-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kf+4NwHfm0khGrllbheLhfAIpEaEPDCfEDCae8AW7BxEa7PWUaJeMm/YLaomHX/t 63UW5vNfvly1yBGH4wBqhw== 0000891020-99-000890.txt : 19990518 0000891020-99-000890.hdr.sgml : 19990518 ACCESSION NUMBER: 0000891020-99-000890 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLAMIS GOLD LTD CENTRAL INDEX KEY: 0000782819 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11648 FILM NUMBER: 99628426 BUSINESS ADDRESS: STREET 1: 5190 NEIL ROAD STREET 2: SUITE 310 CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: 7028274600 MAIL ADDRESS: STREET 1: 5190 NEIL ROAD STREET 2: SUITE 310 CITY: RENO STATE: NV ZIP: 89502 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ___________________ Commission file number 0-31986 (82-689) --------------------------------------------------------- GLAMIS GOLD LTD. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) British Columbia, Canada None. ------------------------------ ------------------ (Jurisdiction of incorporation (IRS Employer or organization) Identification No.) 5190 Neil Road, Suite 310, Reno, Nevada, 89502 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) 775-827-4600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 180 days. Yes [X] No [ ] The number of shares outstanding of the Registrant's common stock, as of May 7, 1999, was 68,439,932. 2 GLAMIS GOLD LTD. INDEX
Page ---- Part I - Financial Information Item 1. Financial Statements.................................................... 1 Consolidated Balance Sheets as at March 31, 1999 and December 31, 1998................................................... 1 Consolidated Statement of Earnings for the three months ended March 31, 1999 and 1998............................................. 2 Consolidated Statement of Retained Earnings (Deficit) for the three months ended March 31, 1999 and 1998................................ 2 Consolidated Statement of Cash Flows for the three months ended March 31, 1999 and 1998....................................... 3 Notes to Interim Consolidated Financial Statements.................. 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................... 6 Item 3. Qualitative and Quantitative Disclosures About Market Risk ............. 14 Part II - Other Information Item 1. Legal Proceedings....................................................... 15 Item 2. Changes in Securities.................................................. 15 Item 3. Defaults Upon Senior Securities......................................... 15 Item 4. Submission of Matters to a Vote of Security Holders..................... 15 Item 5. Other Information....................................................... 15 Item 6. Exhibits and Reports on Form 8-K........................................ 16 Signatures...................................................................... 16 Exhibit Index .................................................................. 16
3 -3- [Part I - Item 1] CONSOLIDATED BALANCE SHEETS (Expressed in thousands of U.S. dollars)
===================================================================================================== MARCH 31, December 31, ASSETS 1999 1998 - ----------------------------------------------------------------------------------------------------- Cash $ 41,885 $ 26,170 Other current assets (note 3) 18,453 12,048 - ----------------------------------------------------------------------------------------------------- Current assets 60,308 38,218 Plant and equipment and mine development costs net 127,589 79,655 Other assets 10,753 1,288 ===================================================================================================== $ 198,650 $ 119,161 LIABILITIES Current liabilities $ 26,090 $ 4,062 Long term liabilities 18,603 4,740 SHAREHOLDERS' EQUITY Share capital (note 5): Authorized: 200,000,000 common shares without par value 5,000,000 preferred shares, $10 par value, issuable in Series Issued and fully paid: 68,357,432 common shares (1998- 38,860,612) 156,506 109,587 Contributed surplus 63 63 Retained earnings (deficit) (2,612) 709 - ----------------------------------------------------------------------------------------------------- 153,957 110,359 - ----------------------------------------------------------------------------------------------------- $ 198,650 $ 119,161 =====================================================================================================
Prepared by Management without audit Approved by the Directors: Signed: "A. Dan Rovig" Signed: "C. Kevin McArthur" ------------------------ ----------------------------- A. Dan Rovig C. Kevin McArthur Director Director 4 -4- CONSOLIDATED STATEMENT OF OPERATIONS (Expressed in thousands of U.S. dollars) (Except per share amounts)
=============================================================================== THREE MONTHS ENDED MARCH 31, 1999 1998 - ------------------------------------------------------------------------------- Revenue from gold production $ 7,986 $ 8,955 Cost of production 7,189 5,186 - ------------------------------------------------------------------------------- 797 3,769 - ------------------------------------------------------------------------------- Expenses Depreciation & depletion 2,107 2,302 Royalties 367 640 Selling, general & administrative 1,202 678 Exploration 647 5 - ------------------------------------------------------------------------------- 4,323 3,625 - ------------------------------------------------------------------------------- Earnings (loss) from operations (3,526) 144 Interest and other income 542 351 Other income (expense) (625) (10) - ------------------------------------------------------------------------------- Earnings before income taxes (3,609) 485 Provision for (Benefit from) income taxes (288) 151 - ------------------------------------------------------------------------------- Net earnings (loss) $(3,321) $ 334 =============================================================================== Earnings per share (loss) $ (0.07) $ 0.01 ===============================================================================
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (DEFICIT) (Expressed in thousands of U.S. dollars)
=============================================================================== THREE MONTHS ENDED MARCH 31, 1999 1998 - ------------------------------------------------------------------------------- Retained earnings, beginning of period $ 709 2,716 Net earnings (loss) (3,321) 334 Dividends -- -- - ------------------------------------------------------------------------------- Retained earnings (deficit), end of period $(2,612) 3,050 ===============================================================================
5 -5- CONSOLIDATED STATEMENT OF CASH FLOWS (Expressed in thousand of U.S. dollars)
=============================================================================== THREE MONTHS ENDED MARCH 31, 1999 1998 - ------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings (loss) $ (3,321) $ 334 Adjustment for items not affecting 2,699 2,372 working capital Net changes in non-cash working capital 1,879 1,364 NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 1,257 $ 4,070 CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES* Capital expenditure (2,967) (1,912) Business acquisition (note 2) 7,146 -- Other assets 1,477 -- - ------------------------------------------------------------------------------- Net cash flows from investing activities 5,656 (1,912) CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Stock issues 143 74 Note payable 8,629 -- - ------------------------------------------------------------------------------- Net cash flows from financing activities 8,772 74 Increase in cash 15,685 2,232 Cash, beginning of period 26,170 26,913 - ------------------------------------------------------------------------------- Cash, end of period $ 41,855 $ 29,145 ===============================================================================
*NOTE: NON-CASH INVESTING ACTIVITIES The acquisition of all issued and outstanding shares of Rayrock Resources Inc. for consideration as follows: Fair value of assets received $ 98,270 Less cash and transaction costs paid (51,494) -------- Consideration paid through the issuance of common shares $ 46,776
6 -6- GLAMIS GOLD LTD. Notes to Interim Consolidated Financial Statements (tables expressed in thousands of United States dollars) Three months ended March 31, 1999 1. GENERAL In the opinion of management, the accompanying unaudited consolidated balance sheet, consolidated statement of operations, consolidated statement of retained earnings (deficit) and consolidated statement of cash flows contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly in all material respects the financial position of Glamis Gold Ltd. ("the Company") as of March 31, 1999 and December 31, 1998 and the consolidated results of operations and cash flows for the three months ended March 31, 1999 and 1998. These unaudited interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and related footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1998. Certain of the comparative figures have been reclassified to conform with the current period's presentation. The financial statements are prepared in accordance with accounting principles generally accepted in Canada which conform, in all material respects, with accounting principles generally accepted in the United States, except as described in note 7 hereof. 2. ACQUISITION OF RAYROCK RESOURCES, INC. In March 1999, the Company completed the acquisition of 100% of the issued and outstanding shares of Rayrock Resources Inc. ("Rayrock"), an Ontario corporation. The Company issued 29,277,820 common shares and paid Cdn. $52,883,007 (approximately U.S. $35.0 million) in connection with the acquisition. The acquisition was accounted for as a purchase and, accordingly, the financial statements presented herein reflect the consolidated position of the Company, including Rayrock, as at March 31, 1999 but only include the operating results of Rayrock for the month of March 1999. Also refer to Part II, Item 2 for details of the acquisition. 3. OTHER CURRENT ASSETS Included in other current assets are the following inventories:
March 31, 1999 December 1998 ------------------------------------------------------------------------ Finished goods $ 2,124 $ 4,048 Work-in-progress 5,956 5,835 Supplies and spare parts 2,975 746 ------------------------------------------------------------------------ $11,055 $10,629 ========================================================================
7 -7- 4. NOTE PAYABLE To facilitate the acquisition of Rayrock the Company negotiated a bridge loan effective March 1, 1999 of Cdn. $13 million (approximately US $8.7 million) at the bank's prime rate plus 0.75%. The loan was secured by cash balances and was payable on or before April 30, 1999. In April 1999 this loan was fully paid . 5. SHARE CAPITAL
Three months Ended Three months Ended March 31, 1999 March 31, 1998 - ------------------------------------------------------------------------------------------------ # of Shares Amount (in 000's) # of Shares Amount (in 000's) - ------------------------------------------------------------------------------------------------ Issued and fully paid: Balance at beginning of period 38,860,612 $ 109,587 31,222,707 $ 89,650 Issued during the period: For cash consideration under the terms of Directors' and Employee's stock Options 219,000 143 13,000 74 Issued upon acquisition of Rayrock (see note 2) 29,277,820 46,776 -- -- - ------------------------------------------------------------------------------------------------ Balance at End of Period 68,357,432 $ 156,506 31,245,707 $ 89,724 ================================================================================================
8 -8- 6. SEGMENT REPORTING (a) Operating segments:
Producing Mines --------------- Exploration and Development Gold Copper Properties Corporate Total ---- ------ ----------- --------- ----- 1999 - ---- Revenue $ 7,183 $ 803 $ -- $ -- $ 7,986 Earnings (loss) from operations (685) (949) -- (1,892) (3,526) Net earnings (loss) $ (685) $ (949) $ (460) $(1,227) $ (3,321) ------- ------- ------- ------- -------- Identifiable assets $68,007 $25,570 $43,851 $61,222 $198,650 ======= ======= ======= ======= ======== 1998 - ---- Revenue $ 8,955 $ -- $ -- $ -- $ 8,955 Earnings (loss) from operations 827 -- -- (683) 144 Net earnings (loss) $ 827 $ -- $ -- $ (493) $ 334 ======= ======= ======= ======= ========
(b) Geographic Information As at March 31, 1999 and for the quarter ended March 31, 1999 (in thousands of dollars)
Central & North America South America Total - ------------------------------------------------------------------------------------------ Revenue $ 7,183 $ 803 $ 7,986 Earnings (loss) from operations $ (2,260) $ (1,266) $ (3,526) Identifiable Assets $ 168,406 $ 30,244 $ 198,650
As at March 31, 1998 and for the quarter then ended, all revenues, earnings and identifiable assets were in North America. 7. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Accounting in these interim consolidated financial statements under Canadian and United States generally accepted accounting principles is substantially the same except for accounting for income taxes and investments in equity securities. However, these differences have no material effect on the amounts presented in the consolidated financial statements as at March 31, 1999, December 31, 1998, or for the three months ended March 31, 1999 or 1998. ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL REVIEW Glamis Gold Ltd. ("the Company") continues to focus on being a quality, cost-effective producer. With the current depressed world gold market the Company continues its cost containment programs at all locations. The Company is actively seeking growth opportunities. In March 1999 the Company acquired Rayrock Resources Inc. ("Rayrock") (refer to note 2 to the financial statements and Part II, Item 2 for details of the transaction). This acquisition added three operating mines to the Company with expected annual output of over 100,000 ounces of gold. As noted previously, the first quarter 1999 financial statements of the Company reflect the acquisition of Rayrock effective March 1999. Accordingly, the Company's consolidated balance sheet includes the assets and liabilities of Rayrock as at March 31, 1999. However, the Company's statement of operations reflects a complete quarter for the Glamis operations, but only one month (March 1999) of the newly acquired Rayrock operations. Certain of the information provided below is not reflected in the financial statements, but is provided to inform readers of the performance of the various properties both prior to and subsequent to the acquisition date. The Company reported a first quarter loss of $3.3 million ($0.07 per share) compared to earnings of $0.3 million ($0.01) per share in the first quarter of 1998. The difference is attributable to a $1.3 million loss from the Ivan mine, $0.8 million from decreased production primarily at Rand and $0.4 million reduction in profits resulting from the decline in the realized price in gold. Selling, general and administrative charges and exploration expenses (net of interest income and tax credits) increased approximately $1.1 million in the quarter ended March 31, 1999 compared to a year earlier. 9 -9- LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $34.2 million at March 31, 1999, the same as at December 31, 1998. The working capital includes approximately $30.0 million of uncommitted cash. Long term liabilities increased to $18.6 million at March 31, 1999 from $4.7 million at December 31, 1998. This increase is due almost entirely to reclamation reserves and deferred taxes attributable to the Rayrock acquisition. As noted, the Company had a bridge loan of $8.7 million outstanding from March 1, 1999 to April 30, 1999. This was incurred to facilitate the Rayrock acquisition. Excluding the acquisition of Rayrock, the Company's capital expenditures for the first quarter of 1999 were $3.0 million. The major expenditures were $1.5 million for deferred stripping at the Rand mine; $0.9 million spent at San Martin, primarily for land acquisition; $0.3 million spent on the Imperial Project; and $0.1 on the new Dee underground project. These were financed out of the Company's working capital. The Company generated $1.3 million of positive cash flow in the first quarter of 1999 with the Rand and Picaco operations contributing almost $2.0 million in cash flow during the first quarter of 1999 (compared to $4.0 million in the same period in 1998), offset by cash used at the Ivan mine. Again, the decline in the production and low gold and copper prices negatively impacted cash flows. Comparative production highlights of the first quarters of 1999 and 1998 respectively are as follows: PRODUCTION/REVENUE DATA
For comparative purposes only. Nevada gold properties acquired GLAMIS GOLD LTD. from Rayrock THREE MONTHS ENDED Three months ended - ---------------------------------------------------------------------------------------------- MARCH 31, 1999(1) MARCH 31, 1998 March 31, 1999 March 31, 1998 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- Gold Ounces sold 24,559 27,337 30,990 24,099 - ---------------------------------------------------------------------------------------------- Average revenue per ounce $ 292 $ 328 $ 287 $ 304 - ---------------------------------------------------------------------------------------------- Average Market price per Ounce $ 287 $ 294 $ 287 $ 294 - ---------------------------------------------------------------------------------------------- Total cash cost per ounce $ 235 $ 213 $ 232 $ 244 - ---------------------------------------------------------------------------------------------- Total cost per ounce $ 329 $ 297 $ 305 $ 312 - ----------------------------------------------------------------------------------------------
1. Includes the results of the new Nevada properties' operations for March 1999 only. 10 -10- OPERATIONS REVIEW MINE PRODUCTION (Note: The Marigold, Dee and Daisy properties were acquired in March 1999 as part of the Company's acquisition of Rayrock (see note 2)).
