<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1994
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 1-8491
HECLA MINING COMPANY
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 82-0126240
- - - ---------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
- - - ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
208-769-4100
- - - --------------------------------------------------------------------------------
(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, and (2) has been subject to such
filing requirements for at least the past 90 days. Yes XX . No .
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding October 31, 1994
- - - ------------------------------------- -----------------------------------
<S> <C>
Common stock, par value 25 cents per share 48,081,919 shares
</TABLE>
<PAGE> 2
HECLA MINING COMPANY and SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1994
I N D E X
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. - Financial Information
Item 1 - Consolidated Balance Sheets - September 30, 1994
and December 31, 1993 3
- Consolidated Statements of Operations - Three
Months and Nine Months Ended September 30, 1994
and 1993 4
- Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 1994 and 1993 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. - Other Information
Item 1 - Legal Proceedings 21
Item 6 - Exhibits and Reports on Form 8-K 21
</TABLE>
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
HECLA MINING COMPANY and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(Note 2)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 20,522 $ 40,031
Short-term investments 84 27,636
Accounts and notes receivable 26,023 18,841
Income tax refund receivable 785 - -
Inventories 14,720 15,020
Other current assets 2,148 2,003
--------- ----------
Total current assets 64,282 103,531
Investments 5,274 6,565
Funds held in escrow 13,497 - -
Properties, plants and equipment, net 261,743 229,055
Other noncurrent assets 5,310 7,002
--------- ----------
Total assets $ 350,106 $ 346,153
========= ==========
LIABILITIES
-----------
Current liabilities:
Accounts payable and accrued expenses $ 16,956 $ 17,312
Accrued payroll and related benefits 2,604 2,056
Preferred stock dividends payable 2,012 2,012
Accrued taxes 1,247 928
--------- ----------
Total current liabilities 22,819 22,308
Deferred income taxes 359 359
Long-term debt 1,821 50,009
Accrued reclamation costs 21,932 24,947
Other noncurrent liabilities 3,641 3,858
--------- ----------
Total liabilities 50,572 101,481
--------- ----------
SHAREHOLDERS' EQUITY
--------------------
Preferred stock, 25 cents par value,
authorized 5,000,000 shares, issued
and outstanding - 2,300,000
liquidation preference $117,012 575 575
Common stock, 25 cents par value,
authorized 100,000,000 shares;
issued 1994 - 48,138,774;
issued 1993 - 39,640,083 12,035 10,080
Capital surplus 328,957 265,687
Retained deficit (40,954) (30,774)
Foreign currency translation adjustment (182) - -
Net unrealized loss on marketable
equity securities (8) (8)
Less common stock reacquired at cost;
1994 - 62,355 shares, 1993 - 63,858 shares (889) (888)
--------- ----------
Total shareholders' equity 299,534 244,672
--------- ----------
Total liabilities and shareholders' equity $ 350,106 $ 346,153
========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 4
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(dollars and shares in thousands, except for per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
Sept. 30, 1994 Sept. 30, 1993 Sept. 30, 1994 Sept. 30, 1993
-------------- -------------- -------------- --------------
(Note 2) (Note 2)
<S> <C> <C> <C> <C>
Sales of products $ 35,279 $ 22,605 $ 99,666 $ 72,406
--------- --------- --------- ----------
Cost of sales and other direct
production costs 25,216 18,775 80,257 62,121
Depreciation, depletion and
amortization 4,217 3,031 10,493 10,366
--------- --------- --------- ----------
29,433 21,806 90,750 72,487
--------- --------- --------- ----------
Gross profit (loss) 5,846 799 8,916 (81)
--------- --------- --------- ----------
Other operating expenses:
General and administrative 2,611 1,783 8,950 5,318
Exploration 2,403 1,477 6,502 3,331
Depreciation and amortization 81 196 443 501
Provision for closed operations and
environmental matters 449 464 1,073 912
--------- --------- --------- ----------
5,544 3,920 16,968 10,062
--------- --------- --------- ----------
Income (loss) from operations 302 (3,121) (8,052) (10,143)
--------- --------- --------- ----------
Other income (expense):
Interest and other income 793 1,346 4,113 1,965
Miscellaneous income (expense) - - 169 - - 152
Gain (loss) on investments 38 27 1,129 (162)
Minority interest in net loss of
consolidated subsidiary - - - - - - 43
Interest expense:
Total interest cost (476) (1,070) (2,523) (3,990)
Less amount capitalized - - 855 1,751 2,226
--------- --------- --------- ----------
355 1,327 4,470 234
--------- --------- --------- ----------
Income (loss) before income taxes
and extraordinary loss 657 (1,794) (3,582) (9,909)
Income tax (provision) benefit 159 122 272 (34)
--------- --------- --------- ----------
Net income (loss) before extraordinary loss 816 (1,672) (3,310) (9,943)
Extraordinary loss on early retirement
of long-term debt (10) - - (833) - -
--------- --------- --------- ----------
Net income (loss) 806 (1,672) (4,143) (9,943)
Preferred dividends (2,013) (2,057) (6,038) (2,057)
--------- --------- --------- ----------
Net loss applicable to common
shareholders $ (1,207) $ (3,729) $ (10,181) $ (12,000)
========= ========= ========= ==========
Net income (loss) per common share:
Loss applicable to common shareholders
before extraordinary loss $ (0.03) $ (0.09) $ (0.22) $ (0.32)
Extraordinary loss on early retirement
of long-term debt - - - - (0.02) - -
--------- --------- --------- ----------
Net income (loss) per common share $ (0.03) $ (0.09) $ (0.24) $ (0.32)
========= ========= ========= ==========
Cash dividends per common share $ - - $ - - $ - - $ - -
========= ========= ========= ==========
Weighted average number of common
shares outstanding 48,075 39,576 42,957 37,471
========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 5
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------
Sept. 30, 1994 Sept. 30, 1993
-------------- --------------
(Note 2)
<S> <C> <C>
Operating activities:
Net loss $ (4,143) $ (9,943)
Noncash elements included in net loss:
Depreciation, depletion and amortization 10,936 10,867
Loss on disposition of properties, plants
and equipment 14 28
Gain on exchange of LYONs - - (323)
Extraordinary loss on early retirement of
long-term debt 833 - -
Accretion of interest on long-term debt 2,000 3,403
Provision for reclamation and closure costs 905 (455)
Minority interest in net loss of subsidiaries - - 43
Change in:
Accounts and notes receivable (7,182) 812
Income tax refund receivable (785) 390
Inventories 300 1,967
Other current assets (145) 145
