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- 30 -
SCHEDULE "A"
DAKOTA MINING CORPORATION
PRIVATE PLACEMENT OF SPECIAL WARRANTS
CONVERTIBLE DEBENTURES
TERM SHEET
144554\0514777.WP
SCHEDULE "A"
DAKOTA MINING CORPORATION
PRIVATE PLACEMENT OF SPECIAL WARRANTS
CONVERTIBLE DEBENTURES
INDICATIVE TERM SHEET
Issuer: Dakota Mining Corporation ("Dakota")
Lead Agent: Canaccord Capital Corporation (together with other
agents, if any, the "Agents")
Offering: Up to 25,000 special warrants. Each special
warrant is exercisable into Cdn.$1,000 principal
amount 7.5% unsecured subordinated convertible
debenture (collectively, the "Debentures"). The
special warrants are being offered pursuant to
available private placement exemptions in Canada
and to institutional accredited investors under
section 4(2) of the United States Securities Act
of 1933 to U.S. Persons.
Amount: Cdn.$20 million (minimum) and Cdn.$25 million
(maximum)
Minimum Purchase: Cdn.$150,000
Issue Price: Cdn.$1,000.00 per Special Warrant
Maturity of Debentures: 7 years (January 31, 2004)
Settlement/Closing: January 31, 1997
Interest Payment: Interest will be payable on
the Debentures semi-annually on June
30 and December 31, with the first
payment for accrued interest on and
from the issue date of the Special
Warrants being June 30, 1997.
Accrued interest payableafter
December 31, 2003 shall be paid on
maturity on January 31, 2004.
Early Redemption: The Debentures will not be redeemable prior to
January 29, 2001. Thereafter, the Debentures
will be redeemable at 100% of their principal
amount if the weighted average trading price of
the common shares is 125% of the conversion price
for the 20 consecutive trading days ending
five days preceding the date on which the notice
of redemption is given.
144554\0514777.WP
Conversion Period: January 31, 1997 until maturity or redemption at
the option of the holder.
Conversion Price: Cdn.$2.00 (subject to standard anti-dilution and
similar adjustments) .
Conversion Ratio: 500 common shares (subject to standard
anti-dilution and similar adjustments).
Repayment: On maturity or redemption, the
Company will have the option,
subject to prior notice, to repay
the principal amount of the
Debentures in cash or common shares
of the Company at a price equal to
95% of the weighted average trading
price for 20 consecutive trading
days prior to the maturity date or
the redemption date.
In the event that the weighted
average trading price of the
Company's common shares for the 20
consecutive trading day period
preceding the fifth trading day
prior to the maturity date or
redemption date, as the case may be,
is less than Cdn.$2.00 per share,
the Company will have the option, to
repay the principal amount of the
Debentures in common shares at a
price which is the lesser of (i) 95%
of the weighted average trading
price for the 20 consecutive trading
days prior to the maturity date or
the redemption date; and (ii) the
price of the common shares on the
maturity date or the redemption
date.
Greenshoe: Up to 15% of the issue exercisable for five
business days after the closing.
Escrow: The amount of U.S.$5,000,000 of the net proceeds
(after deducting the commission payable to the
Agents on closing)will be released to the Company
on closing. The balance of the net proceeds will
be escrowed on closing subject to the
completion of the proposed merger (the "Merger")
and shareholder approval (the "Shareholder
Approval") to the issue. The escrowed proceeds
shall not be released to the Company unless and
until the Shareholder Approval is obtained and the
Merger occurs on terms described in the
Merger Agreement and otherwise acceptable to
Canaccord, acting reasonably.
Merger: The Merger involves the business combination of
Dakota and USMX Inc. ("USMX") on the basis of 1.1
shares of USMX for every one share of Dakota
(references to the
144554\0514777.WP
- 2 -
"Company" herein mean Dakota or the company
resulting from the Merger as the context
requires).
Use of Proceeds: The use of proceeds are expected to be as follows
(subject to adjustment to accommodate the Merger).
US$'s CDN$'s
(millions = mm)
USMX
(i) Operations $ 8mm $10.80mm
(ii) Working capital $ 5mm $ 6.75mm
(iii) Feasibility $ 1mm $ 1.35mm
(iv) Exploration $ 3mm $ 4.05mm
$17mm $22.95mm
Take-Over Bid Protection 1. If there is a take-over bid for the
Provisions Applying to Company at any time within three
Special Warrants and years of the issuance of the Special
Debentures: Warrants for consideration on a per
share basis equal to or greater than
Cdn.$1.85, then if the holder of a
Debenture elects to convert into
Common Shares, the conversion price
for the convertible debentures
issuable upon the exercise of the
Special Warrants held by such
Debentureholders shall be adjusted
to be the result obtained when
adding Cdn.$1.85 to the interest
(expressed on a per share basis)
earned on the Debentures to the date
of the take-up and pay under the
take-over bid, subject to a maximum
conversion price of Cdn.$2.00 per
share.
2. For these purposes, "take-over bid" means an offer to
acquire outstanding common shares made to a person or
company where the shares subject to the offer to
acquire, together with the offeror's shares, constitute
in the aggregate 20% or more of the outstanding common
shares on the date of the offer to acquire (other than
a take-overbid that is exempted pursuant to the
requirements of applicable Canadian securities laws).
Holder's Approvals: The approval of the Debentureholders shall be required
for the sale of all or substantially all of the assets
of the Company and for certain other corporate matters.
Commission: 6% commission payable on closing
144554\0514777.WP
- 3 -
SCHEDULE "B"
United States Offers and Sales
1. The Special Warrants, the Debentures issuable upon exercise of the Special
Warrants and the Shares issuable upon conversion of the Debentures (the
"Securities") have not been and will not be registered under the U.S.
Securities Act of 1933, as amended (the "1933 Act") and may not be offered
or sold within the United States or to, or for the account or benefit of,
U.S. persons except in transactions exempt from the registration
requirements of the 1933 Act. Neither the Agents, their U.S. broker-dealer
affiliates (nor any selling group member) have engaged or will engage in
any directed selling efforts in the United States (as defined in Rule 902
of Regulation S under the 1933 Act) with respect to the securities, and the
Agent has complied and will comply with the offering restriction
requirements of Rule 903 of Regulation S.
2. The Agents, through their registered U.S. broker-dealer affiliates, may
sell the Securities in the United States to institutional accredited
investors in transactions not involving any public offering in the United
States. In that regard, they represent and warrant to the Corporation that:
(a) neither the Agents nor their U.S. broker-dealer affiliates have
utilized any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) or have
offered to sell any of the securities in any manner involving a public
offering within the meaning of Section 4(2) of the U.S. Securities
Act;
(b) each offeree was provided with a copy of the U.S. Subscription
Agreement, and no other written material was used in connection with
the offer and sale of the Special Warrants in the United States;
(c) it reasonably believed that each such offeree was an institutional
"accredited investor", as such term is defined in Rule 501(a)(1), (2),
(3) or (7) under the 1933 Act.
3. The Agents represent and warrant that prior to any sales of the Securities
in the United States, they obtained from each U.S. purchaser
representations and warranties to and agreement in writing with the
Corporation that such U.S. Purchaser:
(a) is authorized to consummate the purchase of the Securities;
(b) understands that the Securities have not and will not be
registered under the 1933 Act and that the sale contemplated
hereby is being made in reliance on a private placement exemption
to institutional accredited investors;
(c) is an institutional "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) (an 'Institutional Accredited
Investor") under the 1933 Act and has such knowledge,
sophistication and experience in business and financial matters
that
144554\0514777.WP
such Purchaser is capable of evaluating the merits and risks of the
prospective investment;
(d) is purchasing the Securities in a minimum amount of the greater
of Cdn.$375,000 and U.S.$250,000 for its own account (or for
accounts as to which it exercises sole investment management
discretion and has authority to make the statements contained in
such letter, and each such account is purchasing Securities
having such aggregate purchase price), and not with a view to any
resale, distribution or other disposition of the Securities in
any transaction that would be in violation of the securities laws
of the United States or any state thereof;
(e) has received a copy, for its information only, of the U.S.
Subscription Agreement for the Securities relating to the
offering in the United States of the Securities and has been
afforded the opportunity to obtain such additional information as
it deems necessary;
(f) has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of
its investment in the Securities and it is able to bear the
economic risks of such investment;
(g) acknowledges that it has not purchased the Securities as a result
of any form of general solicitation or general advertising,
including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar
media or broadcast over radio or television or any seminar or
meeting whose attendees have been invited by general solicitation
or general advertising (as those terms are used in Rule 502(c)
under the 1933 Act);
(h) agrees that it may offer, sell or otherwise transfer such
Securities (other than pursuant to an effective registration
statement under the 1933 Act) only if:
(i) the sale is to the Corporation; or
(ii) (A) a purchaser's letter containing representations,
warranties and agreements substantially similar to those
contained in this schedule (except that such purchaser' s
letter need not contain the representation set forth in
paragraph (d) above), and satisfactory to the Corporation,
is executed by the purchaser and delivered to the
Corporation prior to the sale; and
(B) all offers or solicitations in connection with the sale
are arranged and conducted solely by the Corporation;
(iii)the sale is made outside the United States in accordance
with the requirements of Rule 904 of Regulation S under the
1933 Act; or
144554\0514777.WP
- 2 -
(iv) the sale is made pursuant to the exemption from registration
under the 1933 Act provided by Rule 144 thereunder and in
accordance with any applicable state securities or"Blue Sky"
laws; or
(v) the Securities are sold in a transaction that does not
require registration under the 1933 Act or any applicable
United States state laws and regulations governing the offer
and sale of securities, and we have furnished to the
Corporation an opinion of counsel, reasonably satisfactory
to the Corporation, to that effect;
(i) it understands and acknowledges that upon original issuance
of the Securities and for such time as is required under
applicable requirements of the 1933 Act or applicable state
securities laws, the certificates representing the Special
Warrants, and all certificates issued in exchange therefor
or in substitution thereof, shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY
PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
ISSUER THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE ISSUER, (B) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION
S UNDER THE 1933 ACT, (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144
THEREUNDER, IF AVAILABLE, AND THE COMPLIANCE WITH APPLICABLE
STATE SECURITIES LAWS OR (D) IN COMPLIANCE WITH CERTAIN
OTHER PROCEDURES SATISFACTORY TO THE COMPANY.
and that all certificates representing Securities (and all
certificates issued in exchange thereof or in substitution
thereof) issuable upon exercise of the Securities so legended
will bear the same legend and will bear the following
additional legend:
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON THE
TORONTO STOCK EXCHANGE. A NEW CERTIFICATE, BEARING NO
LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY", MAY BE OBTAINED FROM THE TRANSFER AGENT
UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED
DECLARATION, IN A FORM SATISFACTORY TO THE TRANSFER
AGENT AND THE COMPANY, TO THE EFFECT THAT THE SALE OF
THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN
144554\0514777.WP
- 3 -
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
1933 ACT.
provided, however, that if the Securities are being sold under
paragraph (h)(iii) above, the legend may be removed by
providing a declaration to the Montreal Trust Company of
Canada (the 'Transfer Agent") as transfer agent for the
Securities to the following effect:
The undersigned (A) acknowledges that the sale of the
securities to which this declaration relates is being
made in reliance on Rule 904 of Regulation S under
the United States Securities Act of 1933, as amended
(the '1933 Act") and (B) certifies that (1) it is not
an affiliate (as defined in Rule 405 under the 1933
Act) of Dakota Mining Corporation, (2) the offer of
such securities was not made to a person in the
United States and either (A) at the time the buy
order was originated, the buyer was outside the
United States, or the seller and any person acting on
its behalf reasonably believe that the buyer was
outside the United States, or (B) the transaction was
executed on or through the facilities of The Toronto
Stock Exchange the Montreal Exchange. the Vancouver
Stock Exchange or the Alberta Stock Exchange and
neither the seller nor any affiliate of the seller
nor any person acting on any of their behalf has
engaged or will engage in any directed selling
efforts in the United States in connection with the
offer and sale of such securities, (4) the sale is
bona fide and not for the purpose of 'washing off'
the resale restrictions imposed because the
securities are "restricted securities" (as such term
is defined in Rule 144(a)(3) under the 1933 Act), (5)
the seller does not intend to replace the securities
and (6) the contemplated sale is not a transaction,
or part of a series of transactions which, although
in technical compliance with Regulation S, is part of
a plan or scheme to evade the registration provisions
of the 1933 Act. Terms used herein have the meanings
given to them by Regulations S.