THREE MONTHS ENDED THREE MONTHS ENDED - -------------------------------------------------------------------------------------------- March 31, 1999 March 31, 1999 March 31, 1998 March 31, 1998 Total Cash cost Gold ounces Cash cost of Gold ounces Mine of production produced production produced - -------------------------------------------------------------------------------------------- Picacho $ 160 2,238 $ 136 5,689 - -------------------------------------------------------------------------------------------- Rand $ 256 11,900 $ 227 21,209 - -------------------------------------------------------------------------------------------- Marigold(2) $ 242(1) 15,907(1) $ 225 12,317 - -------------------------------------------------------------------------------------------- Daisy(3) $ 545(1) 3,663(1) $ 280 2,670 - -------------------------------------------------------------------------------------------- Dee $ 191(1) 11,420(1) $ 257 9,112 - --------------------------------------------------------------------------------------------
(1) The Company's share of this production (March 1999 only) totals 4,344 ounces from Marigold, 1,305 ounces from Daisy and 4,130 ounces from Dee; total cash costs are based on March 1999 only. 1998 data on Marigold, Dee and Daisy for information only. (2) Marigold is 66.7% owned (3) Daisy was owned 35% in 1998, 100% in 1999. PICACHO MINE, CALIFORNIA Reclamation activities continue at the Picacho Mine while the remaining ounces are being extracted from the heap. The mine produced 2,238 ounces of gold during the first quarter of 1999, compared to 5,689 for the same period in 1998. As it winds down, the mine is projected to produce approximately 6,800 ounces of gold this year. RAND MINE, CALIFORNIA The Rand Mine produced 11,900 ounces of gold in the quarter ending March 31, 1999. While the ounces produced are on plan this is significantly below the ounces produced in the first quarter of 1998 due to two factors. First, ounces stacked in the fourth quarter of 1998 were lower than ounces stacked in the fourth quarter of 1997, second a planned major stripping program also impacted the ounces stacked in the first quarter of 1999. Mine production suffered in February and March as mechanical problems on two large hydraulic shovels resulted in tonnage being down in February, and again in March. The March breakdown resulted in a shortfall of 7,600 gold ounces being stacked. This will impact ounces produced in the second quarter of 1999. The shovels are back on line now and the mine is attempting to make up the shortfall. Costs were higher than planned due to high maintenance costs associated with the shovels and tire usage in mine operations. The Company anticipates total production from Rand to exceed 75,000 ounces of gold in 1999. 11 -11- MARIGOLD MINE, NEVADA The 66.7%-owned Marigold Mine was acquired in the Rayrock acquisition. Marigold is an open-pit mine in central Nevada at the north end of the Battle Mountain-Eureka Trend. Glamis is the operator of Marigold. March production for Glamis' account from Marigold totaled 4,344 ounces of gold, 12% above the budgeted amount. The mill, which is normally operated only part of the year, ran an additional month. While incurring additional costs due to mill production, the mill ounces produced an additional $916,000 in revenue. The overall cash cost per ounce was as budgeted ($242 per ounce). Marigold is projected to produce an additional 30,000 ounces for the Company in 1999. DEE MINE, NEVADA The Dee Mine was also acquired as part of the Rayrock acquisition. This open-pit mine is located along the Carlin Trend in northeast Nevada, five miles north of the Barrick Goldstrike property. Underground expansion is planned at the Dee Mine, and on April 15, 1999, the Company approved a $3.4 million underground development program. Dee's March production of 4,130 ounces of gold were below plan by approximately 15%. Heap leach costs were above plan as the good weather allowed for unbudgeted operation, but mining and milling costs on a per-unit basis were both below plan due to the additional tons mined. The Company anticipates production of approximately 46,000 ounces during the balance 1999. DAISY MINE, NEVADA The third Nevada property acquired from Rayrock is the Daisy Mine. Daisy is an open-pit mine in Nye County, Nevada. Daisy experienced a difficult month during March as only 1,305 ounces of gold were produced as compared to the budget of 2,778 ounces. The Mother Lode pit was determined to have less leachable ore than expected and was abandoned at the end of February. Mining costs incurred in March were higher than expected due to a revised mining schedule generated to accommodate the production shortfall. March mining was all within the Secret Pass pit. Development at the Reward Project continued on schedule. The Company expects Daisy to produce approximately 33, 000 ounces for the last three quarters of 1999. IMPERIAL PROJECT Work continues on the permitting for the Imperial Project. The Company's legal counsel has written letters to the BLM stating our concern with the pace of the process and issues such as the BLM "preferred" formatting of the final EIS. The Company received the Draft Biologic Opinion from the U.S. Fish and Wildlife Service during February. The document is generally acceptable, with a few requested changes to clarify the document. 12 -12- CIENEGUITA PROJECT, MEXICO Gold production continues to be problematic. Production of 642 ounces of gold during the first quarter is 46% below budget. No mining activities occurred in February or March as the heaps were fully charged with ore. Percolation characteristics of the newly stacked ore and water shortages have negatively impacted the production capabilities throughout the quarter. It is expected that gold production will improve as solution delivery to the heap becomes more regular. MINA IVAN, CHILE The Ivan Mine is a copper mine acquired in the Rayrock transaction. Ivan is located in the coastal range of northern Chile, approximately 40 kilometers north of the major port city of Antofagasta. Mining at Ivan has been from underground and open-pit workings. March production was 601.5 tonnes of copper versus a budget of 850.0 tonnes. There was no underground production in March as extremely low-grade ores had been produced in the previous months. Total cash costs for the month of March 1999 were $1.03 per pound of production, versus a realized sales price of $0.64 per pound. The Company is currently assessing the operation at Ivan to determine how best to proceed. SAN MARTIN PROJECT, HONDURAS Work is progressing at the San Martin Project. Additional drilling on the Palo Alto Zone has increased the San Martin resource to 41.5 million tons and over 1 million ounces. Drilling on the Palo Alto Zone and the Rosa deposit continues. The Company is actively working on converting its Exploration Concession to a Mining Concession. Significant efforts were expended on completing the annual reports for the concessions due at the end of March. Project managers continue to work closely with the community of San Ignacio on construction projects of mutual benefit. CERRO BLANCO PROJECT, GUATEMALA The on-going drilling program progressed through the first quarter of 1999. Substantial data has been produced which is currently being analyzed. Results are expected to be reported shortly. OTHER MATTERS The Year 2000 issue arises because many computerized systems use two digits rather than four to identify a year. Date sensitive systems may recognize the year 2000 as 1900 or some other date resulting in errors when information-using year 2000 dates is processed. In addition similar problems may arise in some systems which use certain dates in 1999 to represent something other than a date. The effects of the Year 2000 issue may be experienced before, on, or after January 1, 2000, and if not addressed, the impact on operations and financial reporting may range from minor 13 -13- errors to significant systems failure, which could affect an entity's ability to conduct normal business operations. It is not possible to be certain that all aspects of the Year 2000 issue affecting the entity, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. The Company disclosed its readiness and plans relating to Y2K compliance issues in the Form 10K for the year ending December 31, 1998. The current status of this project is that our major equipment suppliers are keeping the Company informed of their progress. Contingency planning is ongoing and consists of continuing contact with major suppliers not yet certifying compliance regarding correction or mitigation efforts. The Company expects total in-house compliance and completion of supplier assessment by early third quarter 1999. To March 31, 1999 there have been limited specific Year 2000 costs incurred by the Company. Hardware and software upgrades during 1998 and the first quarter of 1999 were planned based on business requirements resulting from the relocation of the Company's corporate office from Vancouver to Reno in March 1998 and the subsequent centralization of several management functions there throughout 1998 and to date in 1999. Additional expenditures directly related to Y2K issues prior to year-end 1999 are not expected to exceed $10,000. FORWARD-LOOKING STATEMENTS Certain of the information contained herein constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other applicable laws or regulatory policies. Such forward-looking statements, involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, among others, the actual results of current exploration activities, conclusions of feasibility studies now underway, changes in project parameters as plans continue to be refined, future prices for gold and other mineral commodities, as well as those factors discussed in the section entitled "Other Considerations" in the Company's Form 10-K. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause actual results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK As noted in Item 7 "Other Risks" in the Company's annual report on Form 10K for the year ended December 31, 1998, the Company is subject to changes in metals prices, which directly impact its profitability and cash flows. Because the markets in which the Company sells its 14 -14- products set prices outside of the Company's control, the Company believes it is important to reduce the impact of negative price movements through hedging transactions. These hedging transactions utilize so-called "derivatives", the value of which is "derived" from movements in the prices or rates associated with the underlying product. The Company's hedging policy attempts to protect the Company's production by use of forward contracts, spot deferred contracts, and options, in any combination. The Company continuously monitors its position with respect to the unrealized gains and losses and to ensure compliance with Company policy. The Company also invests cash balances in short-term investments, which are subject to interest rate fluctuations. Because these investments are in highly liquid, short-term instruments, any impact of an interest rate change will not be material. The table below sets forth the positions of the Company at March 31, 1999 and December 31, 1998. Fair values are estimated based on market quotations of the variables based on expected maturity date.