Accounts payable and accrued expenses (356) 176
Dividend payable - - 2,057
Accrued payroll and related benefits 548 (192)
Accrued taxes 319 391
Noncurrent liabilities (181) (2,297)
--------- ---------
Net cash provided by operating activities 3,063 7,069
--------- ---------
Investing activities:
Additions to properties, plants and equipment (57,511) (22,203)
Proceeds from disposition of properties,
plants and equipment 13,406 234
Purchase of investments and increase in cash
surrender value of life insurance (1,926) (539)
Change in funds held in escrow (13,497) - -
Proceeds from maturity of short-term investments
and sale of investments 30,769 - -
Other, net (2,795) (3,786)
--------- ---------
Net cash applied to investing activities (31,554) (26,294)
--------- ---------
Financing activities:
Common stock issued under stock option plans 1,726 853
Dividends on preferred stock (6,038) (2,057)
Issuance of common stock 63,499 6,975
Early retirement of long-term debt (50,169) - -
Issuance of preferred stock - - 110,360
Decrease in deferred revenue (36) - -
--------- ---------
Net cash provided by financing activities 8,982 116,131
--------- ---------
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents (19,509) 96,906
Cash and cash equivalents at beginning of period 40,031 3,967
--------- ---------
Cash and cash equivalents at end of period $ 20,522 $ 100,873
========= =========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest (net of amount capitalized) $ 16,497 $ 296
Income tax payments, (net of refunds) $ 397 $ (9)
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE> 6
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The notes to the Company's 1993 historical financial statements
included in its Form 10-K filing with the Securities and Exchange
Commission and the notes to the Company's 1993 supplemental
consolidated financial statements, which reflect the pooling of
interests transaction between the Company and Equinox Resources
Ltd. ("Equinox"), as set forth in the Company's Amendment No. 3
to Form S-3 Registration Statement filed with the Securities and
Exchange Commission on May 4, 1994, substantially apply to the
interim consolidated financial statements for the three and nine
months ended September 30, 1994, and are not repeated here.
Note 2. The financial information given in the accompanying unaudited
interim consolidated financial statements reflects all
adjustments which are, in the opinion of management, necessary to
a fair statement of the results for the interim periods reported.
All such adjustments are of a normal recurring nature. All
financial statements presented herein are unaudited. However,
the balance sheet as of December 31, 1993, was derived from the
audited supplemental consolidated balance sheet described in Note
1 above. The balance sheet as of December 31, 1993, the
statements of operations for the three and nine months ended
September 30, 1993, and statement of cash flows for the nine
months ended September 30, 1993, as previously reported, have
been restated to give retroactive effect to the acquisition by
the Company of Equinox on March 11, 1994, which has been treated
as a pooling of interests for financial reporting and accounting
purposes.
Separate operating results of the combining entities for the
three- and nine-month periods ended September 30, 1993 are as
follows (in thousands):
<TABLE>
<CAPTION>
Three months Nine months
ended ended
Sept 30, Sept 30,
1993 1993
------------ -----------
<S> <C> <C>
Sale of products:
Hecla $ 19,542 $ 63,496
Equinox 3,063 8,910
-------- --------
$ 22,605 $ 72,406
======== ========
Net loss applicable to
common shareholders:
Hecla $ 3,191 $ 9,974
Equinox 538 2,026
-------- --------
$ 3,729 $ 12,000
======== ========
</TABLE>
-6-
<PAGE> 7
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Note 3. The components of the income tax provision (benefit) for the nine
months ended September 30, 1994 and 1993 are as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Current:
State income taxes $ 208 $ 34
Federal income tax benefit (480) - -
------- -------
Total current provision (benefit) (272) 34
Deferred provision - - - -
------- -------
Total $ (272) $ 34
======= =======
</TABLE>
The Company's income tax provision (benefit) for the nine months
of 1994 and 1993 varies from the amount that would have been
provided by applying the statutory rate to the income before
income taxes primarily due to the utilization of net operating
losses.
Note 4. Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
Sept 30, December 31,
1994 1993
-------- ------------
<S> <C> <C>
Concentrates and metals in transit
and other products $ 3,496 $ 2,615
Industrial mineral products 4,314 5,260
Materials and supplies 6,910 7,145
-------- --------
$ 14,720 $ 15,020
======== ========
</TABLE>
Note 5 The Company has received notices from the United States
Environmental Protection Agency ("EPA") that it and numerous
other parties are potentially responsible to remediate alleged
hazardous substance releases at several sites under the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended ("CERCLA" or "Superfund"). In addition,
in the mid-1980s, the Company was named as a defendant in two
separate actions brought in Federal District Court in Colorado
asserting liability of the Company under CERCLA for response
costs and natural resource damages associated with a superfund
site located near Leadville, Colorado ("Leadville Site"). These
legal proceedings were consolidated by the Federal District Court
into a single legal proceeding. On January 6, 1993, the Colorado
Federal District Court entered a Partial Consent Decree between
the United States and the Company which resolves all issues
concerning the Company's alleged liability to the United States
for response costs at the Leadville Site, except for response
costs related to certain mill tailings impoundments located at
the Leadville Site. The Company paid the United States $450,000
under the decree. In February 1994, the Company entered into a
second partial consent decree with the federal government
providing for the payment by the Company of $516,000 to cover a
portion of EPA's past costs at the site and a portion of the
costs of the selected response action for the tailings
impoundments. The consent decree has been signed by all parties,
and on August 17, 1994 approved and entered by the Colorado
Federal District Court. The approval of the consent decree by
the
-7-
<PAGE> 8
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Court and the Company's payment of $516,000 to the U.S.
Government provided for in the decree releases the Company from
liability to the federal government for all response costs under
Superfund for the entire Leadville Site.
In October 1989, and again in February 1990, the Company was
notified by the EPA that the EPA considered the Company a
Potentially Responsible Party ("PRP") at the Bunker Hill
Superfund Site located at Kellogg, Idaho ("Bunker Hill Site").