(j) consents to the Corporation making a notation on its records
or giving instructions to the Transfer Agent of the securities
in order to implement the restrictions on transfer set forth
and described herein.
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SCHEDULE "B"
TO: Dakota Mining Corporation
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX
00000
Dear Sirs:
In connection with our purchase of Special Warrants, and the Debentures (the
"Securities") of Dakota Mining Corporation (the "Company"), we confirm to
you that:
(a) we are authorized to consummate the purchase of the Securities, and
the Subscription Agreement constitutes a legal, valid and binding
obligation enforceable against us in accordance with its terms;
(b) we are an institutional "accredited investor" ( an "Institutional
Accredited Investor") within the meaning of Rule 501(a)(1), (2), (3)
or (7) under the United States Securities Act of 1933, as amended (the
"1933 Act") and are acquiring the Securities for our own account or
for the account or benefit of an Institutional Accredited Investor as
to which we exercise sole investment discretion, and not with a view
to any resale, distribution or other disposition of the Securities in
violation of the United States securities laws;
(c) we understand that the Securities have not been and will not be
registered under the 1933 or any applicable state securities laws and
that the sale contemplated hereby is being made in reliance on a
private placement exemption to accredited investors under the 1933 Act
and exemptions from registration under applicable state securities
laws;
(d) we have such knowledge, sophistication and experience in business and
financial matters that we are capable of evaluating the merits and
risks of the prospective investment and are able to bear the economic
risk of such investment;
(e) we are purchasing the Securities having an aggregate purchase price of
at least US$250,000 for our own account (or for accounts as to which
we exercise investment management discretion and have authority to
make the statements contained in this letter);
(f) we acknowledge that we have not purchased the Securities as a result
of any general solicitation or general advertising, including
advertisements, articles, notices or other communications published in
any newspaper, magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising;
(g) we agree that we may offer, sell or otherwise transfer such Securities
(other than pursuant to an effective registration statement under the
1933 Act) only if:
144554\0514777.WP
(i) the sale is to the Company; or
(ii) the sale is made outside the United States in accordance with the
requirements of Rule 904 of Regulation S under the 1933 Act; or
(iii)the sale is made pursuant to the exemption from registration
under the 1933 Act provided by Rule 144 thereunder and in
accordance with applicable state securities laws; or
(iv) the securities are sold in a transaction that does not require
registration under the 1933 Act or any applicable United States
state laws and regulations governing the offer and sale of
securities, and we have furnished to the Company an opinion of
counsel, reasonably satisfactory to the Company, to that effect;
provided that, in the case of sales in accordance with (iv)
above, the purchaser executes and delivers letter agreement
containing terms that are substantially similar to this Schedule;
(h) we understand and acknowledge that upon original issuance and for such
time as is required under applicable requirements of the 1933 Act or
applicable state securities laws, the certificates representing the
Special Warrants and all certificates issued in exchange therefor or
in substitution thereof, shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF THE ISSUER THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE ISSUER, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT, (C)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT
PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR (D) IN COMPLIANCE WITH CERTAIN
OTHER PROCEDURES SATISFACTORY TO THE COMPANY.
and that all certificates representing Debentures (and all
certificates issued in exchange therefor or in substitution
thereof) issuable upon exercise of the securities so legended
shall bear the same legend and shall bear the following
additional legend:
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE
"GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON
144554\0514777.WP
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THE TORONTO STOCK EXCHANGE. A NEW CERTIFICATE,
BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE
"GOOD DELIVERY", MAY BE OBTAINED FROM THE TRANSFER
AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY
EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE
TRANSFER AGENT AND THE COMPANY, TO THE EFFECT THAT
THE SALE OF THE SECURITIES REPRESENTED HEREBY IS
BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION
S UNDER THE 1933 ACT;
provided that if the Debentures are being sold under paragraph
(g)(iii) above, the legend may be removed by providing a
declaration to the Montreal Trust Company of Canada as
transfer agent for the securities to the following effect:
"The undersigned (A) acknowledges that the sale of
the securities to which this declaration relates is
being made in reliance on Rule 904 of Regulation S
under the United States Securities Act of 1933, as
amended (the "1933 Act") and (B) certifies that (1)
it is not an affiliate (as defined in Rule 405 under
the 1933 Act) of Dakota Mining Corporation, (2) the
offer of such securities was not made to a person in
the United States and either (A) at the time the buy
order was originated, the buyer was outside the
United States, or the seller and any person acting on
its behalf reasonably believe that the buyer was
outside the United States, or (B) the transaction was
executed on or through the facilities of The Toronto
Stock Exchange, the Montreal Exchange, the Vancouver
Stock Exchange or the Alberta Stock Exchange and
neither the seller nor any affiliate of the seller
nor any person acting on any of their behalf has
engaged or will engage in any directed selling
efforts in the United States in connection with the
offer and sale of such securities, (4) the sale is
bona fide and not for the purpose of "washing off"
the resale restrictions imposed because the
securities are "restricted securities" (as such term
is defined in Rule 144(a)(3) under the 1933 Act), (5)
the seller does not intend to replace the securities
and (6) the contemplated sale is not a transaction,
or part of a series of transactions which, although
in technical compliance with Regulation S, is part of
a plan or scheme to evade the registration provisions
of the
144554\0514777.WP
- 3 -
1933 Act. Terms used herein have the meanings
given to them by Regulations S."
DATED:
Name of Purchaser
By:
Name:
Title:
144554\0514777.WP
- 4 -
SCHEDULE "C"
Subscription Agreements
144554\0514777.WP
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND, DURING THE 40 DAY
PERIOD IMMEDIATELY FOLLOWING YOUR ACQUISITION OF SUCH SECURITIES, SUCH
SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO UNITED STATES
PERSONS UNLESS THE SECURITIES ARE REGISTERED UNDER THE 1933 ACT OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
DAKOTA MINING CORPORATION
SUBSCRIPTION AGREEMENT
(For Non-U.S. Residents)
February 4, 1997
TO: DAKOTA MINING CORPORATION
AND TO: CANACCORD CAPITAL CORPORATION
RE: SUBSCRIPTION FOR AND PURCHASE OF SPECIAL
WARRANTS OF DAKOTA MINING CORPORATION
Reference is made to an engagement letter (the "Engagement Letter" dated
December 23, 1996 between Dakota Mining Corporation (the "Company") and
Canaccord Capital Corporation (the "Agent") providing for the issuance and sale
by the Company to purchasers of between 20,000 and 25,000 special warrants (the
"Special Warrants") for a consideration of Cdn.$1,000.00 per Special Warrant
(the "Offering") on the terms and conditions set forth in the Engagement Letter.
A copy of a term sheet (the "Term Sheet") outlining the features of the Special
Warrants and certain terms contained in the Engagement Letter is attached as
Schedule "A" hereto. Pursuant to the Engagement Letter, the Company and the
Agent will enter into a definitive agency agreement (the "Agency Agreement")
which shall set forth certain terms relating to the Special Warrants.
1. Subscription
The undersigned (the "Subscriber") hereby irrevocably
subscribes for and agrees to purchase, subject to the terms and conditions set
forth herein, that number of Special Warrants of the Company set out above, and
above the Subscriber's name on page 17 hereof at a price of Cdn.$1,000.00 per
Special Warrant. The Subscriber understands that the Special Warrants subscribed
for constitute a portion of an offering of between 20,000 and 25,000 Special
144554\0514777.WP
- 2 -
Warrants by the Company, pursuant to the terms of the Agency Agreement under
which the Agent will offer the Special Warrants for sale, on a best efforts
basis, on behalf of the Company.
2. Description of Special Warrants
The Special Warrants shall be created and issued pursuant to a
special warrant indenture (the "Special Warrant Indenture") between Montreal
Trust Company of Canada, as trustee (the "Trustee"), and the Company to be dated
as of the Closing Date (as hereinafter defined). The specific attributes of the
Special Warrants shall be set forth in the Special Warrant Indenture, which
shall provide, among other things, that the holders of Special Warrants shall be
entitled to receive, without payment of any additional consideration, upon
exercise of each Special Warrant in accordance with the terms of the Special
Warrant Indenture, one $1,000.00 principal amount unsecured convertible
debenture of the Company (each, a "Debenture" and collectively, the
"Debentures") subject to adjustment as described herein. Upon maturity or
redemption of the Debentures, the Company will have the option, subject to prior
notice, to repay the principal amount of the Debentures in cash or in common
shares of the Company (the "Common Shares" or "Shares").
The Special Warrants shall be exchangeable at the option of
the holder at any time on or before 5:00 p.m. (Vancouver time) on the earlier of
(a) the 5th business day after a receipt is issued by the last of the securities
regulatory authorities in each of the Qualifying Jurisdictions (as hereinafter
defined) for the final prospectus (the "Prospectus") qualifying the issuance
(the "Prospectus Qualification") of the Debentures and (b) February 4, 1998 (the
earlier of such dates hereinafter referred to as the "Expiry Date"). All of the
net proceeds (after deducting the commission payable to the Agent on closing)
will be escrowed on closing. The amount of U.S.$5,000,000 will be released to
the Company provided that certain conditions relating to the Merger (as
hereinafter defined) are fulfilled to the satisfaction of the Agent. The balance
of the net proceeds (the "Escrow Proceeds") will remain escrowed subject to the
completion of the proposed merger involving USMX Inc. and the Company (the
"Merger") and shareholder approval (the "Shareholder Approval") to the issue.
The Escrow Proceeds shall not be released to the Company unless and until the
Shareholder Approval is obtained and the Merger occurs on terms described in the
letter agreement as between the Company and USMX Inc., dated January 3, 1997
(the "Merger Agreement") and which are otherwise acceptable to the Agent. Any
Special Warrants not exercised by the Expiry Date shall be exercised by the
Trustee on behalf of the holder immediately prior thereto without any further
action on the part of the holder as described herein.
The Company shall undertake to file the Prospectus and obtain
receipts therefor from the applicable securities regulatory authorities British
Columbia, Alberta, Ontario and in each of the provinces of Canada in which
Subscribers are resident, as applicable (the "Qualifying Jurisdictions") not
later than the later of May 31, 1997 and the date which falls 120 days from the
Closing Date (as hereinafter defined), or such later date as may be designated
by the Agent (the "Qualification Deadline").
In the event that receipts for the Prospectus are not obtained
prior to the Qualification Deadline, subject to the Redemption Obligation and
the Redemption Option
144554\0514777.WP
- 3 -
described below, the holders of the Special Warrants shall be entitled to
acquire prior to the Expiry Date, for no additional consideration, 1.10 Common
Shares for every Share of the Company otherwise issuable as and at such time as
the Debentures are converted.