(in thousands of U.S. dollars unless indicated) As of March 31, 1999 As of December 31, 1998 - ---------------------------------------------------------------------------------------------------------- Estimated Fair Estimated Fair Value Maturity 1999 Value at 3/31/99 Maturity 1999 at 12/31/98 - ---------------------------------------------------------------------------------------------------------- Assets: Short-term investments $ 22.9 million $ 22.9 million $ 23.0 million $ 23.0 million - ---------------------------------------------------------------------------------------------------------- Derivatives: Gold Forward Sales Ounces 3,000 $ 17.0 Price per ounce $ 294 - ---------------------------------------------------------------------------------------------------------- Gold Put Options Purchased Ounces 10,800 $ 71.0 Price per ounce $ 286 Ounces 13,500 $140.0 Price per ounce $ 290 - ---------------------------------------------------------------------------------------------------------- Gold Call Options sold: Ounces 13,500 Nil 10,000 Nil Price per ounce $ 320 $ 310 Ounces 10,800 Nil Price per ounce $ 310 - ----------------------------------------------------------------------------------------------------------
15 -15- PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS: None ITEM 2 CHANGES IN SECURITIES: Issuance of Unregistered Securities: On March 2, 1999, the Company completed the acquisition ("the Acquisition") of 100% of the issued and outstanding shares of Rayrock Resources Inc. The consideration for the acquisition was the issuance of 29,277,820 common shares of the Company and payment of Cdn.$52,883,007 (approximately US$35.0 million) in cash to the shareholders of Rayrock. The cash portion of the consideration paid came from the Company's working capital. As part of the Acquisition, share purchase options in respect of 1,649,500 common shares of Rayrock were exchanged for share purchase options (the "Replacement Options") providing for the right to acquire 4,470,145 shares of the Company. Also as part of the Acquisition, the Company issued 857,780 share appreciation rights in exchange for 316,524 Rayrock share appreciation rights. The Acquisition was carried out through an arrangement pursuant to section 182 of the Business Corporations Act (Ontario) (the "Arrangement"). Under the Arrangement, shareholders of Rayrock were entitled to receive in exchange for each common share of Rayrock held either: (a) 2.4 Shares (the "All Share Consideration"); or (b) 1.6 Shares and Cdn.$3.00 (the "Cash/Share Consideration"). Each holder of Rayrock common shares was deemed to elect to receive the All Share Consideration unless they made a proper election to receive the Cash/Share Consideration. No fractional shares were issued under the Acquisition. A holder of common shares of Rayrock who was entitled to receive a fractional Share received cash in lieu thereof based on a whole Share being valued at Cdn.$3.75. The Shares and Replacement Options were not registered under the Securities Act in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 3(a)(10) thereof. ITEM 3 DEFAULTS UPON SENIOR SECURITIES: None ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None ITEM 5 OTHER INFORMATION: None 16 -16- ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits Exhibit No. Exhibit Description 10.54 Services Agreement between the Company and C. Kevin McArthur dated January 1, 1998 10.55 Services Agreement between the Company and Daniel J. Forbush dated March 1, 1998 10.56 Letter Loan Agreement between the Company and the Bank of Nova Scotia dated February 24, 1999 10.57 Services Agreement between the Company and Charles A. Jeannes dated April 26, 1999 27 Financial Data Schedule (b) Reports on Form 8-K (i) Report on Form 8-K filed February 4, 1999 pertaining to details of an agreement to acquire Rayrock Resources, Inc. (ii) Report on Form 8-K filed March 15, 1999 and amended by a Form 8-K-A filed May 14, 1999 with respect to the acquisition of Rayrock Resources Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GLAMIS GOLD LTD. (registrant) /s/ DANIEL J. FORBUSH Date: May 14, 1999 ______________________________________________ DANIEL J. FORBUSH Chief Financial Officer, Treasurer & Secretary (Principal Accounting and Financial Officer) EX-10.54 2 EXHIBIT 10.54 1 -17- EXHIBIT 10.54 SERVICES AGREEMENT THIS AGREEMENT Effective as of January 1, 1998 BETWEEN: GLAMIS GOLD LTD., A British Columbia company having an address at 3324 Four Bengal Centre, 1055 Dunsmuir Street, Vancouver, British Columbia, V7X 1L3 ("Glamis") OF THE FIRST PART AND: C. KEVIN MCARTHUR, having a mailing address at 5190 Neil Road, Suite 310 Reno, Nevada 89502 ("McArthur") OF THE SECOND PART WHEREAS: (A) McArthur is currently the Chief Operating Officer, North America of Glamis; (B) Glamis wishes to engage McArthur to perform the duties of President and Chief Executive Officer of Glamis effective the date hereof. NOW THEREFORE THIS AGREEMENT WITNESSES that the parties mutually agree as follows: ENGAGEMENT 1) The Services Agreement between McArthur and Glamis dated August 1, 1997 is terminated as of the date hereof and Glamis hereby engages (the "Engagement") McArthur as and McArthur agrees to serve as, the President and Chief Executive Officer ("CEO") of Glamis and as President of Glamis Gold, Inc., and it subsidiaries and to perform the duties described in Section 3, on the terms and subject to the conditions set out herein. 2 -18- TERM 2) The term ("Term") of the Engagement will commence on the date hereof and will continue thereafter on a month basis until terminated by either party pursuant to the terms hereof. DUTIES AND OBLIGATIONS OF MCARTHUR 3) McArthur will consent to stand as a director of Glamis at Annual General Meetings of the Shareholders of Glamis held during the Term and as President and CEO of Glamis, will perform those duties and functions (the "Duties") that are described in Schedule A hereto, together with such other functions and duties as may be specified from time to time by the Board of Directors (the "Board") of Glamis. PERFORMANCE OF DUTIES 4) McArthur will perform the Duties as follows: a) subject to ill-health and subsection 4(c), McArthur will perform the Duties during each day that is a Business Day in the Term (a "Business Day" being a day, other than a Saturday or a Sunday, on which the main branch of Glamis Gold, Inc.'s banker in Reno, Nevada is open for the transaction of business); b) subject to subsection 4(c), McArthur will devote substantially all of his time and energy during normal business hours on each working day during the Term to performing the Duties to the best of his skill and ability; and c) notwithstanding subsections 4(a) and 4(b), McArthur will not be required to perform the Duties on statutory holidays and during periods of holidays, which will be not less than four weeks in the aggregate in respect of each calendar year, provided however, that if McArthur does not take his full entitlement to vacation days in a year he may use such vacation days during the next 2 succeeding calendar years and if such unused vacation days are not taken by the end of such 2 year period, McArthur will forfeit the right to take such days as vacation days. REMUNERATION 5) In consideration of the performance of the Duties by McArthur, Glamis, through Glamis Gold, Inc., will: a) pay McArthur a salary ("Salary") of U.S. $182,500 (or such other amount as the parties may mutually agree in writing) per calendar year during the Term by paying 1/24 thereof on the 15th of each month and 1/24th thereof on the last day of each month or, if such days are not Business Days, on the first prior day that is a business day, such payments to be 3 -19- reduced by the amount of applicable withholding and other requirements of the Internal Revenue Code (United States) and any other applicable United States legislation in respect of remuneration paid to employees; b) reimburse McArthur for all reasonable expenses incurred by McArthur in carrying out his functions as President and CEO of Glamis and will provide Glamis such particulars as Glamis may reasonably require; c) permit McArthur to participate in medical, dental and other employee benefit plans of Glamis Gold, Inc. as they are from time to time initiated, if and to the extent that participation is permitted by the plans, such plans to include, without limitation, the Glamis Gold, Inc. Profit Sharing and Retirement Plan and the Glamis Gold, Inc. Group Insurance Benefits Plan; d) indemnify and hold McArthur harmless from and against any and all costs, damages or losses resulting from the performance by McArthur of the Duties and as a result of McArthur acting as Director, President and CEO of Glamis and its direct and indirect subsidiaries; e) perform a review of the Salary on an annual basis, as a minimum; f) grant to McArthur share purchase options from time to time on an aggregate of not less than 200,000 common shares of Glamis ("Shares") under Glamis' Incentive Share Purchase Option Plan (the "Plan"), in accordance with the rules and regulations of applicable regulatory authorities and the Plan, it being understood that 50% of such options shall be exercisable immediately upon grant and that the remaining 50% of the options may be exercised in 4 equal installments on or after each of the 1st, 2nd, 3rd and 4th anniversaries of the date of grant of the options; and g) notwithstanding the provisions of subsection 5(f), Glamis shall, through its Executive Compensation Committee, continuously monitor the performance of McArthur and of Glamis and shall grant McArthur additional share purchase options if, in the sole discretion of the Executive Compensation Committee, such is warranted. TERMINATION OF ENGAGEMENT 6. The following will govern termination under this Agreement: a) McArthur may deliver to Glamis a notice to terminate the Engagement on a day not less than 60 days after the day of such delivery and the Engagement will terminate at the expiration of such 60-day or longer period and in such case any outstanding share purchase options held at such time by McArthur will expire on the 30th day after the effective date of the termination; 4 -20- b) Glamis may terminate the Engagement without notice and without any payment in lieu of notice if i) McArthur is guilty of any willful act, neglect, or conduct that causes substantial damage or discredit to Glamis; or ii) McArthur is convicted of any offence involving fraud, and in such case any outstanding share purchase options held at such time by McArthur will expire on the 30th day after the effective date of termination; c) Except for those matters referred to in subsection 6(b), Glamis may, at its sole option, terminate the Engagement for cause by providing three months written notice to McArthur and in such case any outstanding share purchase options held at such time by McArthur will expire on the 30th day after the effective date of the termination; d) Glamis may, at its sole option, terminate the Engagement without cause by notice (the "Termination Notice") to McArthur, in which case McArthur will be paid any remuneration due hereunder to the date of termination, together with an aggregate amount equal to 2 times the Salary which is in force at the time of delivery of the Termination Notice and the cash value of 24 months of full benefit coverage under subsection 5(c), less applicable withholding and other requirements of the Internal Revenue Code (United States) and any other applicable United States legislation in respect of remuneration paid to employees and in such case any outstanding share purchase options held at such time by McArthur will expire on the 30th day after the effective date of the termination; e) If McArthur becomes permanently disabled prior to termination of the Engagement hereunder the provisions of subsection 6(c) will not apply, however, Glamis may terminate the Engagement pursuant to subsection 6(d), provided however that such termination will not affect any benefits which McArthur would be entitled to as a disabled employee under the plans described in subsection 5(c). McArthur will be deemed to be permanently disabled if he is unable to perform the material and substantial portion of the Duties because of sickness or injury. For the purposes hereof "sickness" means an organic disease, including without limitation mental illness, and the medical or surgical treatment of the disease and "injury" means bodily injury caused directly by external, violent and purely accidental means; f) On termination of the Engagement, McArthur will deliver to Glamis in a reasonable state of repair all property of Glamis used by or in the possession of McArthur; and g) Termination of the Engagement will not terminate Glamis' obligation under subsection 5(d), which obligation will survive such termination. 