The EPA has also notified a number of other companies involved in
mining or smelting activities in the site area that the EPA has
determined are also PRPs at the Bunker Hill Site. In February
1994, the Company and three other mining company PRPs entered
into a Consent Decree with EPA and the State of Idaho pursuant to
which the Company and two of the three companies signing the
decree agreed to implement remediation work at a portion of the
Bunker Hill Site. The remediation will primarily involve the
removal and replacement of lead-contaminated soils in residential
yards within the site and is estimated to be completed by the
participating mining companies over the period of the next five
to seven years. The Consent Decree also provides for the mining
companies to reimburse EPA for a portion of the government's past
costs incurred at the Bunker Hill Site. The Consent Decree has
been signed by all PRPs, the EPA, and the State of Idaho, has
received public comment, and is pending approval by the Federal
District Court in Idaho. The Consent Decree, when entered by the
court, will settle the Company's response-cost liability under
Superfund at the Bunker Hill Site.
The Records of Decision with respect to both the populated and
nonpopulated areas for the Bunker Hill Site indicate that future
remediation costs total approximately $93.0 million.
Additionally, the federal government has asserted that it has
incurred approximately $17.0 million in past costs at the site.
Because CERCLA assigns joint and several liability among the
PRPs, any one of the PRPs, including the Company, could be
assessed the entire cost of remediation. However, based upon the
terms of the consent decree and related agreements for the Bunker
Hill Site, as described above, the Company has accrued an amount
for the Company's share of such remediation and other costs that
management presently believes is the most likely amount that the
Company will be required to fund. The total allowance for
liability for remedial activity costs at the Bunker Hill Site is
$9.8 million as of September 30, 1994. Other than consulting
work necessary for the implementation of the Company's allocated
portion of the remedial activity at this site, the Company's
accruals do not include any future legal or consulting costs.
The Company does not believe that these costs will be material.
In addition, the Company has not included any amounts for
unasserted claims at these or any other sites because the
Company's potential liability has not been asserted or
established and amounts, if any, of potential liability are
impossible to determine.
In July 1991, the Coeur d'Alene Indian Tribe (the "Tribe")
brought a lawsuit, under CERCLA, in Idaho Federal District Court
against the
-8-
<PAGE> 9
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Company and a number of other mining companies asserting claims
for damages to natural resources located downstream from the
Bunker Hill Site over which the Tribe alleges some ownership or
control. The Company has answered the Tribe's complaint denying
liability for natural resource damages and asserted a number of
defenses to the Tribe's claims, including a defense that the
Tribe has no ownership or control over the natural resources they
assert have been damaged. In July 1992, the Idaho Federal
District Court, in a separate action, determined that the Tribe
does not own the beds, banks and waters of Lake Coeur d'Alene and
the lower portion of its tributaries, the ownership of which is
the primary basis for the natural resource damage claims asserted
by the Tribe against the Company. Based upon the Tribe's appeal
of the July 1992 district court ownership decision to the 9th
Circuit U.S. Court of Appeals, the court in the natural resource
damage litigation issued an order on October 30, 1992, staying
the court proceedings in the natural resource damage litigation
until a final decision is handed down on the question of the
Tribe's title.
In 1991, the Company initiated litigation in the Idaho State
District Court in Kootenai County, Idaho, against a number of
insurance carriers which provided comprehensive general liability
insurance coverage to the Company and its predecessors. The
Company believes that the insurance companies have a duty to
defend and indemnify the Company under their policies of
insurance relating to claims asserted against the Company by the
EPA and the Tribe. In two separate decisions issued in August
1992 and March 1993, the court ruled that the primary insurance
companies had a duty to defend the Company in the Tribe's
lawsuit, but that no carrier had a duty to defend the Company in
the EPA proceeding. The Company has not reduced its
environmental accrual to reflect any anticipated insurance
proceeds.
In December 1993, Industrial Constructors Corp. ("ICC") served
the Company with a complaint in Federal District Court for the
District of Idaho alleging that the Company failed to comply with
the terms of the contract between the Company and ICC relating to
the earth moving work contracted to ICC at the Company's Grouse
Creek gold project. ICC has alleged that the Company owes ICC in
excess of $5.0 million not previously paid, including an
approximate $1.0 million retention currently held by the Company
under the terms of the contract. The Company terminated ICC's
work at the Grouse Creek project effective November 26, 1993,
pursuant to its rights under the contract and has contracted
the second season of work originally contracted to ICC to a
different earth moving contractor. The Company has answered
the complaint denying the allegations of ICC and has filed a
counterclaim against ICC in excess of $2.0 million for damages
incurred by the Company as a result of ICC's failure to comply
with the terms of the contract.
In June 1994, a judgment was entered against the Company in Idaho
State District Court in the amount of $10.0 million in
compensatory damages and $10.0 million in punitive damages based
on a jury verdict rendered in late May 1994 with respect to a
lawsuit previously filed
-9-
<PAGE> 10
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
against the Company by Star Phoenix Mining Company ("Star
Phoenix"), a former lessee of the Star Morning Mine over a
dispute between the Company and Star Phoenix concerning the
Company's November 1990 termination of the Star Phoenix lease of
the Star Morning Mine property. A number of other claims by Star
Phoenix and certain principals of the Star Phoenix against the
Company in the lawsuit were dismissed by the State District
Court. The Company's post-trial motions were denied by the State
District Court, and the Company has appealed the District Court
judgment to the Idaho State Supreme Court. Post-judgment
interest will accrue during the appeal period; the current
interest rate is 10.5%. In order to stay the ability of Star
Phoenix to collect on the judgment during the pending of the
appeal, the Company has posted an appeal bond in the amount of
$27.2 million representing 136% of the District Court judgment.
The Company pledged cash and cash equivalents totaling $10.0
million as collateral for the $27.2 million appeal bond.
Although the ultimate outcome of the appeal of the judgment is
subject to the inherent uncertainties of any legal proceeding,
based upon the Company's analysis of the factual and legal issues
associated with the proceeding before the Idaho District Court
and based on the opinions of outside counsel, as of the date
hereof, it is management's belief that the Company should
ultimately prevail in this matter, although there can be no
assurance.