Subject to the Redemption Obligation and the Redemption Option
as discussed below, in the event that the Shareholder Approval has not been
obtained on a date (the "Shareholder Approval Date") which occurs on or before
April 30, 1997 (the "Shareholder Qualification Deadline") the terms of the
Debentures shall provide that, unless the Shareholder Qualification Deadline is
extended up to May 31, 1997 in accordance with the Merger Agreement, the number
of Special Warrants proportionate to the Escrow Proceeds shall be subject to
automatic redemption by the Company (the "Redemption Obligation") and, unless
the holders elect to keep their Special Warrants outstanding, holders of such
Special Warrants who do not so elect will receive the Escrow Proceeds for their
Special Warrants at the issue price plus interest earned thereon (on a pro rata
basis if the Redemption Obligation exceeds the available Escrow Proceeds). The
Special Warrants of those holders which were not repurchased pursuant to the
Redemption Obligation shall remain outstanding until the earlier of February 4,
1998 and the date on which the Shareholder Approval is obtained or no longer
required, provided that Special Warrants whose exchange into Debentures requires
Shareholder Approval may not be exchanged for Debentures until such Shareholder
Approval is obtained or no longer required.
In the event that the Merger does not place on or before the
Qualification Deadline, the holders of the Special Warrants shall have the
option (the "Redemption Option") for a period of five business days after the
Qualification Deadline to cause the Company to redeem their Special Warrants by
giving notice to the Company or otherwise tendering their Special Warrants to
the Company, which shall be redeemed and paid for with the Escrow Proceeds
together with interest earned thereon. If the Escrow Proceeds are insufficient
for the redemption of all of the Special Warrants to which such notice relates
or so tendered, then the Special Warrants to be redeemed shall be redeemed on a
pro rata basis.
The Special Warrants and the Debentures issuable upon exercise
of the Special Warrants have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "1933 Act), and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. Persons unless they are registered under the 1933 Act, or an exemption
from the registration requirements of the 1933 Act is available.
The foregoing description of the Special Warrants is a summary
only and is subject to the detailed provisions of the Special Warrant Indenture
under which such securities shall be issued. In the event of a conflict, the
provisions of the Special Warrant Indenture shall prevail.
3. Payment
The aggregate amount payable by the Subscriber in respect of
the Special Warrants (the "Subscription Price") must accompany this Subscription
Agreement and shall be made in Canadian dollars by certified cheque or bank
draft drawn on a Canadian chartered bank
000000\0000000.WP
- 4 -
and payable to Canaccord Capital Corporation or payable in such other manner as
may be specified by the Agent to be dealt with in accordance with the provisions
set forth herein.
4. Questionnaire, Undertaking, Direction and Form 20A(IP)
The Subscriber must complete, sign and return the following
documents along with two (2) executed copies of this Subscription Agreement to
Canaccord Capital Corporation (Attention: Xxxx Xxxxxxxx ) as soon as possible
and, in any event, not later than two days prior to the Closing Date (defined
below):
(a) Schedule I, a questionnaire and undertaking required by The Toronto
Stock Exchange on which the Debentures will be listed;
(b) Schedule II, a direction with respect to registration and delivery
instructions;
and
(c) if the Subscriber is an individual, Schedule III, a form 20A (IP)
required by the British Columbia Securities Commission.
The Company will file the questionnaires and undertakings of
Subscribers whose subscriptions are accepted by the Company with The Toronto
Stock Exchange.
5. Other Documentation
The Subscriber may also be required to execute any further
documentation as required by The Toronto Stock Exchange or The American Stock
Exchange, or under securities legislation or by any other regulatory authority
of the Qualifying Jurisdictions, the United States or the jurisdiction in which
the Subscriber is resident and covenants and agrees to do so upon request by the
Company or the Agent.
6. Closing
Delivery and payment for the Special Warrants (the "Closing")
will be completed at the offices of XxXxxxxx Xxxxxxxx, Barristers & Solicitors,
Suite 4700, Toronto-Dominion Bank Tower, Toronto-Dominion Centre, Toronto,
Ontario M5K 1E6 at 12:00 a.m. (Toronto time) (the "Closing Time") on February 4,
1997 or such other date or time on or before February 21, 1997 as the Company
and the Agent shall mutually agree (the "Closing Date").
Certificates representing the Special Warrants (individually,
a "Special Warrant Certificate" and collectively, the "Special Warrant
Certificates") will be available for delivery against payment to the Company of
the Subscription Price in the manner specified below.
It is a condition of Closing that all necessary regulatory
approvals be obtained and the documents completed in accordance with Section 4
hereof be received prior to the Closing Date. By its execution of this
Subscription Agreement, the Company hereby agrees with the
144554\0514777.WP
- 5 -
Subscriber that the Subscriber shall have the benefit of the following
provisions set forth in the Agency Agreement:
(a) the representations and warranties made by the Company to the Agent
and the undersigned as a purchaser of the Special Warrants; and
(b) the covenants of the Company in favour of the Agent and the
undersigned as a purchaser of the Special Warrants;
which representations or warranties, covenants and conditions are hereby
incorporated by reference such that they form an integral part of this
Subscription Agreement and all of which shall survive the closing of the
purchase and sale of the Special Warrants and shall continue in full force and
effect for the benefit of the Subscriber for the period set forth in the Agency
Agreement.
7. Prospectus Exemptions
The sale and delivery of the Special Warrants to the
Subscriber is conditional upon such sale being exempt from the requirements as
to the filing of a prospectus and as to the delivery of an offering memorandum
as defined in the applicable securities legislation or upon the issuance of such
rulings, orders, consents or approvals as may be required to permit such sale
without the requirement of filing a prospectus or delivering an offering
memorandum.
The Subscriber acknowledges and agrees that: (a) it (or others
for whom it is contracting hereunder) was not provided with, has not requested,
and does not need to receive, a prospectus or an offering memorandum as defined
in the applicable securities legislation or similar document; (b) its decision
to execute this subscription agreement and to purchase the Special Warrants
agreed to be purchased hereunder (or by others for whom it is contracting
hereunder) has not been based upon any verbal or written representations as to
fact or otherwise made by or on behalf of the Company, the Agent or any other
person or company and that its decision (or the decision of others for whom it
is contracting hereunder) is based entirely upon the Term Sheet and publicly
available information concerning the Company which was obtained by the
Subscriber and not provided to it by either the Company or the Agent; (c) the
sale of the Special Warrants was not accompanied by any advertisement in printed
media of general and regular paid circulation, radio or television or any other
form of advertisement or as part of a general solicitation; and (d) it (or
others for whom it is contracting hereunder) has been advised to consult its own
legal advisors with respect to applicable resale restrictions and it (or others
for whom it is contracting hereunder) is solely responsible (and neither the
Company nor the Agent is in any way responsible) for compliance with applicable
resale restrictions.
The Subscriber acknowledges and agrees that the Special
Warrants and the Debentures issuable upon exercise of the Special Warrants are
subject to statutory hold periods during which these securities may not be
offered, resold or otherwise transferred in Canada, the United States or
elsewhere except in compliance with applicable securities laws and the
requirements of applicable stock exchanges and that the Subscriber shall not so
offer, resell or otherwise transfer these securities except in compliance with
applicable securities laws and the requirements of applicable stock exchanges.
The Subscriber confirms that no representation has
144554\0514777.WP
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been made respecting the applicable hold periods for the Special Warrants.
Subscribers are advised to consult with their own legal advisers in connection
with any applicable resale restrictions.
8. Representations, Warranties and Covenants of the Subscriber
The Subscriber hereby represents and warrants to the Company
and the Agent (which representations and warranties shall survive Closing) that:
1. the Subscriber and any beneficial purchaser for whom the Subscriber is
acting is resident in the jurisdiction set out below the Subscriber's
signature on page 17;
2. either (A) the Subscriber is purchasing the Special Warrants as
principal for its own account and not for the benefit of any other
person and not with a view to the resale or distribution of all or any
of the Special Warrants, or (B) if the Subscriber is not purchasing as
principal the Subscriber is duly authorized to enter into this
subscription and to execute all documentation in connection with the
purchase on behalf of each beneficial purchaser and acknowledges that
the Company is required by law to disclose on a confidential basis to
certain regulatory authorities the identity of each beneficial
purchaser for whom it may be acting;
3. the delivery of this subscription, the acceptance of it by the
Company, the issuance of the Special Warrants to the Subscriber and
the acquisition of the Debentures upon the exercise of the Special
Warrants complies with all applicable laws of the Subscriber's
jurisdiction of residence or domicile and all other applicable laws
and will not cause the Company to become subject to or comply with any
disclosure, prospectus or reporting requirements under any such
applicable laws;
4. if the Subscriber is not purchasing in accordance with subparagraphs
5, 6, 7 or 8, it is purchasing pursuant to an exemption from
prospectus and registration requirements (particulars of which are
disclosed herewith) available to it under applicable securities
legislation and shall deliver to the Company and the Agent such
further particulars of the exemptions(s) and the Subscriber's
qualification thereunder as the Company and the Agent may reasonably
request;
5. if the Subscriber is subject to the applicable securities legislation
of the Province of Ontario, it is one of the following:
(i) a bank to which the Bank Act (Canada) applies or the Federal
Business Development incorporated under the Federal Business
Development Act (Canada); or
(ii) a credit union or an entity which the Credit Union and Caisses
Populaires Act, 1994 applies, or a subsidiary of such persons
where such persons own beneficially all of the voting securities
of that subsidiary; or
144554\0514777.WP
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(iii)a loan corporation or trust corporation registered under the
Loan and Trust Corporations Act (Ontario); or
(iv) an insurance company licensed under the Insurance Act (Ontario);
or
(v) Her Majesty in right of Canada, or any province or territory of
Canada; or
(vi) a municipal corporation or public board or commission in Canada,
(vii)is recognized or designated as an exempt purchaser and is not an
individual or is purchasing a sufficient number of Special
Warrants such that the aggregate acquisition cost to the
Subscriber of such Special Warrants is not less than $150,000; or
(viii) in the case of the purchase of Special Warrants by the
Subscriber as agent for a disclosed principal, each beneficial
purchaser of such Special Warrants for whom the Subscriber is
acting is purchasing as a principal for its own account, and not
for the benefit of any other person, and not with a view to the
resale or distribution of all or any of the Special Warrants, and
(a) is purchasing a sufficient number of Special Warrants so
that such beneficial purchaser has an aggregate acquisition
cost of not less than $150,000 for such Special Warrants; or
(b) is recognized or designated as an exempt purchaser under
applicable securities legislation and is not an individual,
and the Subscriber is an agent with due and proper authority
to execute this agreement and all documentation in
connection with the purchase on behalf of the beneficial
purchaser, or
(ix) in the case of the purchase of Special Warrants by the Subscriber
as a trustee or as agent for a principal which is undisclosed or
identified by account number only, the Subscriber is a trust
corporation registered under the Loan and Trust Corporations Act
(Ontario) and is purchasing such Special Warrants as trustee or
as agent for accounts fully managed by the Subscriber and the
beneficial purchaser of the Special Warrants for whom the
Subscriber is acting is an individual or corporation and is
purchasing as principal for its own account, and not for the
benefit of any other person, and:
(a) is purchasing a sufficient number of Special Warrants so
that such beneficial purchaser has an aggregate acquisition
cost for such Special Warrants of not less than $150,000, or
144554\0514777.WP
- 8 -
(b) is recognized or designated as an exempt purchaser under
applicable securities legislation and, if subject to the
securities legislation of Ontario and is not an individual,
and the Subscriber is a trustee or agent with due and proper
authority to execute this agreement and all other
documentation in connection with the purchase on behalf of
the beneficial purchaser, and
(x) neither the Subscriber nor any purchaser on whose behalf the
Subscriber is acting has been formed, created, established or
incorporated for the purpose of permitting the purchase of the
Special Warrants without a prospectus by groups of individuals
whose individual share of the aggregate acquisition cost is less
than $150,000; and
(xi) where the Subscriber or the beneficial purchaser is not a
corporation or an individual (including, without limitation, a
syndicate, partnership, trust, association or other form of
unincorporated organization), the Subscriber or the beneficial
purchaser falls within one of the following categories:
(a) pension plans,