5 -21- DISCLOSURE 7. McArthur undertakes to refrain, both during the Term and thereafter, except so far as may be necessary or proper in performing the Duties, from making public or disclosing to any person who is not an employee, officer or director of Glamis or one of its subsidiaries, any confidential information that may come to the knowledge of McArthur during the Term including any information in respect of the business dealings of Glamis or its subsidiaries or in respect of any of the contractual agreements of Glamis or its subsidiaries and McArthur will, at the request of Glamis, enter into a separate agreement with respect to such matters. MISCELLANEOUS 8. a) Each party will, on the request of the other, execute and deliver such other agreements, deeds, documents and instruments, and do such further acts and things as the other may reasonably request in order to evidence, carry out and give full force and effect to the terms, conditions, intent and meaning of this Agreement. b) If any provision of this Agreement is invalid or unenforceable for any reason whatsoever, such provision will be severable from the remainder of this Agreement, the validity of the remainder will continue in full force and effect and this Agreement will be construed as if it had been executed without the invalid or unenforceable provision. c) No consent or waiver, express or implied, by either party to or of any breach or default by the other party in the performance by the other of any or all of its obligation under this Agreement. i) will be valid unless it is in writing and specifically stated to be a consent or waiver pursuant to this subsection, ii) may be relied upon by the other as consent or waiver to or of any other breach or default of the same or any other obligation, iii) will constitute a general consent or waiver under this Agreement, or iv) will eliminate or modify the need for a specific consent or waiver pursuant to this subsection in any other instance. d) Notices, requests, demands or directions to one party to this Agreement by another will be in writing and will be delivered as follows: 6 -22- If to Glamis at: 5190 Neil Road, Suite 310 Reno, NV 89502-8502 Attention: Mr. C.F. Millar, Chairman If to McArthur at; 5190 Neil Road, Suite 310 Reno, NV 89502-8502 Attention: Mr. C. Kevin McArthur or to such other address as may be specified by one party to the other in a notice given in the manner provided in this subsection. e) This Agreement is made in British Columbia with the intention that its construction and validity and all other issues related to its administration will in all respects be governed by the laws prevailing in that province. f) In the event of any dispute between the parties in respect of the interpretation of this Agreement or any matter to be agreed on, such dispute will be determined by a single arbitrator appointed and acting pursuant to the Commercial Arbitration Act (British Columbia) and the decision of the arbitrator shall be final and binding on the parties. g) This Agreement constitutes the entire agreement between the parties and there are no representations or warranties, express or implied, statutory or otherwise, and no agreements collateral hereto other than as expressly set forth or referred to herein. h) This Agreement will ensure to the benefit of and be binding upon the respective legal representatives and successors and permitted assigns of the parties. i) None of the parties may assign any right, benefit or interest in this Agreement without the written consent of the others and any purported assignment without such consent will be void, save and except that Glamis may assign any or all of its rights and obligations hereunder to Glamis Gold Inc. 7 -23- IN WITNESS WHEREOF the parties hereto have executed the Agreement on the day first above written. The Common Seal of GLAMIS GOLD LTD. ) Was hereunto affixed in the presence of: ) ) Signed: "C. F. Millar" - ----------------------------------- Signed Sealed and Delivered by C. KEVIN MCARTHUR in the presence of: ) ) - ----------------------------------- ) Name ) - ----------------------------------- ) Address ) Signed: "C. Kevin McArthur" - ----------------------------------- ) C. KEVIN MCARTHUR ) - ----------------------------------- ) Occupation ) EX-10.55 3 EXHIBIT 10.55 1 -24- EXHIBIT 10.55 SERVICES AGREEMENT THIS AGREEMENT Effective as of March 1, 1998 BETWEEN: GLAMIS GOLD LTD., A British Columbia company having an address at 3324 Four Bentall Centre, 1055 Dunsmuir Street, Vancouver, British Columbia, V7X 1L3 ("Glamis") OF THE FIRST PART AND: DANIEL J. FORBUSH, having a mailing address at 5190 Neil Road, Suite 310 Reno, Nevada 89502 ("Forbush") OF THE SECOND PART WHEREAS: (B) Forbush is currently the Controller of Glamis Gold, Inc., a wholly owned subsidiary of Glamis; (B) Glamis wishes to engage Forbush to perform the duties of Chief Financial Officer and Treasurer of Glamis effective the date hereof. NOW THEREFORE THIS AGREEMENT WITNESSES that the parties mutually agree as follows: ENGAGEMENT 2) Glamis, effective the date hereof, engages (the "Engagement") Forbush as and Forbush agrees to serve as, the Chief Financial Officer ("CFO") of Treasurer of Glamis and to perform the duties described in Section 3, on the terms and subject to the conditions set out herein. 2 -25- TERM 2) The term ("Term") of the Engagement will commence on the date hereof and will continue thereafter on a month basis until terminated by either party pursuant to the terms hereof. DUTIES AND OBLIGATIONS OF FORBUSH 3) Forbush will, as CFO and Treasurer of Glamis, perform those duties and functions (the "Duties") that are described in Schedule A hereto, together with such other functions and duties as may be specified from time to time by the Board of Directors (the "Board") of Glamis. PERFORMANCE OF DUTIES 6) Forbush will perform the Duties as follows: a) subject to ill-health and subsection 4(c), Forbush will perform the Duties during each day that is a Business Day in the Term (a "Business Day" being a day, other than a Saturday or a Sunday, on which the main branch of Glamis Gold, Inc.'s banker in Reno, Nevada is open for the transaction of business); b) subject to subsection 4(c), Forbush will devote substantially all of his time and energy during normal business hours on each working day during the Term to performing the Duties to the best of his skill and ability; and c) notwithstanding subsections 4(a) and 4(b), Forbush will not be required to perform the Duties on statutory holidays and during periods of holidays, which will be not less than four weeks in the aggregate in respect of each calendar year, provided however, that if Forbush does not take his full entitlement to vacation days in a year he may use such vacation days during the next 2 succeeding calendar years and if such unused vacation days are not taken by the end of such 2 year period, Forbush will forfeit the right to take such days as vacation days. REMUNERATION 7) In consideration of the performance of the Duties by Forbush, Glamis, through Glamis Gold, Inc., will: h) pay Forbush a salary ("Salary") of U.S. $125,000 (or such other amount as the parties may mutually agree in writing) per calendar year during the Term by paying 1/24 thereof on the 15th of each month and 1/24th thereof on the last day of each month or, if such days are not Business Days, on the first prior day that is a business day, such payments to be 3 -26- reduced by the amount of applicable withholding and other requirements of the Internal Revenue Code (United States) and any other applicable United States legislation in respect of remuneration paid to employees; i) reimburse Forbush for all reasonable expenses incurred by Forbush in carrying out his functions as President and CEO of Glamis and will provide Glamis such particulars as Glamis may reasonably require; j) permit Forbush to participate in medical, dental and other employee benefit plans of Glamis Gold, Inc. as they are from time to time initiated, if and to the extent that participation is permitted by the plans, such plans to include, without limitation, the Glamis Gold, Inc. Profit Sharing and Retirement Plan and the Glamis Gold, Inc. Group Insurance Benefits Plan; k) indemnify and hold Forbush harmless from and against any and all costs, damages or losses resulting from the performance by Forbush of the Duties and as a result of Forbush acting as CFO and Teasurer of Glamis; l) perform a review of the Salary on an annual basis, as a minimum; m) grant to Forbush share purchase options from time to time on an aggregate of not less than 125,000 common shares of Glamis ("Shares") under Glamis' Incentive Share Purchase Option Plan (the "Plan"), in accordance with the rules and regulations of applicable regulatory authorities and the Plan, it being understood that 50% of such options shall be exercisable immediately upon grant and that the remaining 50% of the options may be exercised in 4 equal installments on or after each of the 1st, 2nd, 3rd and 4th anniversaries of the date of grant of the options; and n) notwithstanding the provisions of subsection 5(f), Glamis shall, through its Executive Compensation Committee, continuously monitor the performance of Forbush and of Glamis and shall grant Forbush additional share purchase options if, in the sole discretion of the Executive Compensation Committee, such is warranted. TERMINATION OF ENGAGEMENT 8. The following will govern termination under this Agreement: a) Forbush may deliver to Glamis a notice to terminate the Engagement on a day not less than 60 days after the day of such delivery and the Engagement will terminate at the expiration of such 60-day or longer period and in such case any outstanding share purchase options held at such time by Forbush will expire on the 30th day after the effective date of the termination; b) Glamis may terminate the Engagement without notice and without any payment in lieu of 4 -27- notice if i) Forbush is guilty of any willful act, neglect, or conduct that causes substantial damage or discredit to Glamis; or ii) Forbush is convicted of any offence involving fraud, and in such case any outstanding share purchase options held at such time by Forbush will expire on the 30th day after the effective date of termination; c) Except for those matters referred to in subsection 6(b), Glamis may, at its sole option, terminate the Engagement for cause by providing three months written notice to Forbush and in such case any outstanding share purchase options held at such time by Forbush will expire on the 30th day after the effective date of the termination; d) Glamis may, at its sole option, terminate the Engagement without cause by notice (the "Termination Notice") to Forbush, in which case Forbush will be paid any remuneration due hereunder to the date of termination, together with an aggregate amount equal to 2 times the Salary which is in force at the time of delivery of the Termination Notice and the cash value of 24 months of full benefit coverage under subsection 5(c), less applicable withholding and other requirements of the Internal Revenue Code (United States) and any other applicable United States legislation in respect of remuneration paid to employees and in such case any outstanding share purchase options held at such time by Forbush, which have not vested at the time of the Termination Notice, will be immediately exercisble and will expire on the 30th day after the effective date of the termination; e) If Forbush becomes permanently disabled prior to termination of the Engagement hereunder the provisions of subsection 6(c) will not apply, however, Glamis may terminate the Engagement pursuant to subsection 6(d), provided however that such termination will not affect any benefits which Forbush would be entitled to as a disabled employee under the plans described in subsection 5(c). Forbush will be deemed to be permanently disabled if he is unable to perform the material and substantial portion of the Duties because of sickness or injury. For the purposes hereof "sickness" means an organic disease, including without limitation mental illness, and the medical or surgical treatment of the disease and "injury" means bodily injury caused directly by external, violent and purely accidental means; f) On termination of the Engagement, Forbush will deliver to Glamis in a reasonable state of repair all property of Glamis used by or in the possession of Forbush; and g) Termination of the Engagement will not terminate Glamis' obligation under subsection 5(d), which obligation will survive such termination. 5 -28- DISCLOSURE 9. Forbush undertakes to refrain, both during the Term and thereafter, except so far as may be necessary or proper in performing the Duties, from making public or disclosing to any person who is not an employee, officer or director of Glamis or one of its subsidiaries, any confidential information that may come to the knowledge of Forbush during the Term including any information in respect of the business dealings of Glamis or its subsidiaries or in respect of any of the contractual agreements of Glamis or its subsidiaries and Forbush will, at the request of Glamis, enter into a separate agreement with respect to such matters. MISCELLANEOUS 8. a) Each party will, on the request of the other, execute and deliver such other agreements, deeds, documents and instruments, and do such further acts and things as the other may reasonably request in order to evidence, carry out and give full force and effect to the terms, conditions, intent and meaning of this Agreement. b) If any provision of this Agreement is invalid or unenforceable for any reason whatsoever, such provision will be severable from the remainder of this Agreement, the validity of the remainder will continue in full force and effect and this Agreement will be construed as if it had been executed without the invalid or unenforceable provision. c) No consent or waiver, express or implied, by either party to or of any breach or default by the other party in the performance by the other of any or all of its obligation under this Agreement. i) will be valid unless it is in writing and specifically stated to be a consent or waiver pursuant to this subsection, ii) may be relied upon by the other as consent or waiver to or of any other breach or default of the same or any other obligation, iii) will constitute a general consent or waiver under this Agreement, or iv) will eliminate or modify the need for a specific consent or waiver pursuant to this subsection in any other instance. d) Notices, requests, demands or directions to one party to this Agreement by another will be in writing and will be delivered as follows: 6 -29- If to Glamis at: 5190 Neil Road, Suite 310 Reno, NV 89502-8502 Attention: Mr. C.F. Millar, Chairman If to Forbush at; 5190 Neil Road, Suite 310 Reno, NV 89502-8502 Attention: Mr. Daniel J. Forbush or to such other address as may be specified by one party to the other in a notice given in the manner provided in this subsection. e) This Agreement is made in British Columbia with the intention that its construction and validity and all other issues related to its administration will in all respects be governed by the laws prevailing in that province. f) In the event of any dispute between the parties in respect of the interpretation of this Agreement or any matter to be agreed on, such dispute will be determined by a single arbitrator appointed and acting pursuant to the Commercial Arbitration