On September 15, 1994, the Company intervened in a lawsuit
brought in the U.S. District Court in Idaho by two environmental
groups against the United States Forest Service seeking to enjoin
current and prospective logging, road building and mining
operations within six national forests located in Idaho. The
lawsuit alleges that the Forest Service failed to comply with
certain obligations with respect to agency consultation under
the Endangered Species Act in the planning process for these
national forests. The Company's Grouse Creek project is located
within one of the national forests identified in the lawsuit
and could be subject to the relief requested. Recent
communications betwen the applicable federal agencies regarding
activities at the project indicate that additional consultation
under the Endangered Species Act will be necessary for certain
aspects of the Company's Grouse Creek project. Although the
ultimate impact on the Grouse Creek project of any consultation
under the Endangered Species Act and the pending lawsuit can not
be predicted at the present time, based on the comprehensive
environmental assessment completed with respect to developing
the Company's Grouse Creek project and the fact that the project
has recently been placed in operation, the Company's management
currently does not anticipate that these matters will have a
material adverse affect on the Company or its financial
condition.
The Company is subject to other legal proceedings and claims
which have arisen in the ordinary course of its business and have
not been finally adjudicated. Although the ultimate disposition
of these matters and various other pending legal actions and
claims is not presently determinable, it is the opinion of the
Company's management, based upon the information available at
this time, that the outcome of these other suits and proceedings
will not have a material adverse effect on the results of
operations and financial condition of the Company and its
subsidiaries.
Note 6. On May 11, 1994, the Company completed a public offering of
7,475,000 shares of its common stock for a price to the public
of $9.125 per share and called for redemption of $109,950,000
principal amount at maturity of its outstanding Liquid Yield
Option Notes ("LYONs") due 2004. After underwriting discount
totaling $4,111,250 or $0.55 per
-10-
<PAGE> 11
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
share, the net proceeds to the Company totaled $63,499,000. On
June 13, 1994, the Company used approximately $50.2 million of
the net proceeds to redeem Hecla's outstanding LYONs. The
Company recorded an extraordinary loss on early retirement of
debt totaling approximately $0.8 million for the nine-month
period ended September 30, 1994, which related principally to the
write-off of the unamortized balance of deferred issuance costs.
The Company currently intends to use the remaining proceeds from
the public offering for certain development projects and other
corporate purposes.
Note 7. On November 10, 1994, the Company's board of directors approved a
fourth quarter adjustment to earnings for asset write-downs
totaling approximately $8.3 million. The write-downs relate
principally to property, plant and equipment valuation
adjustments at the Republic Unit ($7.3 million) and the Zenda
property ($0.3 million), as well as, supplies inventory valuation
adjustments at the Republic Unit ($0.7 million). Recent
exploration efforts at the Republic Unit have been unsuccessful
in extending the mine's ore reserves. Although the Company
expects to continue exploration efforts there through 1995, the
mine is scheduled to discontinue operations in early 1995.
At the same meeting, the Company's board of directors also
approved increasing the reclamation and closure cost accrual by a
fourth quarter adjustment to earnings totaling $9.8 million. The
adjustment relates primarily to estimated reclamation and closure
costs at the Republic Unit ($7.4 million), the Coeur d'Alene
Mining District ($1.1 million), and other miscellaneous idle
properties ($1.3 million).
Note 8. On August 30, 1994, the Company entered into an unsecured
revolving and term loan facility, under the terms of which the
Company can borrow up to $40.0 million. Amounts may be borrowed
on a revolving credit basis through July 31, 1997, and are
repayable in eight quarterly installments beginning on October
31, 1998. Borrowings bear interest at floating rates depending
on the type of advance. During the commitment period, the
Company is obligated to pay an annual fee of $130,000. The
agreement contains restrictive covenants, among others,
concerning the current ratio, fixed charge coverage ratio and
limitations on the issuance of additional indebtedness. Amounts
available under the facility are based on a debt to cash flow
calculation. At September 30, 1994, there were no borrowings
outstanding under the facility.
-11-
<PAGE> 12
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
The Company is primarily involved in the exploration,
development, mining and processing of gold, silver, lead, zinc
and industrial minerals. As such, the Company's revenues and
profitability are strongly influenced by world prices of gold,
silver, lead and zinc, which fluctuate widely and are affected by
numerous factors beyond the Company's control, including
inflation and worldwide forces of supply and demand. The
aggregate effect of these factors is not possible to accurately
predict. In the instances following the Company's description of
changes that are attributable to more than one factor, the
Company presents each attribute describing the change in
descending order relative to the attribute's importance to the
overall change.
The Company incurred net losses applicable to common shareholders
in the third quarter of 1994 and 1993 totaling $1.2 million and
$3.7 million, respectively. If the current market prices of
gold, silver and lead do not increase, and as a result of the
Company's preferred stock dividend payment requirements, the
Company expects to continue to experience net losses applicable
to common shareholders, even with the start-up of the Grouse
Creek project in November 1994. However, the Company's operating
cash flows are expected to increase subsequent to the
commencement of commercial production at this project even if
metals prices remain at current levels. At present metals prices
for 1994, the Company currently forecasts a net loss applicable
to common shareholders in the range of $25.0 million to $30.0
million after the expected dividends to preferred shareholders
totaling approximately $8.0 million for the year ending December
31, 1994. The anticipated 1994 loss includes the estimated
fourth quarter adjustments to earnings for asset write-downs and
reclamation and closure costs totaling $8.3 million and $9.8
million, respectively, as further described under "Financial
Condition and Liquidity" and Note 7 of Notes to Consolidated
Financial Statements. Due to the volatility of metals prices and
the significant impact metals price changes have on the Company's
operations, there can be no assurance that the actual results of
operations for theyear ending December 31, 1994 will be as
forecasted.
The variability of metals prices requires that the Company, in
assessing the impact of prices on recoverability of its assets,
exercise judgment as to whether price changes are temporary or
are likely to persist. The Company performs a comprehensive
evaluation of the recoverability of its assets on a periodic
basis. The evaluation includes a review of future cash flows
against the carrying value of the assets. Moreover, a review is
made on a quarterly basis to assess the impact of significant
changes in market conditions and other factors. Asset
write-downs may occur if the Company determines that
-12-
<PAGE> 13
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
the carrying values attributed to individual assets are not
recoverable given reasonable expectations for future market
conditions.