(b) group of pension plans under common management,
(c) organizations of members of a family fund formed to make
investments of family funds,
(d) testamentary trusts and estates,
(e) organizations which have primary ongoing business activities
other than investing in securities,
(f) mutual funds other than private mutual funds (within the
meaning of paragraph (a) of the definition of "private
mutual fund" in subsection 1(1) of the Securities Act
(Ontario)),
(g) group registered retirement savings plans or group deferred
profit sharing plans, or
(h) a partnership, interests in which are offered by prospectus,
where the partnership invests in securities in reliance upon
clause 72(1)(d) of the Securities Act (Ontario) and section
27 of the Regulation made thereunder or under subsection
14(f) of the Regulation made thereunder; and but subject
nevertheless to the requirement that it will not resell the
Special Warrants, or the Debentures issued pursuant thereto,
except in
144554\0514777.WP
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accordance with the provisions of applicable securities
legislation and stock exchange rules;
6. if the Subscriber is subject to the applicable securities legislation of
the Province of British Columbia, it is one of the following:
(i) the Federal Business Development Bank incorporated under the Federal
Business Development Act (Canada), or a savings institution or a
subsidiary of either of such persons where such person owns
beneficially all of the voting securities of the subsidiary, except
the voting securities required by law to be owned by directors of that
subsidiary, or
(ii) an insurance company or a subsidiary of such insurance company where
such insurance company owns beneficially all of the voting securities
of the subsidiary, except the voting securities required by law to be
owned by directors of that subsidiary, or
(iii) Her Majesty in Right of Canada or a province, or
(iv) a municipal corporation or public board or commission in Canada,
(v) is recognized or designated as an exempt purchaser under applicable
securities legislation or is purchasing a sufficient number of Special
Warrants such that the aggregate acquisition cost of the Subscriber of
such Special Warrants is not less than $97,000, or
(vi) in the case of the purchase of Special Warrants by the Subscriber as
agent for a disclosed principal, each beneficial purchaser of such
Special Warrants for whom the Subscriber is acting is purchasing as
principal for its own account, and not for the benefit of any other
person and not with a view to the resale or distribution of all of any
of the Special Warrants, and
(a) is purchasing a sufficient number of Special Warrants so that the
beneficial purchaser has an aggregate acquisition cost of not
less than $97,000 for such Special Warrants; or
(b) is recognized or designated as an exempt purchaser under
applicable securities legislation, and the Subscriber is an agent
with due and proper authority to execute this agreement and all
documentation in connection with the purchase on behalf of the
beneficial purchaser, or
(vii)in the case of the purchase of Special Warrants by the Subscriber as a
trustee or as agent for a principal which is undisclosed or identified
by account number only, the Subscriber is a trust company or an
144554\0514777.WP
- 10 -
extra-provincial trust corporation authorized to carry on business under
the Financial Institutions Act (British Columbia), or an insurance
company or extra-provincial insurance corporation authorized to carry
on business under the Financial Institutions Act (British Columbia),
or a trust company or insurer authorized under the laws of a province
or territory of Canada other than British Columbia to carry on
business in such province or territory, purchasing or selling as an
agent or trustee for accounts that are fully managed by the Subscriber
or a portfolio manager registered under the Securities Act (British
Columbia) or is exempt from such registration, or is a portfolio
manager registered or exempt from registration under the laws of a
province or territory of Canada other than British Columbia,
purchasing or selling as an agent for accounts that are fully managed
by the Subscriber and the Subscriber is purchasing Special Warrants
which have an aggregate acquisition cost of not less than $97,000, or
the beneficial purchaser of the Special Warrants for whom the
Subscriber is acting is purchasing as principal for its own account,
not for the benefit of any other person, and:
(a) is purchasing a sufficient number of Special Warrants so that the
beneficial purchaser has an aggregate acquisition cost for such
Special Warrants of not less than $97,000, or
(b) is recognized or designated as an exempt purchaser under
applicable securities legislation, and the Subscriber is a
trustee or agent with due and proper authority to execute this
agreement and all other documentation in connection with the
purchase on behalf of the beneficial purchaser, and
(viii) neither the Subscriber nor any purchaser on whose behalf the
Subscriber is acting has been formed, created, established or
incorporated or used primarily to permit a group of individuals to
purchase securities without a prospectus unless each individual is
purchasing securities having an aggregate acquisition cost of at least
$97,000, and
(ix) the Subscriber and any purchaser on whose behalf the Subscriber is
acting acknowledges that, as the Special Warrants are subject to a
hold period under applicable British Columbia securities legislation
and pursuant to British Columbia Securities Commission Blanket Order
BOR#95/17, an initial trade report in the appropriate form in respect
of the resale of the Special Warrants or of the Debentures acquired on
the exercise thereof, must be filed within ten days of the initial
trade of such securities.
7. if the Subscriber is subject to the applicable securities legislation of
the Province of Alberta, it is one of the following:
144554\0514777.WP
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(i) the Federal Business Development Bank incorporated under the Federal
Business Development Act (Canada) or a bank, or
(ii) a loan corporation, trust corporation, treasury branch or credit union
or a subsidiary of such persons where such persons own beneficially
all of the voting securities of that subsidiary, or
(iii)an insurance company licensed under the Insurance Act (Alberta) or a
subsidiary of such insurance company where such insurance company owns
beneficially all of the voting securities of the subsidiary, or
(iv) the Government of Canada, the Government of Alberta or the Government
of any other province, or
(v) a municipal corporation or public board or commission in Canada, or
(vi) is recognized or designated as an exempt purchaser under applicable
securities legislation and is not an individual or is purchasing a
sufficient number of Special Warrants such that the aggregate
acquisition cost to the Subscriber of such Special Warrants is not
less than $97,000, or
(vii)in the case of the purchase of Special Warrants by the Subscriber as
agent for a disclosed principal, each beneficial purchaser of such
Special Warrants for whom the Subscriber is acting is purchasing as
principal for its own account, and not for the benefit of any other
person and not with a view to the resale or distribution of all or any
of the Special Warrants, and
(a) is purchasing a sufficient number of Special Warrants so that
such beneficial purchaser has an aggregate acquisition cost of
not less than $97,000 for such Special Warrants; or
(b) is recognized or designated as an exempt purchaser under
applicable securities legislation and is not an individual, and
the Subscriber is an agent with due and proper authority to
execute this agreement and all documentation in connection with
the purchase on behalf of the beneficial purchaser, or
(viii) in the case of the purchase of Special Warrants by the Subscriber as
a trustee or as agent for a principal which is undisclosed or
identified by account number only, the Subscriber is a trust
corporation as defined in the securities legislation of the Province
of Alberta trading as a trustee or an agent for accounts that are
fully managed by the Subscriber or a portfolio manager or a person or
a company trading as an agent that is exempt from registration as a
portfolio manager under applicable securities legislation for accounts
that are fully managed by the Subscriber and the
144554\0514777.WP
- 12 -
beneficial purchaser of the Special Warrants for whom the Subscriber is
acting is an individual or corporation and is purchasing as principal
for its own account, not for the benefit of any other person, and:
(a) is purchasing a sufficient number of Special Warrants so
that the beneficial purchaser has an aggregate acquisition
cost for such Special Warrants of not less than $97,000, or
(b) is recognized or designated as an exempt purchaser under
applicable securities legislation, and the Subscriber is a
trustee or agent with due and proper authority to execute
this agreement and all other documentation in connection
with the purchase on behalf of the beneficial purchaser, and
(ix) neither the Subscriber nor any purchaser on whose behalf the
Subscriber is acting has been formed, created, established or
incorporated for the purpose of permitting the purchase of the Special
Warrants without a prospectus by groups of individuals whose
individual share of the aggregate acquisition cost is less than
$97,000;
8. If the Subscriber is subject to the applicable securities legislation of a
Province of Canada or other jurisdiction other than the Provinces of
British Columbia, Alberta or Ontario, the Subscriber is purchasing the
Special Warrants in accordance with the securities laws applicable thereto
and in reliance upon a prospectus exemption contained therein;
9. the Subscriber, or the beneficial purchaser (i), is not a U.S. Person (as
defined in Rule 902(o) of Regulation S ("Regulation S") under the 1933 Act,
which definition includes, but is not limited to, any natural person
resident in the United States, any corporation or partnership incorporated
or organized under the laws of the United States, or any estate or trust of
which any executor, administrator or trustee is a U.S. Person); (ii) is not
purchasing the Special Warrants for the account or benefit of any U.S.
Person or for offering, resale or delivery for the account or benefit of
any U.S. Person or for the account of any person in any jurisdiction other
than the jurisdiction set out in the name and address of the Subscriber
below; and (iii) was not offered the Special Warrants in the United States
and was outside the United States at the time of execution and delivery of
this Subscription Agreement;
10. the Subscriber acknowledges that the Special Warrants, and the Debentures
(collectively, the "Securities") have not been registered under the 1933
Act and the Company has no obligation or present intention of filing a
registration statement under the 1933 Act in respect of the Securities;
144554\0514777.WP
- 13 -
11. no U.S. Person, either directly or indirectly, has any beneficial interest
in any of the Securities purchased by the Subscriber hereunder, nor do we
have any agreement or understanding (written or oral) with any U.S. Person
respecting:
(a) the transfer of any assignment of any rights or interest in any of the
Securities;
(b) the division of profits, losses, fees, commissions or any financial
stake in connection with this subscription; or
(c) the voting of the Securities;
12. the current structure of this transaction and all transactions and
activities contemplated hereunder is not a scheme to avoid the registration
requirements of the 1933 Act, without limiting the foregoing, the
Subscriber hereby acknowledges that the United States Securities and
Exchange Commission deems a "scheme" to include, without limitation, the
purchase of Securities purchased by the Subscriber hereunder that have an
active United States trading market:
(a) at a discount, with the intention of reselling the Securities into the
United States immediately or shortly following the expiration of the
40 day period during which such resales are prohibited under
Regulation S; or
(b) coupled with the purchaser's hedging or taking an offsetting "short"
position with respect to such Securities in a United States market;
13. the Subscriber has no intention to distribute either directly or indirectly
any of the Securities in the United States or to any U.S. Person;
14. the Subscriber has not and will not engage in any directed selling efforts
in the United States in respect of the Securities, including any activities
undertaken for the purpose of, or that could reasonably be expected to have
the effect of, conditioning the market in the United States, for the resale
of the Securities;
15. the Subscriber agrees that if it decides to offer, sell or otherwise
transfer the Securities as permitted according to their terms, the same may
be offered, sold or otherwise transferred only:
(a) to the Company;
(b) in accordance with Rule 904 of Regulation S under the 1933 Act;
(c) with the prior written consent of the Company, pursuant to another
applicable exemption from registration under the 1933 Act; provided an
opinion of counsel of recognized standing reasonably satisfactory to
the Company is delivered; or
144554\0514777.WP
- 14 -
(d) pursuant to an effective registration statement under the 1933 Act, in
each case in accordance with applicable state securities laws;
16. the Subscriber understands and acknowledges that upon the initial issuance
thereof, and until such time as the same is no longer required under the
1933 Act or applicable state securities laws, the certificates representing
the Securities, and all certificates issued in exchange therefor or in
substitution thereof, shall bear the following legends:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE United States SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF,
BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF THE ISSUER THAT SUCH SECURITIES MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE ISSUER,
(B) OUTSIDE THE United States in accordance with RULE
904 OF REGULATION S UNDER THE 1933 ACT, (C) WITH THE
PRIOR WRITTEN CONSENT OF THE ISSUER, PURSUANT TO
ANOTHER APPLICABLE EXEMPTION FROM REGISTRATION UNDER
THE 1933 ACT; PROVIDED AN OPINION OF COUNSEL OF
RECOGNIZED STANDING REASONABLY SATISFACTORY TO THE
ISSUER IS DELIVERED
and further certifies that the certificates representing the
Securities, and all certificates issued in exchange therefor
or in substitution thereof, shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY
MAY NOT BE EXERCISED BY OR ON
BEHALF OF ANY U.S. PERSON UNLESS
REGISTERED UNDER THE 1933 ACT OR AN
EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE.