Act (British Columbia) and the decision of the arbitrator shall be final and binding on the parties. g) This Agreement constitutes the entire agreement between the parties and there are no representations or warranties, express or implied, statutory or otherwise, and no agreements collateral hereto other than as expressly set forth or referred to herein. h) This Agreement will ensure to the benefit of and be binding upon the respective legal representatives and successors and permitted assigns of the parties. i) None of the parties may assign any right, benefit or interest in this Agreement without the written consent of the others and any purported assignment without such consent will be void, save and except that Glamis may assign any or all of its rights and obligations hereunder to Glamis Gold Inc. 7 -30- IN WITNESS WHEREOF the parties hereto have executed the Agreement on the day first above written. The Common Seal of GLAMIS GOLD LTD. ) Was hereunto affixed in the presence of: ) ) Signed: "C. F. Millar" ) - ----------------------------------- Signed Sealed and Delivered by DANIEL J. FORBUSH in the presence of: ) ) - ----------------------------------- ) Name ) - ----------------------------------- ) Address ) Signed: "Daniel J. Forbush" - ----------------------------------- ) DANIEL J. FORBUSH ) - ----------------------------------- ) Occupation ) 8 -31- SCHEDULE A Duties of Chief Financial Officer and Treasurer of Glamis 1. administer Glamis' financial reporting obligations under laws and regulations promulgated by securities and other administrative bodies having jurisdiction over Glamis' corporate financial matters; 2. recommend financial policy to the Board of Directors of Glamis ("the Board") and implement all such policies as are approved by the Board; 3. have responsibility for preparing monthly, quarterly and annual financial statements and reporting regularly to the Board thereon; 4. design and implement financial and accounting systems to provide information for planning and control purposes; 5. assume responsibility for management, corporate banking and the treasury of Glamis; 6. undertake strategic and financial planning for the purposes of preparing and monitoring budgets and forecasts; 7. monitor and evaluate the financial performance of Glamis, including analyzing statistics; 8. communicate with Glamis' auditors, bankers and financial institutions as required; 9. participate in tax planning; 10. participate in financial and tax aspects of merger and acquisition negotiations; 11. prepare financial aspects of reports to the shareholders; 12. attend to insurance matters; 13. become familiar with all the agreements to which Glamis or its subsidiaries are parties and to administer the due compliance by Glamis of the financial terms thereof; and 14. assist the President and Chief Executive Officer as requested and to otherwise act in accordance with his instructions. EX-10.56 4 EXHIBIT 10.56 1 -32- EXHIBIT 10.56 CONFIDENTIAL 24 February 1999 Glamis Gold Ltd. 5190 Neil Road Suite 310 Reno, Nevada 89502 Attention: Mr. Daniel J. Forbush Dear Sirs: Re: Rayrock Resources Inc. We are pleased to confirm that, subject to your acceptance, we will establish a credit in your favour on the following terms and conditions: PARTIES BORROWER Glamis Gold Ltd. (the "Borrower") RESTRICTED PARTIES Glamis Gold Inc. ("Glamis USA"), Rayrock Mines, Inc. ("RMI") and Rayrock Resources Inc. ("RRI" and collectively with Glamis USA and RMI, the "Guarantors"), together with the Borrower and the subsidiaries of the Borrower and the Guarantors, are collectively referred to as the "Restricted Parties." LENDER The Bank of Nova Scotia (the "Lender") CREDIT FACILITY All references to "$" in this letter mean Canadian dollars, unless otherwise specified. Non-revolving short term credit (the "Credit") of up to $15,000,000 which will be available in a single advance. Once repaid the Credit may not be reborrowed. 2 -33- PURPOSE OF CREDIT The Borrower has entered into an agreement providing for an arrangement (the "Arrangement") relating to RRI by which the Borrower would acquire all of the issued and outstanding shares of RRI (collectively the "RRI Shares"), all as more particularly described in a circular to the holders of the RRI Shares dated 26 January 1999 (the "Circular"). The Credit is available to provide funds to assist the Borrower in paying the cash portion of the purchase price for 100% of the RRI Shares pursuant to the Arrangement and to pay the Borrower's expenses in connection with the Arrangement. The Credit will be cancelled to the extent it is not required for those purposes. TERM, MATURITY AND REPAYMENT The Credit will be payable in full on 30 April 1999. Outstanding Prime Rate advances may be voluntarily prepaid in whole or in part without penalty. Bankers' Acceptances may not be prepaid. INTEREST RATES AND FEES At the Borrower's option, advances under the Credit will be available as Canadian dollar Prime Rate advances bearing interest at Prime Rate plus 0.75% per annum or, subject to availability, seven day bankers' acceptances in respect of which a bankers' acceptance fee of 1.5% per annum shall be payable. For the purposes of this Term Sheet "Prime Rate" shall mean, on any day, the higher of (i) the rate used by Scotiabank as its reference rate for commercial loans made in Canada in Canadian dollars, and (ii) the average rate for 30 day Canadian dollar bankers' acceptances that appears on the Reuters Screen CDOR page at 10:00 a.m. Toronto time on that day, plus 0.75% per annum. Standby Fee A standby fee of 0.50% per annum on the undrawn principal amount of the Credit will accrue beginning on 1 March 1999 and be payable on the date of the advance or on the date of cancellation of the Credit, whichever is earlier. Upfront Fee 3 -34- A non-refundable upfront fee of Cdn. $275,000 is payable to the Lender, of which Cdn. $100,000 has been paid and the balance is payable on acceptance of this Agreement. SECURITY The Borrower shall deliver or cause the delivery of the following documents (collectively, the "Security") in form and substance satisfactory to the Lender with all registrations, consents, ancillary agreements and legal opinions required by the Lender: (a) unconditional, unlimited guarantees by each of the Guarantors of the Borrower's obligations under and in connection with the Credit; (b) first-ranking pledges by Glamis USA of cash or cash equivalent securities in the amounts of U.S. $18,000,000, (c) a first-ranking pledge of all issued and outstanding RRI Shares. Immediately after completion of the Arrangement, the Borrower shall make arrangements satisfactory to the Lender to (i) provide security over cash or cash equivalent securities currently held by RMI, including security from or in respect of Rayrock Finance Company ("RFC") as the Lender may reasonably consider necessary having regard to its role in any repatriation of the cash currently held by RMI, or (ii) promptly make other arrangements satisfactory to the Lender in order to allow repayment of the Credit. CONDITIONS PRECEDENT The Lender's obligation to advance the Credit is subject to fulfillment of the following conditions prior to or contemporaneously with the advance under the Credit: (a) the Lender having received satisfactory legal opinions relating to this Agreement, the Security and any other documents relating to the Credit (collectively, the "Credit Documents") and such other matters including the fulfilment of the condition set out in (e) below as the Lender may reasonably require; (b) the applicable requirements under the heading "Security," other than the last paragraph under that heading, being satisfied; 4 -35- (c) the Lender having entered into an agreement satisfactory to the Lender with a third party custodian satisfactory to the Lender covering the cash or cash equivalent securities being pledged by Glamis USA, which will provide for the Lender to have control of the collateral; (d) the Lender having received confirmation satisfactory to it from a third party custodian satisfactory to it (or having received other evidence satisfactory to the Lender) as to the amount of unencumbered cash or cash equivalent securities the custodian is holding for the account of RMI; to the extent the amount held is less than U.S.$10,000,000, the amount of the Credit shall be reduced by the Canadian dollar equivalent of the difference; (e) the Borrower having become the owner of 100% of the RRI Shares; (f) the Lender being satisfied that there have been no material changes to the terms of the Arrangement from those distributed in the Circular except those approved by the Lender, and that all conditions of the Borrower's agreement with RRI concerning the Arrangement have been satisfied, or have been waived on grounds satisfactory to the Lender and that any discretion by the Borrower concerning the satisfaction of conditions has been exercised on grounds satisfactory to the Lender; (g) the Lender having received acknowledgments and agreements, if applicable, from any other lenders or secured creditors of the Borrower or the Guarantors as reasonably required to ensure the priority of the Lender's security; (h) the first advance under the Credit being made on or before 31 March 1999; (i) the Lender having received certificates of each of the Borrower and the Guarantors, to which are attached copies of its constating documents, a list of its officers and directors and copies of resolutions authorizing it to execute, deliver and perform its obligations under the Credit Documents; (j) the Borrower having paid any cash component of the acquisition price of 100% of the RRI Shares in excess of $60,000,000 from funds available to the Borrower that are not borrowed by any of the Restricted Parties. In addition, the Lender's obligation to make an Advance under the Credit is subject to the conditions precedent that no Event of Default (as defined below) or event that, with the passage of time, 5 -36- giving of notice or other condition subsequent would be an Event of Default (such event being a "Pending Event of Default") has occurred and is continuing on the date of the Advance, or would result from making the Advance and that the Lender has received prior written notice from the Borrower requesting the Advance as required by this Agreement. REPRESENTATIONS AND WARRANTIES Each of the Borrower and the Guarantors represents and warrants to the Lender that, with respect to itself and, as to items (a), (e), (g) to (l) inclusive and (p) below, the other Restricted Parties: (a) it is a duly incorporated and validly existing corporation and has the corporate power and authority, and all material permits required as of the date hereof, to enter into and perform its obligations under the Credit Documents to which it is or will be a party, to own its property and to carry on the business in which it is engaged; (b) the entering into and the performance by it of the Credit Documents to which it is or will be a party (i) have been duly authorized by all necessary corporate action on its part, and (ii) do not and will not violate its constating documents, any law, treaty, regulation, ordinance, decree, judgment, order or similar legal requirement (each, a "Requirement of Law"), or any material agreement, franchise, lease, permit, privilege or other right acquired from any person (each, a "Contract") to which any Restricted Party is a party; (c) the Credit Documents to which it is a party from time to time will, when executed and delivered, constitute legal, valid and binding obligations enforceable against it in accordance with their respective terms, subject to the availability of equitable remedies and the effect of bankruptcy, insolvency and other laws affecting the rights of creditors generally; (d) from and after the date on which the relevant Security is delivered, the Lender will have legal, valid and enforceable security upon the property that is encumbered by that Security (as to which the grantor is the legal and/or beneficial owner) subject only to Permitted Encumbrances (as defined below), the availability of equitable remedies and the effect of bankruptcy, insolvency and other laws affecting the rights of creditors generally; 6 -37- (e) it is not in default under any of the Permitted Encumbrances relating to it, except for violations that would not, in the aggregate, have a material and adverse effect on its ability to perform its obligations under any Credit Documents to which it is a party; (f) neither its constating documents nor any shareholder agreement to which it is a party restrict the power of its directors to borrow money, to give guarantees or to encumber any or all of its present and future property to secure its obligations under or in connection with the Credit; (g) as of the date of execution of this Agreement, there are no litigation, arbitration or administrative proceedings outstanding and, to its knowledge after having made reasonable inquiry, there are no proceedings pending or threatened against it which were not disclosed in the Circular or which, in either case, could materially and adversely affect the acquisition of the RRI Shares, its business or property or its ability to perform its obligations under the Credit Documents; (h) no Event of Default or Pending Event of Default has occurred and is continuing; (i) it is not in violation of any term of its constating documents, and to its knowledge after having made reasonable inquiry, is not in violation of any Requirement of Law or any Contract, the violation of which would materially and adversely affect its ability to own its property and conduct its business, nor will its execution, delivery and performance of any Credit Documents to which it is a party result in any such violation; (j) all of the historical financial statements which have been furnished to the Lender in connection with this Agreement are complete and, to its knowledge after reasonable inquiry, fairly present its financial position as of the dates referred to therein and have been prepared in accordance with generally accepted accounting principles of Canada or the United States, consistently applied ("GAAP"); (k) as