In 1994, the Company expects to produce approximately 128,000
ounces of gold, including 52,000 ounces from the La Choya mine,
39,000 ounces from the Republic mine, 30,000 ounces from the
American Girl mine and an additional 7,000 ounces from other
sources. Assuming planned production level is attained with
the start-up of the Grouse Creek project in November 1994, the
Company's 1994 total gold production could increase by 31,000
ounces to 159,000 ounces, based upon its 80% interest in the
project. The Company's expected gold production increase in
1994 includes a full year of production at the La Choya project
and the start-up of production at the Grouse Creek project in
November of 1994, which offsets the decrease in gold production
at the Republic mine planned to close in early 1995. The
Company's actual level of gold production for 1994 will depend,
in significant part, upon the timely commencement of production
at the Grouse Creek project.
The Company's share of silver production for 1994 is expected to
be 1.8 million ounces compared to actual 1993 silver production
of 3.0 million ounces. The expected decrease in silver
production is primarily due to the suspension of operations at
the Greens Creek mine in April 1993 by the mine manager as well
as the Lucky Friday Silver Shaft accident on August 30, 1994,
which halted production there until repairs can be completed.
Production at the Lucky Friday mine is expected to resume no
earlier than mid-December 1994.
The Company's production of industrial minerals is expected to
increase in 1994 to 982,000 tons, principally due to increased
shipments of feldspar, ball clay and kaolin. Additionally, the
Company expects to ship 647,000 cubic yards of landscape material
from its recently acquired subsidiary, Mountain West Products,
acquired in late 1993.
RESULTS OF OPERATIONS
FIRST NINE MONTHS 1994 COMPARED TO FIRST NINE MONTHS 1993
The Company incurred a net loss of approximately $4.2 million
($0.10 per common share) in the first nine months of 1994
compared to a net loss of approximately $9.9 million ($0.27 per
common share) in the same period of 1993. After $6.0 million in
dividends to shareholders of the Company's Series B Cumulative
Preferred Stock, the Company's net loss applicable to common
shareholders for the first nine months of 1994 was approximately
$10.2 million, or $0.24 per common share. This loss was due to a
variety of factors, the most significant of which are discussed
below in descending order of magnitude.
Sales of the Company's products increased by approximately $27.3
million, or 37.6%, in the first nine months of 1994 as compared
to the same period in 1993, principally the result of (1)
increased product sales totaling $31.2 million, most notably from
the La Choya gold mine
-13-
<PAGE> 14
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
in Mexico, which commenced production in February 1994, and
Mountain West Products, which was acquired in December 1993; and
(2) increases in the average prices of silver, gold and lead.
These two factors were partially offset by decreased sales in the
Company's metals segment, the impact of which is approximately
$6.4 million, attributable to (1) the suspension of operations at
the Greens Creek mine in April 1993; and (2) decreased gold
production in the 1994 period at the Republic gold mine due to
lower-grade ore being mined and processed.
Comparing the average metal prices for the nine months of 1993
with the comparable 1994 period, gold increased by 8% from $355
per ounce to $384 per ounce, silver increased by 27% from $4.20
per ounce to $5.33 per ounce, lead increased by 28% from $0.18
per pound to $0.23 per pound.
Cost of sales and other direct production costs increased
approximately $18.1 million, or 29%, in the first nine months of
1994 compared to the same period in 1993, primarily a result of
(1) production costs incurred during the 1994 period at Mountain
West Products (acquired in December 1993) totaling approximately
$9.4 million; (2) production costs at the La Choya mine during
the 1994 period totaling approximately $8.2 million, due to the
commencement of operations in early 1994; (3) increased operating
costs at the American Girl Joint Venture totaling $2.4 million;
and (4) increases in operating costs at various other operations
totaling approximately $5.5 million. These increases in cost of
sales and other direct production costs were partially offset by
decreases in operating costs at other operations totaling
approximately $6.8 million, the most notable of which is the
Greens Creek mine, where decreased operating costs are the result
of the suspension of operations there in April 1993.
Cost of sales and other direct production costs as a percentage
of sales from products decreased from 86% in the first nine
months of 1993 to 81% in the comparable 1994 period, primarily
due to increases in production and average metals prices realized
in the metals division, as well as improved sales within the
industrial minerals segment during the 1994 period.
Cash and full production cost per gold ounce increased from $235
and $302 for the first nine months of 1993 to $270 and $331 for
the comparable 1994 period, respectively. The increases in both
the cash and full cost per gold ounce are mainly attributed to
the initial start-up costs at the La Choya gold mine in Mexico
and decreased gold production from the Republic and American Girl
gold mines due to declining ore grades.
Cash and full production cost per silver ounce increased from
$5.21 and $6.64 for the first nine months of 1993 to $5.73 and
$7.00 for the comparable 1994 period, respectively. The
increases in both the cash and full cost per silver ounce are due
primarily to lower silver, lead and zinc production from the
Lucky Friday mine in the 1994 period,
-14-
<PAGE> 15
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
resulting from decreased tons of ore milled and decreased ore
grades. These were partially offset by an increase in the
average price of lead in the 1994 period. Lead and zinc are
by-products in the ore processing at the Lucky Friday mine, the
net revenues from which are deducted from production costs in the
calculation of production cost per ounce.
Other operating expenses increased by approximately $7.0 million,
or 69% from the 1993 period to the 1994 period, due principally
to (1) increased general and administrative costs of $3.6 million
attributable primarily to costs totaling approximately $2.2
million incurred in connection with the March 11, 1994
acquisition of Equinox Resources Ltd. ("Equinox"); and (2)
increased exploration expenditures totaling approximately $3.2
million relating principally to the Greens Creek and La Choya
mines, as well as, the Grouse Creek project.
Other income (expense) reported income of approximately $4.5
million in the 1994 period compared to income of $0.2 million in
the 1993 period. The increase in reported income is primarily
due to (1) an increase in royalty income of approximately $2.2
million in the 1994 period; (2) decreased interest expense
totaling $1.6 million in the 1994 period due to the June 1994
retirement of long-term debt; (3) the January 1994 sale of the
Company's investment in Granduc Mines Ltd. resulting in a gain of
$1.3 million; and (4) increased interest income of $0.5 million
in the 1994 period earned on the investment of proceeds from the
Company's June 1993 public offering of the Series B Cumulative
Convertible Preferred Stock and the May 1994 public offering of
the Company's common stock.
During the 1994 period, the Company recorded an extraordinary
loss totaling approximately $0.8 million on the early retirement
of long-term debt as further described in Note 6 of Notes to
Consolidated Financial Statements. The loss relates principally
to the write-off of the unamortized balance of deferred issuance
costs.
THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1993
The Company reported net income of approximately $0.8 million
($0.02 per common share) in the third quarter of 1994 compared to
a net loss of approximately $1.7 million ($0.04 per common share)
in the same period of 1993. After $2.0 million in dividends to
shareholders of the Company's Series B Cumulative Preferred Stock
in both periods, the Company's net loss applicable to common
shareholders was $1.2 million ($0.03 per common share) and $3.7
million ($0.09 per common share) for the third quarter of 1994
and 1993, respectively. The loss was due to a variety of
factors, the most significant of which are discussed below in
descending order of magnitude.
Sales of the Company's products increased by approximately $12.7
million, or 56%, in the third quarter of 1994 as compared to the
same period in 1993, principally the result of (1) increased
product sales
-15-
<PAGE> 16
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
totaling $12.7 million, most notably from the La Choya gold mine
in Mexico, which commenced production in February 1994, Mountain
West Products, which was acquired in December 1993, and K-T Clay
de Mexico, which commenced operations in early 1994; and (2)
increases in the average prices of lead, silver, and gold, the
impact of which is estimated to be approximately $1.5 million.
These two factors were partially offset by decreased sales in the
metals segment, the impact of which is approximately $1.5
million, attributable principally to (1) the temporary suspension
of operations at the Lucky Friday mine resulting from the Silver
Shaft accident on August 30, 1994; and (2) decreased gold
production in the 1994 period at the Republic gold mine due to
lower-grade ore being mined and processed.
Comparing the average metal prices for the third quarter of 1993
with the comparable 1994 period, gold increased by 3% from $375
per ounce to $385 per ounce, silver increased by 14% from $4.67
per ounce to $5.34 per ounce, lead increased by 59% from $0.17
per pound to $0.27 per pound.
Cost of sales and other direct production costs increased
approximately $6.4 million, or 34%, in the third quarter of 1994
compared to the same period in 1993, primarily a result of (1)
production costs at the La Choya mine during the 1994 period
totaling approximately $3.0 million due to the commencement of
operations in 1994; (2) production costs during the 1994 period
at Mountain West Products (acquired in December 1993) totaling
approximately $2.3 million; and (3) increases in operating costs
at various other operations totaling approximately $2.9 million.
These increases in cost of sales and other direct production
costs were partially offset by decreases in operating costs at
other operations totaling approximately $1.8 million, the most
notable of which is the temporary suspension of operations at the
Lucky Friday mine effective August 30, 1994, noted above.
Cost of sales and other direct production costs as a percentage
of sales from products decreased from 83% in the third quarter of
1993 to 71% in the comparable 1994 period, primarily due to
increases in production and average metals prices realized in the
metals division, as well as, improved sales within the industrial
minerals segment during the 1994 period.
Cash and full production cost per gold ounce decreased from $233
and $299 for the third quarter of 1993 to $213 and $279 for the
comparable 1994 period, respectively. The decreases in both the
cash and full cost per gold ounce are mainly attributed to the
commencement of operations at the La Choya gold mine in Mexico.
Partially offsetting the decrease in the cash cost per gold ounce
is an increased per gold ounce cost at the American Girl gold
mine resulting principally from declining ore grade.
Cash and full production cost per silver ounce decreased from
$6.69 and $8.03 for the third quarter of 1993 to $4.50 and $5.84
for the comparable 1994 period, respectively. The decreases in
both the cash
-16-
<PAGE> 17
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
and full cost per silver ounce are due primarily to an increase
in the average price of lead in the 1994 period. Lead and zinc
are by-products in the ore processing at the Lucky Friday mine,
the net revenues from which are deducted from production costs in
the calculation of production cost per ounce.
Depreciation, depletion and amortization increased by
approximately $1.2 million, or 39%, in the third quarter of 1994
as compared to the comparable 1993 period, primarily a result of
the commencement of operations at the La Choya gold mine in 1994
($1.8 million increase in depreciation), partially offset by the
fourth quarter 1993 write-down of the American Girl mine carrying
value, the impact of which reduced depreciation expense in the
1994 period by $0.6 million.
Other operating expenses increased by approximately $1.6 million,
or 41% from the 1993 period to the 1994 period, due principally
to (1) increased general and administrative costs totaling $0.8
million attributable primarily to an increase in the accrual for
nonqualifying stock options and other increases; and (2)
increased exploration expenditures totaling approximately $0.9
million relating principally to the Greens Creek and La Choya
mines, as well as, the Grouse Creek project.
Other income (expense) reported income of approximately $0.4
million in the 1994 period compared to income of $1.3 million in
the 1993 period. The decrease in reported income is primarily
due to (1) a decrease in interest and other income totaling $0.5
million in the 1994 period resulting from declining cash and
short-term investment balances as the Grouse Creek project
required cash for construction; and (2) decreased interest
expense totaling $0.6 million in the 1994 period due to the June
1994 retirement of long-term debt.
FINANCIAL CONDITION AND LIQUIDITY
A substantial portion of the Company's revenue is derived from
the sale of products, the prices of which are affected by
numerous factors beyond the Company's control. Prices may change
dramatically in short periods of time and such changes have a
significant effect on revenues, profits and liquidity of the
Company. The Company is subject to many of the same inflationary
pressures as the U.S. economy in general. The Company continues
to implement cost-cutting measures in an effort to reduce per
unit production costs. Management believes, however, that the
Company may not be able to continue to offset the impact of
inflation over the long term through cost reductions alone.
However, the market prices for products produced by the Company
have a much greater impact than inflation on the Company's
revenues and profitability. Moreover, the discovery, development
and acquisition of mineral properties are in many instances
unpredictable events. Future metals prices, the success of
exploration programs, changes in legal and regulatory
requirements, and other property transactions can have a
significant impact on the need for capital.