If the Securities are being sold in accordance with paragraph
15 (b) above, the legend or legends may be removed by
providing a declaration to the registrar and transfer agent to
the following effect (or as the Company may prescribe from
time to time):
The undersigned (A) acknowledges that the sale of the Securities to
which this declaration relates is being made in reliance upon
Rule 904 of Regulation S under the United
144554\0514777.WP
- 15 -
States Securities Act of 1933, as amended (the "1933
Act") and (B) certifies that (1) it is not an
affiliate (as defined in Rule 405 under the 1933 Act)
of Dakota Mining Corporation, (2) the offer of such
securities was not made to a person in the United
States and either (A) at the time the buy order was
originated, the buyer was outside the United States,
or the seller and any person acting on its behalf
reasonably believe that the buyer was outside the
United States, or (B) the transaction was executed on
or through the facilities of The Toronto Stock
Exchange, the Montreal Exchange, the Vancouver Stock
Exchange or the Alberta Stock Exchange and neither
the seller nor any affiliate of the seller nor any
person acting on any of their behalf has engaged or
will engage in any directed selling efforts in the
United States in connection with the offer and sale
of such securities, (4) the sale is bona fide and not
for the purpose of "washing off" the resale
restrictions imposed because the securities are
"restricted securities" (as such term is defined in
Rule 144(a)(3) under the 1933 Act, (5) the seller
does not intend to replace the securities sold in
reliance on Rule 904 of the 1933 Act with fungible
unrestricted securities and (6) the contemplated sale
is not a transaction, or part of a series of
transactions which, although in technical compliance
with Regulation S, is part of a plan or scheme to
evade the registration provisions of the 1933 Act.
Terms used herein have the meanings given to them by
Regulation S.
17. the Subscriber understands and acknowledges that the Company shall instruct
the transfer agent for the Securities not to record a transfer without
first being notified by the Company that it is satisfied that such transfer
is exempt from or not subject to registration under the 1933 Act and
applicable state securities laws.
18. the Subscriber confirms and acknowledges that the term sheet attached
hereto is the definitive term sheet and we have relied on it, and not any
prior term sheet (if any), to make our investment decision.
19. if the Subscriber or any purchaser on whose behalf the Subscriber is acting
is not resident in Canada, such person will:
(a) not sell or otherwise dispose of the Special Warrants or the
Debentures issuable upon exercise of the Special Warrants, except in
accordance with applicable Canadian laws; and
(b) if such person sells or otherwise disposes of the Special Warrants or
the Debentures upon exercise of the Special Warrants to a person other
than
144554\0514777.WP
- 16 -
a resident of Canada, such person covenants to obtain from such
purchaser a covenant in the same form as provided herein;
20. this agreement has been duly authorized, executed and delivered by, and
constitutes a legal, valid, binding and enforceable obligation of, the
Subscriber or the beneficial purchaser for whom the Subscriber is
purchasing;
21. if an individual, the Subscriber has attained the age of majority and in
every case is legally competent to execute this agreement and to take all
actions required pursuant hereto; and
22. the Subscriber is capable of assessing the proposed investment as a result
of the Subscriber's experience or as a result of advice received from a
registered person other than the Company or an affiliate thereof;
23. the Subscriber is not an insider of the Company as defined under the
Securities Act (Ontario).
9. Reliance Upon Representations, Warranties and Covenants
The Subscriber acknowledges that the representations and
warranties and covenants contained in this Subscription Agreement and in the
Schedules hereto are made with the intent that they may be relied upon by the
Company and the Agent to, among other things, determine its eligibility or (if
applicable) the eligibility of others on whose behalf it is contracting
hereunder to purchase the Special Warrants and the Subscriber hereby agrees to
indemnify the Company and the Agent and any person who controls the Company and
the Agent against all losses, claims, costs, expenses and damages or liabilities
which they may suffer or incur which are caused by or arise from, directly or
indirectly, their reliance thereon. The Subscriber further agrees that by
accepting the Special Warrants the Subscriber shall be representing and
warranting that the foregoing representations and warranties are true as at the
Closing Time with the same force and effect as if they had been made by the
Subscriber at the Closing Time and that they shall survive the purchase by the
Subscriber of the Special Warrants and shall continue in full force and effect
notwithstanding any subsequent disposition by him of the Special Warrants or the
Debentures.
10. The Agent
The Subscriber understands that upon completion of the
purchase from the Company of the Special Warrants, the Agent will receive from
the Company a cash commission equal to 6% of the gross proceeds received by the
Company from the sale of the Special Warrants to be sold under the Offering. No
other fee or commission is payable by the Company in connection with the sale of
the Special Warrants. The Subscriber further understands that the Agent, its
directors, officers, employees and affiliates may, from time to time, hold
positions in securities of the Company.
144554\0514777.WP
- 17 -
11. Contractual Right of Action for Rescission
In the event that a holder of Special Warrants, who acquires
the Debentures upon the exercise of the Special Warrants as provided for in the
Prospectus, is or becomes entitled under the Securities Act (Ontario), the
Securities Act (British Columbia) the Securities Act (Alberta) or securities
laws of any other jurisdiction to the remedy of rescission by reason of the
Prospectus or any amendment thereto containing a misrepresentation, such holder
shall be entitled to rescission not only of the holder's exercise of its Special
Warrant(s) but also of the private placement transaction pursuant to which the
Special Warrants were initially acquired, and shall be entitled in connection
with such rescission to a full refund of all consideration paid on the
acquisition of the Special Warrants. In the event such holder is a permitted
assignee of the interest of the original Special Warrants subscriber, such
permitted assignee shall be entitled to exercise the rights of rescission and
refund granted hereunder as if such permitted assignee were such original
subscriber. The foregoing is in addition to any other right or remedy available
to a holder of Special Warrants under Section 130 of the Securities Act
(Ontario), or otherwise at law or pursuant to the applicable securities
regulatory requirements of the Qualifying Jurisdictions.
12. Costs
All costs and expenses incurred by the Subscriber (including
any fees and disbursements of any special counsel retained by the Subscriber)
relating to the sale of the Special Warrants to the Subscriber shall be borne by
the Subscriber.
13. Appointment of Canaccord Capital Corporation as Subscriber's Agent
The Subscriber, on its own behalf and (if applicable) on behalf of
others for whom the Subscriber is contracting hereunder, hereby:
(a) irrevocably authorizes Canaccord Capital Corporation, to negotiate and
settle the form of the Special Warrant Indenture and any other
agreement to be entered into in connection with this transaction and
to waive on its own behalf and on behalf of the purchasers of Special
Warrants in whole or in part, or extend the time for compliance with,
any of the closing conditions in such manner and on such terms and
conditions as Canaccord Capital Corporation may determine, acting
reasonably, without in any way affecting the Subscriber's obligations
or the obligations of such others hereunder;
(b) acknowledges and agrees that Canaccord Capital Corporation and the
Company may vary, amend, alter or waive, in whole or in part, one or
more of the conditions or covenants to be set forth in the Agency
Agreement in such manner and on such terms and conditions as it may
determine, acting reasonably, without affecting in any way the
Subscriber's or such others' obligations hereunder; provided, however,
that Canaccord Capital Corporation shall not vary, amend, alter or
waive any such condition where to do so would result in a material
change to any of the material attributes of the Special Warrants
described herein; and
144554\0514777.WP
- 18 -
(c) irrevocably authorizes Canaccord Capital Corporation to swear,
accept, execute, file and record any documents (including
receipts) necessary to accept delivery of the Special Warrants
on the Closing Date and to terminate this subscription on
behalf of the Subscriber in the event that any condition
precedent of the Offering has not been satisfied.
14. Appointment of Trustee
The Subscriber hereby directs the Trustee or other suitable
party to exercise all of the Special Warrants held by the Subscriber, on the
Subscriber's behalf, if the Subscriber has not so exercised all or part of the
Special Warrants on or before the Expiry Date, such direction being subject to
revocation by the Subscriber at any time by providing the Trustee or other
suitable party with written notice of such revocation. The Subscriber
acknowledges and agrees that the terms of this Subscription Agreement do not
require the Subscriber to give the authorization and direction set forth herein
and the Subscriber may elect not to so authorize and direct by deleting this
paragraph 14 and placing the Subscriber's initials beside the same at the time
the Subscriber executes this Subscription Agreement.
15. Conditional Upon TSE and ASE Approval
Without limitation, this subscription is conditional upon and
subject to the Company receiving approval of The Toronto Stock Exchange (the
"TSE") and The American Stock Exchange (the "ASE") of this subscription and the
transactions contemplated hereby and the acceptance of the listing of the
Debentures by the TSE (if so required by the Agent) and the listing of the
Shares to be issued upon exercise of the Debentures on the ASE and the TSE.
16. Facsimile Subscriptions
The Company and the Agent will be entitled to rely upon
delivery by facsimile machine of an executed copy of this Subscription Agreement
and acceptance of the Company of such facsimile copy will be legally effective
to create a valid and binding agreement between the Subscriber and the Company
in accordance with the terms hereof.
17. Governing Law
This Subscription Agreement is governed by the laws of the
Province of British Columbia and the federal laws of Canada applicable therein.
18. Survival
This Subscription Agreement, including without limitation the
representations, warranties and covenants contained herein, shall survive and
continue in full force and effect and be binding upon the Subscriber
notwithstanding the completion of the purchase of the Special Warrants by the
Subscriber pursuant hereto, the issuance of Special Warrants by the Company and
any subsequent disposition by the Subscriber of the Special Warrants, or the
Debentures.
144554\0514777.WP
- 19 -
19. Assignment
This Subscription Agreement is not transferable or assignable
by the parties hereto.
20. Time of the Essence
Time shall be of the essence of this Subscription Agreement.
21. Entire Agreement
This Subscription Agreement contains the entire agreement of
the parties hereto relating to the subject matter hereof and there are no
representations, covenants or other agreements relating to the subject matter
hereof except as otherwise stated or referred to herein.
22. Language
The Subscriber hereby acknowledges that it has consented and
requested that all documents evidencing or relating in any way to the sale of
Special Warrants be drawn up in the English language only. Nous, soussignes,
reconnaissans par les presentees avoir consenti et exige que tous les documents
faisant foi ou se rapportant de quelqu maniere a la vente de ces warrants soient
re diges en langue anglaise seulement.
IN WITNESS WHEREOF the Subscriber has duly executed this
subscription as of the date first above mentioned.
Number of Special Warrants to be purchased at Cdn.$1,000 each:
Total Purchase Price:
(Name of Subscriber - Please type or print)
(Signature and, if applicable, Office)
(Address of Subscriber)
(City, Province, Postal Code)
If the Subscriber is signing as agent for a principal, and the
Subscriber is not a trust company signing as trustee or as an agent for a
fully-managed account, please complete the following:
144554\0514777.WP
- 20 -
(Name of Beneficial Purchaser - Please type or print)
(Address of Beneficial Purchaser)
(City, Province, Postal Code)
144554\0514777.WP
- 21 -
ACCEPTANCE
The above-mentioned Subscription Agreement is hereby accepted
and agreed to by Dakota Mining Corporation.
DATED at Toronto, Ontario, the day of February, 1997.