of the date of execution of this Agreement, it has no liabilities (contingent or other) or other obligations of the type required to be disclosed in accordance with GAAP which are not fully disclosed in the financial statements (FS) section of the Circular, including the pro forma statements (collectively, the "Financial Statements"), other than liabilities and obligations incurred thereafter in the 7 -38- ordinary course of its business and the obligations under or in connection with the Credit; (l) its business and assets are being operated in substantial compliance with all applicable laws (including, without limitation, laws intended to protect the environment), to the best of its knowledge after reasonable inquiry there are no breaches thereof and no enforcement actions in respect thereof are threatened or pending which, in any such case, could materially and adversely affect its business or property or its ability to perform its obligations under the Credit Documents to which it is or will be a party; (m) there are no governmental licenses, authorizations, consents, registrations, exemptions, permits or other approvals required by law that are required to complete the acquisition of the RRI Shares that have not been obtained and are not in full force and effect without unduly burdensome provisions, other than the court order approving the Arrangement and the issuance of articles implementing the Arrangement, which will be obtained before the Credit is advanced; (n) there are no consents that are required from the directors or shareholders of RRI, either in connection with the pledge of the RRI Shares or in connection with any disposition of the RRI Shares pursuant to the Security; (o) its chief executive office is located in Nevada, in the case of the Borrower, Glamis USA and RMI and Ontario in the case of RRI; (p) there is no fact that it has not disclosed to the Lender in writing that materially adversely affects its business or property or its ability to perform its obligations under the Credit Documents to which it is or will be a party. The representations and warranties made in this Agreement shall survive the execution of this Agreement and all other Credit Documents, and shall be deemed to be repeated as of the date of each advance and as of the date of delivery of each quarterly certificate referred to under "Reporting Requirements" below. The Lender shall be deemed to have relied upon such representations and warranties at each such time as a condition of making an Advance hereunder or continuing to extend the Credit hereunder. COVENANTS AND CONDITIONS 1. The Borrower and the Guarantors shall not, and shall not permit the Restricted Parties to, create, assume or permit the 8 -39- existence of any hypothec, mortgage, security interest, lien or other encumbrance whatsoever on their respective undertakings, property and assets, other than the Security, encumbrances disclosed in the Financial Statements and other encumbrances arising in the ordinary course of business that do not secure Debt (collectively, "Permitted Encumbrances"). 2. Other than through the Arrangement and in connection with the anticipated redemption of RFC's preferred shares, the Borrower and the Guarantors shall not, and shall not permit the Restricted Parties to effect any change in its business, acquire material assets of any other person except in the ordinary course of business, acquire shares or other securities of any other person, or make loans to or other investments in, or give financial assistance to, any other person. 3. The Borrower and the Guarantors shall not, and shall not permit the Restricted Parties to incur or permit any Debt (as defined on the attached schedule) to remain outstanding other than (a) the Credit, (b) other Debt disclosed in the Financial Statements, (c) other Debt to the Lender and (d) Debt owed to other Restricted Parties as of the date of this Agreement. 4. The Borrower shall not pay any dividends or make other payments to its direct or indirect shareholders or make payments on notes held by affiliated corporations, including redemptions of shares, principal or cash interest payments, and payment of management fees. 5. The Borrower and the Guarantors shall not, and shall not permit the Restricted Parties to consolidate, amalgamate or merge with any other person, enter into any corporate reorganization or other transaction intended to effect or permit a change in its existing corporate or capital structure (other than the Arrangement in the case of RRI and the anticipated redemption of preferred shares of RFC), liquidate, wind-up or dissolve itself. 6. The Borrower and the Guarantors shall not, and shall not permit the Restricted Parties to sell, lease or otherwise dispose of the whole or any material part of their respective undertakings, property and assets, except for the sale of inventory in the ordinary course of business and except for dispositions of assets of RRI or subsidiaries that are not related to gold mining or gold exploration. 7. The Borrower and the Guarantors shall ensure that each of the Restricted Parties operates its business in accordance with sound business practice and in compliance in all material respects with all applicable Requirements of Law and material Contracts. 8. The Borrower and the Guarantors shall ensure that each of the Restricted Parties, at all reasonable times and from time to time 9 -40- upon reasonable notice, permits representatives of the Lender to inspect any of its property and to examine and take extracts from its financial books, accounts and records, including but not limited to accounts and records stored in computer data banks and computer software systems, and to discuss its financial condition with its senior officers and (in the presence of such of its representatives as it may designate) its auditors, the reasonable expense of all of which shall be paid by the Borrower. 9. The Borrower and the Guarantors shall ensure that each of the Restricted Parties maintains insurance on all its property with financially sound and reputable insurance companies or associations, including all-risk property insurance, comprehensive general liability insurance and business interruption insurance, in amounts and against risks that are reasonably required by the Lender, and furnishes to the Lender, on written request, satisfactory evidence of the insurance carried. REPORTING REQUIREMENTS During the term of this Agreement, the Borrower shall: (a) as soon as practicable and in any event within 45 days of the end of each of its fiscal quarters (except the fourth quarter), cause to be prepared and delivered to the Lender in a form satisfactory to the Lender, its interim unaudited consolidated financial statements, which shall be prepared in accordance with GAAP; (b) as soon as practicable and in any event within 90 days after the end of each of its fiscal years, cause to be prepared and delivered to the Lender annual consolidated financial statements for the Borrower and, for 1998, RRI including, without limitation, balance sheet, statement of income and retained earnings and statement of changes in financial position for such fiscal year, which shall be audited by an internationally recognized accounting firm and shall be prepared in accordance with GAAP; (c) concurrently with the delivery of its quarterly financial statements, provide the Lender with a certificate in a form satisfactory to the Lender, indicating whether an Event of Default or Pending Event of Default has occurred; (d) promptly provide the Lender with all other information reasonably requested by the Lender from time to time 10 -41- concerning the property and financial condition of the Restricted Parties. ADVANCES AND PAYMENTS Upon timely fulfilment of all applicable conditions as set forth in this Agreement, the Lender will make the requested amount of a Prime Rate advance and the proceeds of the sale of bankers' acceptances requested by the Borrower (net of the discount on sale and the applicable bankers' acceptance fee payable to the Lender) available to the Borrower on the date requested by the Borrower by crediting such amount to the Borrower's Canadian dollar account at the Lender's branch located at 650 West Georgia Street, Vancouver, British Columbia, V6B 4P6 or paying it as otherwise directed in the Borrower's request for an advance. The Borrower shall pay interest with respect to Prime Rate advances to the Lender at its International Banking Division, 14th Floor, 44 King Street West, Toronto, Ontario, M5H 1H1 on the 22nd day of each month and shall make all other payments to the Lender at that address. All interest shall accrue from day to day and shall be payable in arrears for the actual number of days elapsed from and including the date of advance or the previous date on which interest was payable, as the case may be, to but excluding the date on which interest is payable, both before and after maturity, default and judgment, with interest on overdue interest at the same rate payable on demand. Interest calculated with reference to the Prime Rate shall be calculated monthly on the basis of a year of 365 days. Each rate of interest which is calculated with reference to a period (the "deemed interest period") that is less than the actual number of days in the calendar year of calculation is, for the purposes of the Interest Act (Canada), equivalent to a rate based on a calendar year calculated by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing by the number of days in the deemed interest period. The provisions of the Acceptance Agreement attached to this Agreement shall apply to all bankers' acceptances under this Agreement. The "Undersigned" referred to in the Acceptance Agreement means the Borrower. The aggregate fee contemplated in section 2 of the Acceptance Agreement shall be 1.5% per annum. The present and future debts, liabilities and obligations of the Borrower to the Lender under or in connection with the Credit (the "Obligations") shall be evidenced by records maintained by the Lender, which shall constitute, in the absence of manifest error, prima facie evidence of the Obligations and all details relating thereto. The failure of the Lender to correctly record any amount, 11 -42- date or other detail shall not, however, adversely affect the obligation of the Borrower to pay the Obligations in accordance with this Agreement. The Borrower shall give the Lender irrevocable written notice, in the form attached to this Agreement, of any request for any advance to the Borrower under the Credit. The Borrower shall also give the Lender irrevocable written notice of any payment by the Borrower (whether resulting from repayment, prepayment, rollover or conversion) of any advance under the Credit. Notice shall be given on the second business day prior to the date of any advance or payment (a business day being a day other than a Saturday or Sunday on which the Lender is open for business at its principal office in Toronto), or at such other time as is acceptable to the Lender. Notice shall be given not later than 11:00 a.m. (Toronto time) on the date for notice. Payments (other than those being made solely from the proceeds of rollovers and conversions) must be made prior to 11:00 a.m. (Toronto time) on the date for payment. If a notice or payment is not given or made by those times, it shall be deemed to have been given or made on the next business day. The Lender acknowledges that the Borrower currently expects to require the advance of the Credit on 1 March 1999 but that the precise amount of the advance may not be known two business days before that. The Borrower shall promptly provide the Lender with all available information concerning the advance and the Lender shall endeavour to provide the advance with less than two business days notice if necessary. Each advance by way of bankers' acceptances shall be in minimum amount of $1,000,000 and a whole multiple of $100,000. Terms of seven days only may be requested by the Borrower for bankers' acceptances, subject to availability of bankers' acceptances of that term. No term of a bankers' acceptance may end on a date which is not a business day, or after the date on which the Credit is required to be paid in full. The Borrower may from time to time, by giving not less than two business days express written notice to the Lender and paying all accrued and unpaid standby fees to the effective date of cancellation or reduction, irrevocably cancel or permanently reduce the committed amount of the Credit by an amount which shall be a minimum of $1,000,000 and a whole multiple of $100,000. The Borrower shall have no right to any increase in the committed amount of the Credit thereafter. EVENTS OF DEFAULT Each of the following events shall constitute an Event of Default under this Agreement: 12 -43- (a) the Borrower fails to pay any amount of principal or interest when due or to pay fees or other Obligations (apart from principal and interest) within three days of when due; or (b) a Restricted Party makes any representation or warranty under any of the Credit Documents which is incorrect or incomplete in any material respect when made or deemed to be made; or (c) any of the Borrower, the Guarantors and RFC ceases or threatens to cease to carry on its business, or admits its inability or fails to pay its debts generally; or (d) a Restricted Party: (i) permits any default under one or more agreements or instruments relating to its Debt other than the Obligations; or (ii) permits any other event to occur and to continue after any applicable grace period specified in such agreements or instruments; if the effect is to accelerate, or to permit the acceleration of, the date on which any material Debt of a Restricted Party becomes due (whether or not acceleration actually occurs); or (e) any of the Borrower, the Guarantors and RFC becomes a bankrupt, voluntarily or involuntarily; or (f) any of the Borrower, the Guarantors and RFC becomes subject to any proceeding seeking liquidation, arrangement, reorganization, dissolution, winding-up, relief of debtors or creditors or the appointment of a receiver or trustee over, or any judgment or