-17-
<PAGE> 18
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
At September 30, 1994, assets totaled approximately $350.1
million and shareholders' equity totaled approximately $299.5
million. Cash, cash equivalents and short-term investments
decreased by $47.2 million to $20.5 million at September 30, 1994
from $67.7 million at the end of 1993. The major sources of cash
during this perioc were (1) proceeds totaling approximately $63.5
million from the Company's May 1994 public offering of 7,475,000
shares of its common stock as described further in Note 6 of
Notes to Consolidated Financial Statements; (2) the maturity of
short-term investments and sale of other investments totaling
approximately $30.1 million; (3) proceeds totaling approximately
$13.3 million from the sale of a 20% undivided interest in the
Grouse Creek project; and (4) proceeds of $1.7 million from
common stock issued under stock option plans. The primary uses
of cash were (1) approximately $57.5 million expended for
properties, plants and equipment principally for ongoing
development of the Grouse Creek and Rosebud projects totaling
$45.3 million and $4.2 million, respectively, and expenditures at
the clay slurry facility in Mexico totaling $1.3 million; (2)
approximately $50.2 million required to redeem the Company's
outstanding long-term debt (see Note 6 of Notes to Consolidated
Financial Statements); (3) approximately $13.5 million primarily
for the purchase of restricted investments for bonding
requirements in connection with the Star Phoenix judgment as
further described in Note 5 of Notes to Consolidated Financial
Statements; (4) increases in accounts receivable totaling $7.2
million principally relating to the increase at the La Choya
mine, which commenced operations in early 1994, and increases in
accounts receivable at other locations; and (5) preferred
dividend payments totaling approximately $6.0 million.
The Company estimates that remaining capital expenditures to be
incurred in the balance of 1994 will be approximately $11.5
million. These expenditures consist primarily of (1) the
Company's share of further development expenditures at the Grouse
Creek project totaling approximately $7.0 million; and (2)
development expenditures at the Rosebud project totaling
approximately $2.0 million. The Company intends to finance these
capital expenditures through a combination of (1) existing cash
and cash equivalents; and (2) cash flow from operating
activities. In addition, the Company may borrow funds
from its revolving and term credit facility (described below)
which, subject to certain conditions, provides for borrowings up
to a maximum of $40.0 million. The Company's estimate of its
capital expenditure requirements assume, with respect to the
Grouse Creek, Greens Creek and Oro Cruz properties, that the
Company's joint venture partners do not default with respect to
their obligations to contribute their respective portions of
development costs and capital expenditures.
The Company's planned environmental and reclamation expenditures
for the balance of 1994 are expected to be approximately $1.4
million, principally for environmental and reclamation activities
at the Bunker Hill Superfund Site and the Coeur d'Alene River
Basin.
-18-
<PAGE> 19
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Exploration expenditures for the balance of 1994 are estimated to
be approximately $1.6 million. The Company's exploration
strategy is to focus further exploration at or in the vicinity of
its currently owned properties. Accordingly, these exploration
expenditures will be incurred principally at Republic, Grouse
Creek, La Choya, and Greens Creek.
As described in Note 7 of Notes to Consolidated Financial
Statements, exploration efforts at the Republic gold mine have
been unsuccessful to date in extending ore reserves. The mine is
now scheduled for shutdown in early 1995. On November 10, 1994,
the Company's board of directors approved a fourth quarter
adjustment to earnings for asset write- downs totaling $8.3
million, of which, $8.0 relates to the Republic gold mine. At
the same meeting, the board of directors approved increasing the
reclamation and closure cost accrual in the fourth quarter by
$9.8 million. The adjustment relates primarily to estimated
reclamation and closure costs at Republic ($7.4 million), the
Coeur d'Alene Mining District ($1.1 million), and other
miscellaneous idle properties ($1.3 million).
On August 30, 1994, the hoist at the Lucky Friday mine
experienced a mechanical failure and the ore conveyance unit fell
over 6,000 feet to the bottom of the shaft. Since that time the
mine has experienced no production as all hoisting capabilities
have been inoperative. The accident is covered by property
damage and business interruption insurance which is expected to
cover substantially all costs other than certain deductibles
not considered significant. Phased-in production will commence
after repair and rehabilitation is complete, which is expected
no earlier than mid-December 1994.
On August 30, 1994, the Company entered into an unsecured
revolving and term loan facility, under the terms of which the
Company can borrow up to $40.0 million. Amounts may be borrowed
on a revolving credit basis through July 31, 1997, and are
repayable in eight quarterly installments beginning on October
31, 1998. Borrowings bear interest at floating rates depending
on the type of advance. During the commitment period, the
Company is obligated to pay an annual fee of $130,000. The
agreement contains restrictive covenants, among others,
concerning the current ratio, fixed charge coverage ratio and
limitations on the issuance of additional indebtedness. Amounts
available under the facility are based on a debt to cash flow
calculation. At September 30, 1994, there were no borrowings
outstanding under the facility.
As further described in Note 5 of Notes to Consolidated Financial
Statements, the Company has been notified by the EPA that it has
been designated by the EPA as a potentially responsible party
with respect to several Superfund sites. At September 30, 1994,
the Company's allowance for Superfund site remedial action costs
was approximately $8.9 million, which the Company believes is
adequate based on current estimates of aggregate costs.
In addition, as described in Note 5 of Notes to Consolidated
Financial Statements, the Company is a defendant in two other
significant actions. The first action was filed in November 1990
by Star Phoenix
-19-
<PAGE> 20
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
and certain principals of Star Phoenix, asserting that the
Company breached the terms of Star Phoenix's lease agreement for
the Company's Star Morning Mine and that the Company interfered
with certain contractual relationships of Star Phoenix relating
to the Company's 1990 termination of such lease agreement. In
June 1994, judgment was entered by the Idaho State District Court
against the Company in the legal proceeding in the amount of
$10.0 million in compensatory damages and $10.0 million in
punitive damages based on a jury verdict rendered in the case in
late May 1994. The Company's post-trial motions were denied by
the District Court, and the Company has appealed the judgment to
the Idaho State Supreme Court. Post-judgment interest will
accrue during the appeal period; the current interest rate is
10.5%. In order to stay the ability of Star Phoenix to collect
on the judgment during the pending of the appeal, the Company
posted an appeal bond in the amount $27.2 million representing
136% of the District Court judgment. The Company pledged cash
and cash equivalents totaling $10.0 million as collateral for the
$27.2 million bond. Although the ultimate outcome of the appeal
of the judgment is subject to the inherent uncertainties of any
legal proceeding, based on the Company's analysis of the factual
and legal issues associated with the proceeding before the
District Court and based upon the opinions of outside counsel, as
of the date hereof, it is management's belief that the Company
should ultimately prevail in this matter, although there can be
no assurance in this regard. The Company's appeal to the Idaho
State Supreme Court of the Star Phoenix judgment is further
described in Note 5 of Notes to Consolidated Financial Statements.