DAKOTA MINING CORPORATION
Per: Authorized Signing Officer
144554\0514777.WP
- 22 -
SCHEDULE "A"
DAKOTA MINING CORPORATION
Term Sheet
144554\0514777.WP
- 23 -
SCHEDULE I
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
1. DESCRIPTION OF TRANSACTION
(a) Name of issuer of the securities DAKOTA MINING CORPORATION
(b) Number and class of securities to be purchased:
Special Warrants each exchangeable for one $1,000 principal
amount 7.5% unsecured subordinated convertible debenture
(c) Purchase Price: (Cdn.)$1,000
2. DETAILS OF PURCHASER
(a) Name of Purchaser:
(b) Address:
(c) Names and addresses of persons having a greater than 10%
beneficial interest in the Purchaser:
3. RELATIONSHIP TO ISSUER
(a) Is the Purchaser (or any person named in response to 2(c) above)
an insider of the Issuer for the purposes of the Ontario
Securities Act (before giving effect to this private placement)?
If so, state the capacity in which the Purchaser (or person named
in response to 2(c)) qualifies as an insider:
144554\0514777.WP
- 24 -
(b) If the answer to (a) is "no", are the Purchaser and the Issuer
controlled by the same person or company? If so, give details:
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the Purchaser, as principal, in the
securities of the Issuer (other than debt securities which are not
convertible into equity securities), directly or indirectly, within the
90 days preceding the date hereof:
144554\0514777.WP
- 25 -
This undertaking is to be used when the private placement is for
special warrants
UNDERTAKING
TO: The Toronto Stock Exchange
The undersigned has subscribed for an agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period equal
to the lesser of:
(a) six months from the date of the closing of the transaction herein
or for such period as is prescribed by applicable securities
legislation, whichever is longer; and
(b) a period ending on the date that a receipt for a final prospectus
relating to the said securities or any securities derived
therefrom has been issued by the Ontario Securities Commission,
without the prior consent of The Toronto Stock Exchange and any other regulatory
body having jurisdiction.
DATED AT:
(Name of Purchaser - please print)
this day of 1997
(Authorized Signature)
(Official Capacity - please print)
(please print here name of
individual whose signature appears
above if different from name of
purchaser printed above)
144554\0514777.WP
- 26 -
SCHEDULE "II"
Dakota Mining Corporation
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX
00000
X.X.X.
Dear Sirs:
Re: Dakota Mining Corporation
Private Placement of Special Warrants
1. Number of Special Warrants at Cdn.$1,000.00 for an aggregate
subscription price of $ .
2. Delivery - please deliver the Special Warrant certificate(s) at
the address appearing above unless indicated otherwise below:
3. Registration - registration of the single certificate which is to
be delivered at Closing should be made as follows:
(name)
(address)
4. The undersigned hereby acknowledges that it will deliver to the
Company all such additional completed forms in respect of the
Subscribers' purchase of Special Warrants of the Company as may
be required for filing with the appropriate securities
commissions and regulatory authorities and stock exchanges.
DATED: , 1997.
(name of purchaser)
Per:
(signature)
(position)
In case more than one Special Warrant certificate is to be delivered at closing,
please complete a Schedule "II" for each certificate to be delivered.
144554\0514777.WP
- 27 -
SCHEDULE "III"
This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 59 of the Securities Act.
FORM 20A(IP)
Securities Act
Acknowledgment of Individual Purchaser
1. I have agreed to purchase from Dakota Mining Corporation (the
"Issuer") [number and description of securities] (the "Securities") of
the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I [circle one] have/have not received an offering memorandum
describing the Issuer and the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, AND (b) there
is no government or other insurance covering the Securities, AND
(c) I may lose all of my investment, AND (d) there are
restrictions on my ability to resell the Securities and it is my
responsibility what those restrictions are and to comply with
them before selling the Securities, AND (e) I will not receive a
prospectus that the British Columbia Securities Act (the "Act")
would otherwise require be given to me because the Issuer has
advised me that it is relying on a prospectus exemption, AND (f)
because I am not purchasing the Securities under a prospectus, I
will not have the civil remedies that would otherwise be
available to me, AND (g) the Issuer has advised me that it is
using an exemption from the requirement to sell through a dealer
registered under the Act, except purchases referred to in
paragraph 5(g), and as a result do not have the benefit of any
protection that might have been available to me by having a
dealer act on my behalf.
5. I also acknowledge that: [circle one]:
(a) I am purchasing Securities that have an aggregate acquisition
cost of $97,000 or more, OR
(b) my net worth jointly with my spouse at the date of the agreement
of purchase and sale of the security, is not less than $400,000,
OR
(c) my annual net income before tax is not less than $75,000, or my
annual net income before tax jointly with my spouse is not less
than $125,000, in each of the two most recent calendar years, and
I reasonably expect to have annual net
144554\0514777.WP
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income before tax of not less than $75,000 or annual net income before
tax jointly with my spouse of not less than $125,000 in the
current calendar year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior
officer or director of the Issuer, or of an affiliate of the
Issuer, OR
(f) I am a close personal friend of a senior officer or director of
the Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000
registrant required) of the Rules, and I have spoke to a person,
[Name of registered person: (the "Registered Person")] who has
advised me that the Registered Person is registered to trade or
advise in the Securities and that the purchase of the Securities
is a suitable investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d), I
acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of
the Securities because: [circle one]:
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person [Name of Adviser: (the
"Adviser") who has advised me that the Adviser is:
(i) registered to advise, or exempted from the requirement to be
registered to advise, in respect of the Securities, and
(ii) not an adviser of, or in a special relationship with, the
Issuer.
The statements made in this report are true.
DATED, 199 .
Signature of Purchaser
Name of Purchaser
Address of Purchaser
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- 29 -
1/24/97-3
DAKOTA MINING CORPORATION
SUBSCRIPTION AGREEMENT
(For United States Residents)
February 4, 1997
TO: DAKOTA MINING CORPORATION
AND TO: SCOTIA CAPITAL MARKETS (USA) INC. AND CANACCORD CAPITAL
CORPORATION
RE: SUBSCRIPTION FOR AND PURCHASE OF SPECIAL WARRANTS
OF DAKOTA MINING CORPORATION
Reference is made to an engagement letter (the "Engagement
Letter" dated December 23, 1996 between Dakota Mining Corporation (the
"Company") and Canaccord Capital Corporation (the "Agent") providing for the
issuance and sale by the Company to purchasers of between 20,000 and 25,000
special warrants (the "Special Warrants") for a consideration of Cdn.$1,000.00
per Special Warrant (the "Offering") on the terms and conditions set forth in
the Engagement Letter. A copy of a term sheet (the "Term Sheet") outlining the
features of the Special Warrants and certain terms contained in the Engagement
Letter is attached as Schedule "A" hereto. Pursuant to the Engagement Letter,
the Company and the Agent will enter into a definitive agency agreement (the
"Agency Agreement") which shall set forth certain terms relating to the Special
Warrants. The Special Warrants are being offered pursuant to section 4(2) of the
United States Securities Act of 1933 by Scotia Capital Markets (USA) Inc.
1. Subscription
The undersigned (the "Subscriber") hereby irrevocably
subscribes for and agrees to purchase, subject to the terms and conditions set
forth herein, that number of Special Warrants of the Company set out above the
Subscriber's name on page 8 hereof at a price of Cdn.$1,000.00 per Special
Warrant. The Subscriber understands that the Special Warrants subscribed for
constitute a portion of an offering of between 20,000 and 25,000 Special
Warrants by the Company, pursuant to the terms of the Agency Agreement under
which the Agent will offer the Special Warrants for sale on a best efforts
basis, on behalf of the Company.
2. Description of Special Warrants
The Special Warrants shall be created and issued pursuant to a
special warrant indenture (the "Special Warrant Indenture") between Montreal
Trust Company of Canada, as trustee (the "Trustee"), and the Company to be dated
as of the Closing Date (as hereinafter defined). The specific attributes of the
Special Warrants shall be set forth in the Special Warrant Indenture, which
shall provide, among other things, that the holders of Special Warrants shall
144554\0514777.WP
be entitled to receive, without payment of any additional consideration, upon
exercise of each Special Warrant in accordance with the terms of the Special
Warrant Indenture, one $1,000 principal amount unsecured convertible debenture
of the Company (each, a "Debenture" and collectively, the "Debentures") subject
to adjustment as described herein. Upon maturity or redemption of the
Debentures, the Company will have the option, subject to prior notice, to repay
the principal amount of the Debentures in cash or in common shares of the
Company (the "Common Shares" or "Shares").
The Special Warrants shall be exchangeable at the option of
the holder at any time on or before 5:00 p.m. (Vancouver time) on the earlier of
(a) the 5th business day after a receipt is issued by the last of the securities
regulatory authorities in each of the Qualifying Jurisdictions (as hereinafter
defined) for the final prospectus (the "Prospectus") qualifying the issuance
(the "Prospectus Qualification") of the Debentures and (b) February 4, 1998 (the
earlier of such dates hereinafter referred to as the "Expiry Date"). All of the
net proceeds (after deducting the commission payable to the Agent on closing)
will be escrowed on closing. The amount of U.S.$5,000,000 will be released to
the Company provided that certain conditions relating to the Merger (as
hereinafter defined) are fulfilled to the satisfaction of the Agent. The balance
of the net proceeds will remain escrowed subject to the completion of the
proposed merger involving USMX Inc. and the Company (the "Merger") and obtaining
the requisite shareholder approval (the "Shareholder Approval") to the issue.
The escrowed proceeds shall not be released to the Company unless and until the
Shareholder Approval is obtained and the Merger occurs on terms described in a
letter agreement between the Company and USMX Inc., dated January 3, 1997 (the
"Merger Agreement") and which are otherwise acceptable to the Agent. Any Special
Warrants not exercised by the Expiry Date shall be exercised by the Trustee on
behalf of the holder immediately prior thereto without any further action on the
part of the holder as described herein.
The Company shall undertake to file the Prospectus and obtain
receipts therefor from the applicable securities regulatory authorities in
British Columbia, Alberta, Ontario and in each of the provinces of Canada in
which Subscribers are resident as applicable (the "Qualifying Jurisdictions")
not later than the later of May 31, 1997 and the date which falls 120 days from
the Closing Date (as hereinafter defined), or such later date as may be
designated by the Agent (the "Qualification Deadline").
Subject to the Redemption Obligation and the Redemption Option
as discussed below, in the event that receipts for the Prospectus are not
obtained prior to the Qualification Deadline, the terms of the Debentures shall
provide that the holders shall be entitled to acquire, for no additional
consideration, 1.10 Common Shares for every Share of the Company otherwise
issuable as and at such time as the Debentures are converted.
In the event that the Shareholder Approval has not been
obtained on a date (the "Shareholder Approval Date") which occurs on or before
April 30, 1997 (the "Shareholder Qualification Deadline"), unless the
Shareholder Qualification Deadline is extended up to May 31, 1997 in accordance
with the Merger Agreement, the number of Special Warrants proportionate to the
Escrow Proceeds shall be subject to automatic redemption by the Company (the
"Redemption Obligation") and, unless the holders elect to keep their Special
Warrants outstanding, holders of such Special Warrants who do not so elect will
receive the Escrow
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Proceeds for their Special Warrants at the issue price plus interest earned
thereon (on a pro rata basis if the Redemption Obligation exceeds the available
Escrow Proceeds). The Special Warrants of those holders which were not
repurchased pursuant to the Redemption Obligation shall remain outstanding until
the earlier of February 4, 1998 and the date on which the Shareholder Approval
is obtained or no longer required, provided that Special Warrants whose exchange
into Debentures requires Shareholder Approval may not be exchanged for
Debentures until such Shareholder Approval is obtained or no longer required.
In the event that the Merger does not place on or before the
Qualification Deadline, the holders of the Special Warrants shall have the
option (the "Redemption Option") for a period of five business days after the
Qualification Deadline to cause the Company to redeem their Special Warrants by
giving notice to the Company or otherwise tendering their Special Warrants to
the Company, which shall be redeemed and paid for with the Escrow Proceeds
together with interest earned thereon. If the Escrow Proceeds are insufficient
for the redemption of all of the Special Warrants to which such notice relates
or so tendered, then the Special Warrants to be redeemed shall be redeemed on a
pro rata basis.