order which has or might have a material and adverse effect on, any material part of its property, and such proceeding, judgment or order is consented to, approved of or acquiesced in by any of the Borrower, the Guarantors and RFC or, if instituted against any of the Borrower, the Guarantors and RFC, is not contested diligently, in good faith and on a timely basis and dismissed or stayed within 45 days of its commencement or issuance; or (g) any of the Borrower, the Guarantors and RFC denies, to any material extent, its obligations under the Credit Documents or claims any of the Credit Documents to be invalid or withdrawn in whole or in part; or any of the Credit Documents is invalidated in any material respect by 13 -44- any act, regulation or governmental action or is determined to be invalid in any material respect by a court or other judicial entity and such determination has not been stayed pending appeal; or (h) one or more final judgments, writs of execution, garnishments, attachments or similar processes are issued or levied against any of the property of the Restricted Parties and are not released, bonded, satisfied, discharged, vacated or stayed within 10 days after issuance or levy; or (i) an encumbrancer takes possession of all or a material portion of the property of any of the Borrower, the Guarantors and RFC by appointment of a receiver, receiver and manager, or otherwise; or (j) a material adverse change occurs in the financial condition or business prospects of the Restricted Parties taken as a whole, as determined by the Lender, acting in good faith and on commercially reasonable grounds; or (k) there is a breach of any other provision of any of the Credit Documents and such breach is not corrected or otherwise satisfied within 30 days after the Lender gives written notice thereof; or (l) following completion of the Arrangement, there is any reduction in the Borrower's direct or indirect percentage ownership of any Restricted Party, other than any subsidiary of RRI that is not engaged in gold mining or gold exploration. If any Event of Default occurs, the Lender shall be under no further obligation to make Advances and may give notice to the Borrower (i) declaring its obligations to make Advances to be terminated, whereupon the same shall forthwith terminate, and/or (ii) declaring the Obligations or any of them to be forthwith due and payable, whereupon they shall become and be forthwith due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower. Notwithstanding the preceding paragraph, if any of the Borrower, the Guarantors and RFC becomes a bankrupt (voluntarily or involuntarily), or institutes any proceeding seeking liquidation, arrangement, reorganization, dissolution, winding-up, relief of debtors or creditors or the appointment of a receiver or trustee over any material part of its property, then without prejudice to the other rights of the Lender as a result of any such event, without any notice or action of any kind by the Lender, and without 14 -45- presentment, demand or protest, the Lender's obligation to make Advances shall immediately terminate and the Obligations shall immediately become due and payable. Upon the occurrence of any event by which any of the Obligations become due and payable, any security shall become immediately enforceable and the Lender may take such action or proceedings as it in its sole discretion deems expedient to enforce the same, all without any additional notice, presentment, demand, protest or other formality, all of which are hereby expressly waived by the Borrower. In addition to and not in limitation of any rights now or hereafter granted under applicable law, if repayment of any Obligation is accelerated, the Lender may at any time and from time to time without notice to the Borrower or any other person, any notice being expressly waived by the Borrower, set-off and compensate and apply any and all deposits, general or special, time or demand, provisional or final, matured or unmatured, and any other indebtedness at any time owing by the Lender to or for the credit of or the account of the Borrower against and on account of the Obligations notwithstanding that any of them are contingent or unmatured. MISCELLANEOUS PROVISIONS The Credit Documents shall be binding upon and enure to the benefit of the Lender, the Borrower, the Guarantors and their respective successors and permitted assigns, except that the Borrower and the Guarantors shall not assign any rights or obligations with respect to this Agreement or any of the other Credit Documents without the prior written consent of the Lender. All statements, reports, certificates, opinions, appraisals and other documents or information required to be furnished to the Lender by the Borrower shall be supplied without cost to the Lender. The Borrower shall pay on demand all reasonable third party costs and expenses of the Lender (including, without limitation, the reasonable fees and expenses of counsel for the Lender on a solicitor and own client basis), incurred in connection with (a) the preparation, execution, delivery, administration, periodic review and enforcement of the Credit Documents; (b) obtaining advice as to its rights and responsibilities in connection with the Credit and the Credit Documents; and (c) other matters relating to the Credit. Such costs and expenses shall be payable whether or not an advance is made under this Agreement. The Borrower shall indemnify the Lender and all of its directors, officers, employees and representatives from and against any and all actions, proceedings, claims, losses (other than loss of profit), 15 -46- damages, liabilities, expenses and obligations of any kind (collectively, "Claims") that may be incurred by or asserted against any of them as a result of or in connection with this Agreement, the Arrangement or the Credit, other than as a result of the indemnitees' negligence or wilful misconduct. A certificate of the Lender as to the amount of any such Claim shall be prima facie evidence as to the amount thereof, in the absence of manifest error. No indemnitee shall be liable to the Borrower or any other person for any consequential damages which may be claimed as a result of or in connection with this Agreement, the Arrangement or the Credit. The agreements of the Borrower concerning expenses and indemnification shall survive the termination of this Agreement and repayment of the Obligations. All payments to be made by or on behalf of the Borrower in connection with the Credit Documents are to be made without set-off, compensation or counterclaim, free and clear of and without deduction for or on account of any tax, including but not limited to withholding taxes, except if such deduction is required by law or the administration thereof. If any tax is deducted or withheld from any payments under the Credit Documents (including the remittance provided for in this paragraph) the Borrower shall promptly remit to the Lender in the currency in which such payment was made, the equivalent of the amount of tax so deducted or withheld together with the relevant receipt issued by the taxing or other receiving authority. If the Borrower is prevented by operation of law or otherwise from paying, causing to be paid or remitting such tax, the interest or other amount payable under the Credit Documents will be increased to such rates as are necessary to yield and remit to the Lender the principal sum advanced or made available together with interest at the rates specified in the Credit Documents after provision for payment of such tax. If the introduction of or any change in or in the interpretation of, or any change in the application to the Borrower or the Lender of, any law or any regulation or guideline from any central bank or other governmental authority that is binding on the Borrower or the Lender (whether or not having the force of law), including but not limited to any reserve or special deposit requirement or any tax (other than a general tax on the Lender's income or capital) or any capital requirement, has due to the Lender's compliance therewith the effect, directly or indirectly, of (a) increasing the cost to the Lender of performing its obligations hereunder; (b) reducing any amount received or receivable by the Lender hereunder or its effective return hereunder or on its capital; or (c) causing the Lender to make any payment or to forego any return based on any amount received or receivable by it hereunder, then upon demand from time to time the Borrower shall pay such amount as shall 16 -47- compensate the Lender for any such cost, reduction, payment or foregone return that is not fully offset by an increase in the applicable interest rate or rates or fees hereunder. Any certificate of the Lender in respect of the foregoing will be prima facie evidence of the foregoing, except for manifest error, provided that the Lender determines the amounts owing to it in good faith using any reasonable averaging and attribution methods and provides a detailed description of its calculation of the amounts owing to it. Time shall be of the essence of this Agreement. No amendment, supplement or waiver of any provision of the Credit Documents, nor any consent to any departure by the Restricted Parties therefrom, shall in any event be effective unless it is in writing, makes express reference to the provision affected thereby and is signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. No waiver or act or omission of the Lender shall extend to or be taken in any manner whatsoever to affect any subsequent Event of Default or breach by any Restricted Party of any provision of the Credit Documents or the rights resulting therefrom. Each of the Credit Documents, except for those which expressly provide otherwise, shall be conclusively deemed to be a contract made under, and shall for all purposes be governed by and construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable in Ontario. If you are in agreement with the foregoing, please sign and return to the Lender a copy of this letter, together with $175,000 in payment of the balance of the upfront fee. This letter replaces our letter to you and term sheet dated 11 February 1999. This letter will be executed by RRI and RMI immediately upon completion of the Arrangement, but will be binding upon the other parties once they have all signed this letter, even though it has not been signed by RRI and RMI. This letter may be executed in separate counterparts, and transmission of this letter and your acceptance by facsimile will be considered as binding as delivery of originally signed documents. Yours very truly, THE BANK OF NOVA SCOTIA Ray Clarke Relationship Manager Agreed to and accepted GLAMIS GOLD LTD. By: /s/ C. K. McARTHUR --------------------------------- C.K. McArthur President By: /s/ D. J. FORBUSH --------------------------------- D.J. Forbush Chief Financial Officer 17 -48- GLAMIS GOLD, INC. By: /s/ C.K. McArthur --------------------------------- C.K. McArthur President By: /s/ D.J. Forbush --------------------------------- D.J. Forbush Chief Financial Officer RAYROCK RESOURCES INC. By: /s/ D.J. Forbush --------------------------------- Name: D.J. Forbush Title: Secretary, Treasurer Date: 3 March 1999 RAYROCK MINES, INC. By: /s/ D.J. Forbush --------------------------------- Name: D.J. Forbush Title: Secretary, Treasurer Date: 3 March 1999 SCHEDULE "DEBT" means, with respect to any person, without duplication and, except as provided in item (b) below, without regard to any interest component thereof (whether actual or imputed) that is not due and payable, the aggregate of the following amounts, each calculated in accordance with GAAP, unless the context otherwise requires: (a) indebtedness for money borrowed (including, without limitation, by way of overdraft) or indebtedness represented by notes payable and drafts accepted representing extensions of credit; (b) the face amount of all bankers' acceptances and similar instruments; (c) all obligations (whether or not with respect to the borrowing of money) that are evidenced by bonds, debentures, notes or other similar instruments; (d) all liabilities upon which interest charges are customarily paid by that person; (e) any capital stock of that person (or of any subsidiary of that person that is not held by that person or by a subsidiary of that person that is wholly owned, directly or indirectly) which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part for cash or securities constituting Debt; 18 -49- (f) all capital lease obligations and purchase money obligations; (g) the amount, if any, that the person would be required to pay to its counterparty in any interest rate swap, basis swap, forward rate transaction, currency hedging or swap transaction, cap transaction, floor transaction, collar transaction or other similar transaction, or any option with respect to such a transaction or combination of any such transactions in order to terminate such transaction as a result of the person being "out of the money" on a mark to market valuation of the transaction; (h) any guarantee (other than by endorsement of negotiable instruments for collection or deposit in the ordinary course of business) in any manner of any part or all of an obligation of another person of the type included in items (a) through (g) above, including contingent liabilities in respect of letters of credit, letters of guarantee and surety bonds; provided that trade payables and accrued liabilities that are current liabilities incurred in the ordinary course of business do not constitute Debt. FORM OF REQUEST FOR ADVANCE TO: THE BANK OF NOVA SCOTIA We refer to the letter loan agreement dated 24 February 1999 between, among others, the undersigned as Borrower and The Bank of Nova Scotia as Lender, as amended, supplemented, restated or replaced from time to time (the "Credit Agreement"). All capitalized terms used in this notice and defined in the Credit Agreement have the meanings defined in the Credit Agreement. Notice is hereby given pursuant to the Credit Agreement that the undersigned hereby irrevocably requests as follows: A that an advance be made under the Credit B the requested