The Special Warrants, and the Debentures have not been and
will not be registered under the United States Securities Act of 1933, as
amended (the "1933 Act), and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. Persons unless they are registered
under the 1933 Act, or an exemption from the registration requirements of the
1933 Act is available.
The foregoing description of the Special Warrants is a summary
only and is subject to the detailed provisions of the Special Warrant Indenture
under which such securities shall be issued. In the event of a conflict, the
provisions of the Special Warrant Indenture shall prevail.
3. Payment
The aggregate amount payable by the Subscriber in respect of
the Special Warrants (the "Subscription Price") must accompany this Subscription
Agreement and shall be made in Canadian dollars by certified cheque or bank
draft drawn on a Canadian chartered bank and payable to Canaccord Capital
Corporation or payable in such other manner as may be specified by the Agent to
be dealt with in accordance with the provisions set forth herein.
4. Questionnaire and Undertaking and Direction
The Subscriber must complete, sign and return the following
documents along with two (2) executed copies of this Subscription Agreement to
any of the Agent as soon as possible:
(a) Schedule I, a questionnaire and undertaking required by The Toronto
Stock Exchange on which the Debentures will be listed; and
(b) Schedule II, a direction with respect to registration and delivery
instructions.
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The Company will file the questionnaires and undertakings of
Subscribers whose subscriptions are accepted by the Company with The Toronto
Stock Exchange.
5. Other Documentation
The Subscriber may also be required to execute any further
documentation as required by The Toronto Stock Exchange or The American Stock
Exchange or under securities legislation or by other regulatory authorities in
the Qualifying Jurisdictions, the United States or the jurisdiction in which the
Subscriber is resident and covenants and agrees to do so upon request by the
Company or the Agent.
6. Closing
Delivery and payment for the Special Warrants (the "Closing")
will be completed at the offices of XxXxxxxx Xxxxxxxx, Barristers & Solicitors,
Xxxxx 0000, Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxx-Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx
M5K 1E6 at 12:00 a.m. (Toronto time) (the "Closing Time") on February 4, 1997 or
such earlier or later date or time on or before February 21, 1997 as the Company
and the Agent shall mutually agree (the "Closing Date").
Certificates representing the Special Warrants (individually,
a "Special Warrant Certificate" and collectively, the "Special Warrant
Certificates") will be available for delivery against payment to the Company of
the Subscription Price in the manner specified below.
It is a condition of Closing that all necessary regulatory
approvals be obtained and the documents completed in accordance with Section 4
hereof be received prior to the Closing Date. By its execution of this
Subscription Agreement, the Company hereby agrees with the Subscriber that the
Subscriber shall have the benefit of the following provisions set forth in the
Agency Agreement:
(a) the representations and warranties made by the Company to the Agent
and the undersigned as a purchaser of the Special Warrants; and
(b) the covenants of the Company in favour of the Agent and the
undersigned as a purchaser of the Special Warrants;
which representations or warranties, covenants and conditions are hereby
incorporated by reference such that they form an integral part of this
Subscription Agreement and all of which shall survive the closing of the
purchase and sale of the Special Warrants and shall continue in full force and
effect for the benefit of the Subscriber for the period set forth in the Agency
Agreement.
7. Prospectus Exemptions
The sale and delivery of the Special Warrants to the
Subscriber is conditional upon such sale being exempt from the requirements as
to the filing of a prospectus and as to the delivery of an offering memorandum
as defined in the applicable securities legislation or upon
144554\0514777.WP
- 4 -
the issuance of such rulings, orders, consents or approvals as may be required
to permit such sale without the requirement of filing a prospectus or delivering
an offering memorandum.
The Subscriber acknowledges and agrees that: (a) it (or others
for whom it is contracting hereunder) was not provided with, has not requested,
and does not need to receive, a prospectus or an offering memorandum as defined
in the applicable securities legislation or similar document; (b) its decision
to execute this subscription agreement and to purchase the Special Warrants
agreed to be purchased hereunder (or by others for whom it is contracting
hereunder) has not been based upon any verbal or written representations as to
fact or otherwise made by or on behalf of the Company, the Agent or any other
person or company and that its decision (or the decision of others for whom it
is contracting hereunder) is based entirely upon the Term Sheet and publicly
available information concerning the Company which was obtained by the
Subscriber and not provided to it by either the Company or the Agent; (c) the
sale of the Special Warrants was not accompanied by any advertisement in printed
media of general and regular paid circulation, radio or television or any form
of advertisement or as part of a general solicitation; and (d) it (or others for
whom it is contracting hereunder) has been advised to consult its own legal
advisors with respect to applicable resale restrictions and it (or others for
whom it is contracting hereunder) is solely responsible (and neither the Company
nor the Agent is in any way responsible) for compliance with applicable resale
restrictions.
The Subscriber acknowledges and agrees that the Special
Warrants, and the Debentures issuable upon exercise of the Special Warrants are
subject to statutory hold periods during which these securities may not be
offered, resold or otherwise transferred in Canada, the United States or
elsewhere except in compliance with applicable securities laws and the
requirements of applicable stock exchanges and that the Subscriber shall not so
offer, resell or otherwise transfer these securities except in compliance with
applicable securities laws and the requirements of applicable stock exchanges.
The Subscriber confirms that no representation has been made respecting the
applicable hold periods for the Special Warrants. Subscribers are advised to
consult with their own legal advisers in connection with any applicable resale
restrictions.
8. Representations, Warranties and Covenants of the Subscriber
The Subscriber hereby represents and warrants to the Company
and the Agent (which representations and warranties shall survive closing) that:
1. the Subscriber and any beneficial purchaser for whom the Subscriber is
acting is resident in the jurisdiction set out below your signatures
on page 8;
2. the Subscriber is not an insider of the Company as defined under the
Securities Act (Ontario); and
3. the statements made in Schedule "B" are true and correct as at the
date thereof.
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- 5 -
9. Reliance Upon Representations, Warranties and Covenants
The Subscriber acknowledges that the representations and
warranties and covenants contained in this Subscription Agreement and in the
Schedules hereto are made with the intent that they may be relied upon by the
Company and the Agent to, among other things, determine its eligibility or (if
applicable) the eligibility of others on whose behalf it is contracting
hereunder to purchase the Special Warrants and the Subscriber hereby agrees to
indemnify the Company and the Agent and any person who controls the Company or
the Agent against all losses, claims, costs, expenses and damages or liabilities
which they may suffer or incur which are caused by or arise from, directly or
indirectly, their reliance thereon. The Subscriber further agrees that by
accepting the Special Warrants the Subscriber shall be representing and
warranting that the foregoing representations and warranties are true as at the
Closing Time with the same force and effect as if they had been made by the
Subscriber at the Closing Time and that they shall survive the purchase by the
Subscriber of the Special Warrants and shall continue in full force and effect
notwithstanding any subsequent disposition by him of the Special Warrants or the
Debentures.
10. The Agent
The Subscriber understands that upon completion of the
purchase from the Company of the Special Warrants, the Agent will receive from
the Company a cash commission equal to 6% of the gross proceeds received by the
Company from the sale of the Special Warrants to be sold under the Offering. No
other fee or commission is payable by the Company in connection with the sale of
the Special Warrants. The Subscriber further understands that the Agent, its
directors, officers, employees and affiliates may, from time to time, hold
positions in securities of the Company.
11. Contractual Right of Action for Rescission
In the event that a holder of Special Warrants, who acquires
the Debentures upon the exercise of the Special Warrants as provided for in the
Prospectus, is or becomes entitled under the Securities Act (British Columbia),
the Securities Act (Alberta) or the Securities Act (Ontario) or the securities
laws of any other jurisdiction to the remedy of rescission by reason of the
Prospectus or any amendment thereto containing a misrepresentation, such holder
shall be entitled to rescission not only of the holder's exercise of its Special
Warrant(s) but also of the private placement transaction pursuant to which the
Special Warrants were initially acquired, and shall be entitled in connection
with such rescission to a full refund of all consideration paid on the
acquisition of the Special Warrants. In the event such holder is a permitted
assignee of the interest of the original Special Warrants subscriber, such
permitted assignee shall be entitled to exercise the rights of rescission and
refund granted hereunder as if such permitted assignee were such original
subscriber. The foregoing is in addition to any other right or remedy available
to a holder of Special Warrants under Section 130 of the Securities Act
(Ontario), or otherwise at law or pursuant to the applicable securities
regulatory requirements of the Qualifying Jurisdictions.
144554\0514777.WP
- 6 -
12. Costs
All costs and expenses incurred by the Subscriber (including
any fees and disbursements of any special counsel retained by the Subscriber)
relating to the sale of the Special Warrants to the Subscriber shall be borne by
the Subscriber.
13. Appointment of Canaccord Capital Corporation as Subscriber's Agent
The Subscriber, on its own behalf and (if applicable) on
behalf of others for whom the Subscriber is contracting hereunder, hereby:
(a) irrevocably authorizes Canaccord Capital Corporation, to negotiate and
settle the form of the Special Warrant Indenture and any other
agreement to be entered into in connection with this transaction and
to waive on its own behalf and on behalf of the purchasers of Special
Warrants in whole or in part, or extend the time for compliance with,
any of the closing conditions in such manner and on such terms and
conditions as Canaccord Capital Corporation may determine, acting
reasonably, without in any way affecting the Subscriber's obligations
or the obligations of such others hereunder;
(b) acknowledges and agrees that Canaccord Capital Corporation and the
Company may vary, amend, alter or waive, in whole or in part, one or
more of the conditions or covenants set forth in the Agency Agreement
in such manner and on such terms and conditions as it may determine,
acting reasonably, without affecting in any way the Subscriber's or
such others' obligations hereunder; provided, however, that Canaccord
Capital Corporation shall not vary, amend, alter or waive any such
condition where to do so would result in a material change to any of
the material attributes of the Special Warrants described herein; and
(c) irrevocably authorizes Canaccord Capital Corporation to swear, accept,
execute, file and record any documents (including receipts) necessary
to accept delivery of the Special Warrants on the Closing Date and to
terminate this subscription on behalf of the Subscriber in the event
that any condition precedent of the Offering has not been satisfied.
14. Appointment of Trustee
The Subscriber hereby directs the Trustee or other suitable
party to exercise all of the Special Warrants held by the Subscriber, on the
Subscriber's behalf, if the Subscriber has not so exercised all or part of the
Special Warrants on or before the Expiry Date, such direction being subject to
revocation by the Subscriber at any time by providing the Trustee or other
suitable party with written notice of such revocation. The Subscriber
acknowledges and agrees that the terms of this Subscription Agreement do not
require the Subscriber to give the authorization and direction set forth herein
and the Subscriber may elect not to so authorize and direct by deleting this
paragraph 14 and placing the Subscriber's initials beside the same at the time
the Subscriber executes this Subscription Agreement.
144554\0514777.WP
- 7 -
15. Conditional Upon TSE and ASE Approval
Without limitation, this subscription is conditional upon and
subject to the Company receiving approval of The Toronto Stock Exchange (the
"TSE") and The American Stock Exchange (the "ASE") of this subscription and the
transactions contemplated hereby and the acceptance of the listing of the
Debentures by the TSE (if so required by the Agent) and the listing of the
Shares to be issued upon exercise of the Debentures on the ASE and the TSE.
16. Facsimile Subscriptions
The Company and the Agent will be entitled to rely upon
delivery by facsimile machine of an executed copy of this Subscription Agreement
and acceptance of the Company of such facsimile copy will be legally effective
to create a valid and binding agreement between the Subscriber and the Company
in accordance with the terms hereof.
17. Governing Law
This Subscription Agreement is governed by the laws of the
Province of British Columbia and the federal laws of Canada applicable therein.