advance represents the following [check one or more]: initial advance under the Credit ( ) rollover of existing advance under the Credit ( ) conversion of existing advance to another type of advance ( ) C the date of the advance shall be D the advance shall be in the form of [check one or more and complete details]: Prime Rate advance ( ) Amount $______________ Bankers' Acceptances with a term of seven days ( ) Face Amount: $______________ 19 -50- E the proceeds of the advance shall be paid as follows: [specify account of Borrower at branch of Lender in Canada or payment instructions for third party payee] The undersigned hereby confirms as follows: (a) the representations and warranties made in the Credit Agreement, other than any expressly stated to be made as of a specific date, are true on and as of the date hereof with the same effect as if such representations and warranties had been made on and as of the date hereof; (b) no Pending Event of Default or Event of Default has occurred and is continuing on the date hereof or will result from the Advance(s) requested herein; (c) the undersigned will immediately notify you if it becomes aware of the occurrence of any event which would mean that the statements in the immediately preceding paragraphs (a) and (b) would not be true if made on the date the advance is made; (d) all other conditions precedent set out in the Credit Agreement have been fulfilled. DATED 24 February 1999 GLAMIS GOLD LTD. By: /s/ C.K. McARTHUR ---------------------------- C.K. McArthur President By: /s/ D.J. FORBUSH ---------------------------- D.J. Forbush Chief Financial Officer EX-10.57 5 EXHIBIT 10.57 1 -51- EXHIBIT 10.57 SERVICES AGREEMENT THIS AGREEMENT made as of April 26, 1999. BETWEEN: GLAMIS GOLD LTD., a British Columbia company having an address at 5190 Neil Road, Suite 310, Reno, Nevada, 89502 ("Glamis") OF THE FIRST PART AND: CHARLES A. JEANNES, of 2420 Grant Springs Drive, Reno, Nevada, 89509 ("Jeannes") OF THE SECOND PART WHEREAS Glamis wishes to engage Jeannes to perform the duties of Senior Vice President, Administration and General Counsel of Glamis and Jeannes wishes to take on such duties. NOW THEREFORE THIS AGREEMENT WITNESSES that the parties mutually agree as follows: ENGAGEMENT 1. Glamis hereby engages (the `Engagement') Jeannes as and Jeannes agrees to serve as Senior Vice President, Administration and General Counsel ("SVP") of Glamis and as Senior Vice President, Administration and General Counsel of Glamis Gold, Inc. and its subsidiaries and to perform the duties described in Section 3, on the terms and subject to the conditions set out herein. TERM 2. The term ("Term") of the Engagement will commence on April 26, 1999, and will continue thereafter on a month-to-month basis until terminated by either party pursuant to the terms hereof. DUTIES AND OBLIGATIONS OF JEANNES 3. As SVP, Jeannes will perform those duties and functions (the "Duties") that are described in Schedule A hereto. PERFORMANCE OF DUTIES 4. Jeannes will perform the Duties as follows: 2 -52- (a) subject to ill-health and subsection 4(c), Jeannes will perform the Duties during each day that is a business day in the Term (a business day being a day, other than a Saturday or a Sunday, on which the office of Glamis Gold, Inc. in Reno, Nevada is open for the transaction of business); (b) subject to subsection 4(c), Jeannes will devote substantially all of his time and energy during normal business hours on each working day during the Term to performing the Duties to the best of his skill and ability; and (c) notwithstanding subsections 4(a) and 4(b), Jeannes will not be required to perform the Duties on statutory holidays and during periods of holidays, which will be not less than four weeks in the aggregate in respect of each calendar year. REMUNERATION 5. In consideration of the performance of the Duties by Jeannes, Glamis, through Glamis Gold, Inc., will: (a) pay Jeannes a salary (the"Salary") of U.S. $200,000 (or such other amount as the parties may mutually agree in writing) per calendar year during the Term by paying 1/24 thereof on the 15th of each month and 1/24th thereof on the last day of each month or, if such days are not business days, on the first prior day that is a business day, such payments to be reduced by the amount of applicable withholding and other requirements of the Internal Revenue Code (United States) and any other applicable United States legislation in respect of remuneration paid to employees; (b) reimburse Jeannes for all reasonable expenses incurred by Jeannes in the performance of the Duties and in respect of such Jeannes will provide to Glamis such particulars as Glamis may reasonable require; (c) permit Jeannes to participate in medical, dental and other employee benefit plans of Glamis Gold, Inc. as they are from time to time initiated, if and to the extent that participation is permitted by the plans, such plans to include, without limitation, the Glamis Gold, Inc. Profit Sharing and Retirement Plan and the Glamis Gold, Inc. Group Insurance Benefits Plan; (d) indemnify and hold Jeannes harmless from and against any and all costs, damages or losses resulting from the performance by Jeannes of the Duties; (e) provide Jeannes with the holiday entitlement described in subsection 4(c) provided however, that Jeannes will forfeit, without compensation, his right to any part of such holiday entitlement not used in a calendar year; (f) perform a review of the Salary on an annual basis, as a minimum; and (g) grant to Jeannes share purchase options from time to time on an aggregate of not less than 125,000 common shares of Glamis ("Shares") under Glamis' Incentive Share Purchase Option Plan (the "Plan"), in accordance with the rules and regulations of applicable regulatory authorities and the Plan, it being understood that upon the full exercise of the 125,000 share purchase options, Jeannes will, subject to the then prevailing policies of Glamis' Executive Compensation Committee, be granted another share purchase option in respect of not less than 125,000 Shares. 3 -53- TERMINATION OF ENGAGEMENT 6. The following will govern termination under this Agreement: (a) Jeannes may deliver to Glamis a notice to terminate the Engagement on a day not less than 60 days after the day of such delivery and the Engagement will terminate at the expiration of such 60-day or longer period and in such case any outstanding share purchase options held at such time by Jeannes will expire on the 30th day after the effective date of the termination; (b) Glamis may terminate the Engagement without notice and without any payment in lieu of notice if (i) Jeannes is guilty of any wilful act, neglect, or conduct that causes substantial damage or discredit to Glamis, or (ii) Jeannes is convicted of any offence involving fraud, and in such case any outstanding share purchase options held at such time by Jeannes will expire on the 30th day after the effective date of the termination; (c) Except for those matters referred to in subsection 6(b), Glamis may, at its sole option, terminate the Engagement for cause by providing three months written notice to Jeannes and in such case any outstanding share purchase options held at such time by Jeannes will expire on the 30th day after the effective date of the termination; (d) Glamis may, at its sole option, terminate the Engagement without cause by notice (the "Termination Notice") to Jeannes, in which case Jeannes will be paid any remuneration due hereunder to the date of termination together with an aggregate amount equal to 2 times the Salary which is in force at the time of delivery of the Termination Notice and the cash value of 24 months of full benefit coverage under subsection 5(c), less applicable withholding and other requirements of the Internal Revenue Code (United States) and any other applicable United States legislation in respect of remuneration paid to employees and in such case any outstanding share purchase options held at such time by Jeannes, will expire on the 365th day after the effective date of the termination; (e) If Jeannes becomes permanently disabled prior to termination of the Engagement hereunder the provisions of subsection 6(c) will not apply, however, Glamis may terminate the Engagement pursuant to subsection 6(d), provided however that such termination will not affect any benefits which Jeannes would be entitled to as a disabled employee under the plans described in subsection 5(c). Jeannes will be deemed to be permanently disabled if he is unable to perform the material and substantial portion of the Duties because of sickness or injury. For the purposes hereof "sickness" means an organic disease, including without limitation mental illness, and the medical or surgical treatment of the disease and "injury" means bodily injury caused directly by external, violent and purely accidental means; (f) In the event that Glamis relocates its corporate offices from Washoe County, Nevada or otherwise requires as a condition of continued employment that Jeannes relocate from Washoe County, Nevada, Jeannes shall have the option of terminating the Engagement and in that event shall receive the remuneration provided in subsection 6(d); 4 -54- (g) On termination of the Engagement, Jeannes will deliver to Glamis in a reasonable state of repair all property of Glamis used by or in the possession of Jeannes; and (h) Termination of the Engagement will not terminate Glamis' obligation under subsection 5(d), which obligation will survive such termination. DISCLOSURE 7. Jeannes undertakes to refrain, both during the Term and thereafter, except so far as may be necessary or proper in performing the Duties, from making public or disclosing to any person who is not an employee, officer or director of Glamis or one of its subsidiaries, any information that may come to the knowledge of Jeannes during the Term respecting the business dealings of Glamis or its subsidiaries or any of the contractual agreements of Glamis or its subsidiaries and Jeannes will, at the request of Glamis, enter into a separate agreement with respect to such matters. MISCELLANEOUS 8. (a) Each party will, on the request of the other, execute and deliver such other agreements, deeds, documents and instruments, and do such further acts and things as the other may reasonably request in order to evidence, carry out and give full force and effect to the terms, conditions, intent and meaning of this Agreement. (b) If any provision of this Agreement is invalid or unenforceable for any reason whatsoever, such provision will be severable from the remainder of this Agreement, the validity of the remainder will continue in full force and effect and this Agreement will be construed as if it had been executed without the invalid or unenforceable provision. (c) No consent or waiver, express or implied, by either party to or of any breach or default by the other party in the performance by the other of any or all of its obligations under this Agreement (i) will be valid unless it is in writing and specifically stated to be a consent or waiver pursuant to this subsection, (ii) may be relied upon by the other as a consent or waiver to or of any other breach or default of the same or any other obligation, (iii) will constitute a general consent or waiver under this Agreement, or (iv) will eliminate or modify the need for a specific consent or waiver pursuant to this subsection in any other instance. (d) Notices, requests, demands or directions to one party to this Agreement by another will be in writing and will be delivered as follows: If to Glamis at: 5190 Neil Road, Suite 310 Reno, Nevada 89502 Attention: C. Kevin McArthur If to Jeannes at: 2420 Granite Springs Drive Reno, Nevada 89509 Attention: Charles A. Jeannes or to such other address as may be specified by one party to the other in a notice given in the manner provided in this subsection. 5 -55- (e) This Agreement is made in the State of Nevada with the intention that its construction and validity and all other issues related to its administration will in all respects be governed by the laws prevailing in that state. (f) In the event of any dispute between the parties in respect of the interpretation of this Agreement or any matter to be agreed on, such dispute will be determined by a single arbitrator appointed and acting pursuant to the Commercial Arbitration Rules of the American Arbitration Association and the decision of the arbitrator shall be final and binding on the parties. (g) This Agreement constitutes the entire agreement between the parties and there are no representations or warranties, express or implied, statutory or otherwise, and no agreements collateral hereto other than as expressly set forth or referred to herein. (h) This Agreement may be executed in counterparts, each of which when delivered (whether in originally executed form or by facsimile transmission) will be deemed to be an original and all of which together will constitute one in the same document. (i) This Agreement will enure to the benefit of and be binding upon the respective legal representatives and successors and permitted assigns of the parties. (j) None of the parties may assign any right, benefit or interest in this Agreement without the written consent of the others and any purported assignment without such consent will be void, save and except that Glamis may assign any or all of its rights and obligations hereunder to Glamis Gold Inc. IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day first above written. GLAMIS GOLD LTD. Per:___________________________________________ A. Dan Rovig, Chairman Per:___________________________________________ C. Kevin McArthur, President & CEO 6 -56- /s/ CHARLES A. JEANNES - --------------------------------- CHARLES A. JEANNES SCHEDULE A DUTIES (none attached) EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLAMIS GOLD LTD. CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 41,855 0 5,592 0 11,055 60,308 307,070 179,481 198,650 26,090 0 0 0 156,506 (2,612) 198,650 7,986 7,986 7,189 11,512 625 0 0 (3,609) (288) (3,321) 0 0 0 (3,321) (0.07) (0.07)
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