18. Survival
This Subscription Agreement, including without limitation the
representations, warranties and covenants contained herein, shall survive and
continue in full force and effect and be binding upon the Subscriber
notwithstanding the completion of the purchase of the Special Warrants by the
Subscriber pursuant hereto, the issuance of Special Warrants by the Company and
any subsequent disposition by the Subscriber of the Special Warrants, or the
Debentures.
19. Assignment
This Subscription Agreement is not transferable or assignable
by the parties hereto.
20. Time of the Essence
Time shall be of the essence of this Subscription Agreement.
21. Entire Agreement
This Subscription Agreement contains the entire agreement of
the parties hereto relating to the subject matter hereof, and there are no
representations, covenants or other agreements relating to the subject matter
hereof except as otherwise stated or referred to herein.
22. Language
The Subscriber hereby acknowledges that it has consented and
requested that all documents evidencing or relating in any way to the sale of
Special Warrants be drawn up in the
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- 8 -
English language only. Nous, soussignes, reconnaissans par les presentees avoir
consenti et exige que tous les documents faisant foi ou se rapportant de quelqu
maniere a la vente de ces warrants soient re diges en langue anglaise seulement.
IN WITNESS WHEREOF the Subscriber has duly executed this
subscription as of the date first above mentioned.
Number of Special Warrants to be purchased at Cdn.$1,000 each:
Total Purchase Price:
(Name of Subscriber - Please type or print)
(Signature and, if applicable, Office)
(Address of Subscriber)
(City, Province, Postal Code)
If the Subscriber is signing as agent for a principal, and the
Subscriber is not a trust company signing as trustee or as an agent for a
fully-managed account, please complete the following:
(Name of Beneficial Purchaser - Please type or print)
(Address of Beneficial Purchaser)
(City, Province, Postal Code)
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- 9 -
ACCEPTANCE
The above-mentioned Subscription Agreement is hereby accepted
and agreed to by Dakota Mining Corporation.
DATED at Toronto, Ontario, the day of February, 1997.
DAKOTA MINING CORPORATION
Per:
Authorized Signing Officer
144554\0514777.WP
- 10 -
SCHEDULE "A"
DAKOTA MINING CORPORATION
Term Sheet
144554\0514777.WP
- 11 -
SCHEDULE I
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
1. DESCRIPTION OF TRANSACTION
(a) Name of issuer of the securities DAKOTA MINING CORPORATION
(b) Number and class of securities to be purchased:
Special Warrants each exchangeable for one $1,000 principal
amount 7.5% unsecured subordinated convertible debenture
(c) Purchase Price: (Cdn.)$1,000
2. DETAILS OF PURCHASER
(a) Name of Purchaser:
(b) Address:
(c) Names and addresses of persons having a greater than 10%
beneficial interest in the Purchaser:
3. RELATIONSHIP TO ISSUER
(a) Is the Purchaser (or any person named in response to 2(c) above)
an insider of the Issuer for the purposes of the Ontario
Securities Act (before giving effect to this private placement)?
If so, state the capacity in which the Purchaser (or person named
in response to 2(c)) qualifies as an insider:
144554\0514777.WP
- 12 -
(b) If the answer to (a) is "no", are the Purchaser and the Issuer
controlled by the same person or company? If so, give details:
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the Purchaser, as principal, in the
securities of the Issuer (other than debt securities which are not
convertible into equity securities), directly or indirectly, within the
90 days preceding the date hereof:
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- 13 -
This undertaking is to be used when the private placement is for special
warrants
UNDERTAKING
TO: The Toronto Stock Exchange
The undersigned has subscribed for an agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period equal
to the lesser of:
(a) six months from the date of the closing of the transaction herein or
for such period as is prescribed by applicable securities legislation,
whichever is longer; and
(b) a period ending on the date that a receipt for a final prospectus
relating to the said securities or any securities derived therefrom
has been issued by the Ontario Securities Commission, without the
prior consent of The Toronto Stock Exchange and any other regulatory
body having jurisdiction.
DATED AT:
(Name of Purchaser - please print)
this day of 1997
(Authorized Signature)
(Official Capacity - please print)
(please print here name of
individual whose signature appears
above if different from name of
purchaser printed above)
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- 14 -
SCHEDULE "II"
Dakota Mining Corporation
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX
00000
X.X.X.
Dear Sirs:
Re: Dakota Mining Corporation
Private Placement of Special Warrants
1. Number of Special Warrants at Cdn.$1,000.00 for an aggregate subscription
price of $ .
2. Delivery - please deliver the Special Warrant certificate(s) at the address
appearing above unless indicated otherwise below:
3. Registration - registration of the single certificate which is to be
delivered at Closing should be made as follows:
(name)
(address)
4. The undersigned hereby acknowledges that it will deliver to the Company all
such additional completed forms in respect of the Subscribers' purchase of
Special Warrants of the Company as may be required for filing with the
appropriate securities commissions and regulatory authorities and stock
exchanges.
DATED: , 1997.
(name of purchaser)
Per:
(signature)
(position)
In case more than one Special Warrant certificate is to be delivered at closing,
please complete a Schedule "II" for each certificate to be delivered.
144554\0514777.WP
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SCHEDULE "III"
This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 59 of the Securities Act.
FORM 20A(IP)
Securities Act
Acknowledgment of Individual Purchaser
1. I have agreed to purchase from Dakota Mining Corporation (the "Issuer")
[number and description of securities] (the "Securities") of the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I [circle one] have/have not received an offering memorandum describing the
Issuer and the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has reviewed
or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the Securities, AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities and it
is my responsibility what those restrictions are and to comply with
them before selling the Securities, AND
(e) I will not receive a prospectus that the British Columbia Securities
Act (the "Act") would otherwise require be given to me because the
Issuer has advised me that it is relying on a prospectus exemption,
AND
(f) because I am not purchasing the Securities under a prospectus, I will
not have the civil remedies that would otherwise be available to me,
AND
(g) the Issuer has advised me that it is using an exemption from the
requirement to sell through a dealer registered under the Act, except
purchases referred to in paragraph 5(g), and as a result do not have
the benefit of any protection that might have been available to me by
having a dealer act on my behalf.
5. I also acknowledge that: [circle one]:
(a) I am purchasing Securities that have an aggregate acquisition cost of
$97,000 or more, OR
(b) my net worth jointly with my spouse at the date of the agreement of
purchase and sale of the security, is not less than $400,000, OR
(c) my annual net income before tax is not less than $75,000, or my annual
net income before tax jointly with my spouse is not less than
$125,000, in each of the two most recent calendar years, and I
reasonably expect to have annual net
144554\0514777.WP
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income before tax of not less than $75,000 or annual net
income before tax jointly with my spouse of not less than
$125,000 in the current calendar year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior officer or
director of the Issuer, or of an affiliate of the Issuer, OR
(f) I am a close personal friend of a senior officer or director of the
Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 - registrant
required) of the Rules, and I have spoke to a person, [Name of
registered person: (the "Registered Person")] who has advised me that
the Registered Person is registered to trade or advise in the
Securities and that the purchase of the Securities is a suitable
investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d), I
acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of
the Securities because: [circle one]:
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person [Name of Adviser: (the "Adviser")
who has advised me that the Adviser is:
(i) registered to advise, or exempted from the requirement to be
registered to advise, in respect of the Securities, and
(ii) not an adviser of, or in a special relationship with, the Issuer.
The statements made in this report are true.
DATED, 199 .
Signature of Purchaser
Name of Purchaser
Address of Purchaser
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SCHEDULE "D"
Legal Opinion of Corporation's Counsel
At the Closing Time, the Agents shall receive a favourable
legal pinion from counsel for the Corporation addressed to the Agents, their
counsel and the Corporation dated the Closing Date, with respect to the
following matters:
(a) the Corporation has been duly incorporated and is existing under
the laws of Canada;
(b) each Canadian Subsidiary has been duly incorporated and is
existing under the laws of its jurisdiction of incorporation;
(c) the Corporation and each Canadian Subsidiary have all necessary
corporate capacity to own, lease and operate their respective
properties and assets and to conduct their respective businesses
at and in the places where such properties and assets are now
owned, leased or operated or such businesses are now conducted;
(d) the Corporation is shown on the share register of each Subsidiary
as the registered holder of all the issued and outstanding shares
in the capital of the Subsidiary (with any modification necessary
to reflect the actual holdings of the Corporation);
(e) the authorized capital of the Corporation consists of o shares,
divided into o Shares and o of which, as at the Closing Date, o
Shares are issued and outstanding (relying solely on a
certificate of the Trustee);
(f) the Debentures have been duly authorized and created and when
issued upon exercise of the Special Warrants, will be validly
issued as fully paid and non-assessable securities of the
Corporation;
(g) the Shares issuable in exchange for the Debentures have been
allotted and reserved for issue pursuant to the exercise of the
Debentures and when issued, will be validly issued as fully paid
and non-assessable shares of the Corporation;
(h) all necessary corporate action has been taken by the Corporation
to duly authorize the creation, issuance and sale of the Special
Warrants and the Special Warrants have been validly created and
issued;
(i) the form and terms of the definitive certificates representing
the Debentures and the Special Warrants have been approved and
adopted by the directors of the Corporation and the Share
certificates comply with all legal requirements relating thereto
including the requirements of the TSE;
(j) each of the Agency Agreement, the Special Warrant Indenture, the
Debenture Indenture and the Subscription Agreements (the
"Agreements") have been duly
144554\0514777.WP
authorized by all necessary corporate action on the part of
the Corporation, have been duly executed and delivered by and
on behalf of the Corporation and constitute legal, valid and
binding obligations of the Corporation enforceable in
accordance with their terms, except as enforcement thereof may
be limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally,
except that specific performance and injunction are equitable
remedies which may only be granted in the discretion of a
court of competent jurisdiction and except as rights to
indemnity, contribution and waiver of contribution may be
limited under applicable law and except as to other
qualifications as to enforceability as are agreed to by
counsel to the Agents;
(k) the execution and delivery of the Agreements, the fulfillment of
the terms hereof and the issuance and sale of the Special
Warrants and the issue of Debentures issuable upon exercise of
the Special Warrants, does not and will not conflict with and
does not and will not result in a breach of, any of the terms,
conditions or provisions of the constating documents of the
Corporation;
(l) the Warrant Agent at its principal office in the City of
Vancouver and Toronto has been duly appointed the transfer agent
and registrar for the Special Warrants;
(m) the Warrant Agent at its principal office in the City of
Vancouver and Toronto has been duly appointed the trustee for the
Debentures;
(n) the TSE has conditionally approved the listing of the Shares
issuable upon conversion of the Debentures, subject to the
Corporation fulfilling all of the requirements of the TSE on or
before the date specified in the letter or letters from the TSE
indicating conditional approval was granted (relying upon such
letters from the TSE);
(o) the issue of the Special Warrants being exempt from the
prospectus and registration requirements of applicable securities
laws;
(p) the issuance of the Debentures issuable upon exercise of the
Special Warrants and the issuance of the Shares issuable in
exchange for the Debentures is exempt from the prospectus and
registration requirements of applicable securities laws;
(q) the resale restrictions applicable to the first trade of the
Shares issued upon conversion of the Debentures where the
distribution of the Shares is qualified pursuant to the
Prospectus;
(r) the resale restrictions applicable to the first trade of the
Shares issued upon conversion of the Debentures where no
Prospectus has been filed in connection therewith;
(s) at the Closing Time, the Debentures do not constitute "foreign
property" within the meaning of the Income Tax Act (Canada), or
any amendments thereto publicly announced by the Minister of
Finance prior to that time; and
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(t) as to such other matters as counsel to the Agent may reasonably
request.
Any modifications of the foregoing shall be subject to the
approval of the Agents and their counsel acting reasonably. The delivery of a
definitive opinion at the Closing Time accepted by the Agents and their counsel
shall be deemed to constitute the approval of the Agents and their counsel to
any such modifications.
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