The second action was filed by Industrial Constructors Corp.
("ICC") in December 1993 alleging that the Company failed to
comply with the terms of a contract between the Company and ICC
related to the Company's Grouse Creek gold project. ICC is
claiming damages in excess of $5.0 million including a $1.0
million retention held by the Company under the contract. The
Company has answered the complaint denying ICC's allegations and
has filed a counterclaim against ICC asserting damages in excess
of $2.0 million.
In addition to these two actions, the Company has intervened in a
lawsuit involving the U.S. Forest Service in Idaho, which could
impact the Grouse Creek project (see Note 5 of Notes to
Consolidated Financial Statements).
Although the ultimate disposition of these matters and various
other pending legal actions and claims is not presently
determinable, it is the opinion of the Company's management,
based upon the information available at this time, that the
outcome of these suits and proceedings will not have a material
adverse effect on the results of operations and financial
condition of the Company and its subsidiaries.
-20-
<PAGE> 21
PART II - OTHER INFORMATION
HECLA MINING COMPANY and SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Note 5 of Notes to Consolidated Financial
Statements in Part I.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1(a) - Credit Agreement between Hecla Mining
Company and Certain Subsidiaries and
NationsBank of Texas, N.A., as Agent, and
Certain Banks, as lenders, $40,000,000,
dated August 30, 1994
13.1 - Third Quarter Report to Shareholders for the
quarter ending September 30, 1994, for
release dated November 3, 1994
27 - Financial Data Schedule
(b) Reports on Form 8-K
Report on Form 8-K dated July 28, 1994, related to Star
Phoenix litigation and Second Quarter 1994 Report to
Shareholders (Item 5)
Items 2, 3, 4 and 5 of Part II are omitted from this report as inapplicable.
-21-
<PAGE> 22
HECLA MINING COMPANY and CONSOLIDATED SUBSIDIARIES
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.
HECLA MINING COMPANY
(Registrant)
Date: November 10, 1994 By /s/ ARTHUR BROWN
--------------------------------
Arthur Brown, Chairman, President
and Chief Executive Officer
Date: November 10, 1994 By /s/ J. T. HEATHERLY
--------------------------------
J. T. Heatherly,
Vice President - Controller
(Chief Accounting Officer)
-22-
<PAGE> 23
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
10.1(a) - Credit Agreement between Hecla Mining
Company and Certain Subsidiaries and
NationsBank of Texas, N.A., as Agent, and
Certain Banks, as lenders, $40,000,000,
dated August 30, 1994
13.1 - Third Quarter Report to Shareholders for the
quarter ending September 30, 1994, for
release dated November 3, 1994
27 - Financial Data Schedule
<PAGE> 1
EX-10.1(a)
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
-------------------------------
HECLA MINING COMPANY
and CERTAIN SUBSIDIARIES
and
NATIONSBANK OF TEXAS, N.A.
as Agent
and CERTAIN BANKS
as Lenders
-------------------------------
$40,000,000
August 30, 1994
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
CREDIT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - Definitions and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.3. Amendment of Defined Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.4. References and Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.5. Calculations and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II - The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.1. Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.2. Requests for Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.3. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4. Rate Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.5. Facility Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.6. Agent's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.7. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.8. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.9. Payments to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.10. Capital Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.11. Increased Cost of Fixed Rate Portions . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.12. Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.13. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.14. Reimbursable Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IIA -- Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2A.1. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2A.2. Requesting Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2A.3. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2A.4. Transferees of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2A.5. Extension of Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2A.6. Restriction on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2A.7. No Duty to Inquire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2A.8. Payment of LC Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE III - Conditions Precedent to Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.1. Documents to be Delivered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.2. Additional Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.1. Borrower's Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.2. Representation by Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE V - Covenants of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VI - Bank Accounts, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.1. Bank Accounts; Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VIA - Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6A.1. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6A.2. Unconditional Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6A.3. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6A.4. No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6A.5. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VII - Events of Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.3. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII - Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.1. Appointment and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.2. Exculpation, Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.3. Lenders' Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.5. Rights as Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.6. Sharing of Set-Offs and Other Payments . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.7. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.8. Benefit of Article VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.9. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.10. Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE IX - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.1. Waivers and Amendments; Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.2. Survival of Agreements; Cumulative
Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.4. Joint and Several Liability; Parties in
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.5. Governing Law; Submission to Process . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.6. Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.7. Termination; Limited Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.10. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES,
ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.11. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
Schedules and Exhibits
- - - ----------------------
SCHEDULE 1 DISCLOSURE SCHEDULE
SCHEDULE 2 SUBSIDIARIES
EXHIBIT A PROMISSORY NOTE
EXHIBIT B REQUEST FOR ADVANCE
EXHIBIT C RATE ELECTION
EXHIBIT D CERTIFICATE ACCOMPANYING FINANCIAL STATEMENTS
EXHIBIT E OPINION OF BORROWER'S COUNSEL
EXHIBIT F STANDBY LETTER OF CREDIT APPLICATION AND AGREEMENT
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<PAGE> 4
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of August 30, 1994, by and among
Hecla Mining Company, a Delaware corporation (herein called "Borrower"),
Colorado Aggregate Company of New Mexico, Inc., a New Mexico corporation,
Kentucky-Tennessee Clay Company, a Delaware corporation, K-T Feldspar
Corporation, a North Carolina corporation, Mountain West Products, Inc., an
Idaho corporation, and NationsBank of Texas, N.A., a national banking
association (herein called "Agent"), and the Lenders referred to below. In
consideration of the mutual covenants and agreements contained herein the
parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Adjusted CD Rate" means, with respect to each particular CD Portion
and the associated CD Rate and Reserve Percentage, the rate per annum
calculated by Agent (rounded upwards, if necessary, to the next higher 0.01%)
determined on a daily basis pursuant to the following formula:
Adjusted CD Rate =
CD Rate + Assessment Rate + A
---------------------------
100.0% - Reserve Percentage
where A means the Spread then in effect. The Adjusted CD Rate for any CD
Portion shall change whenever A changes, but if the Assessment Rate or the
Reserve Percentage changes during the Interest Period for a CD Portion, Agent
may, at its option, either change the Adjusted CD Rate for such CD Portion or
leave it unchanged for the duration of such Interest Period. The Adjusted CD
Rate shall in no event, however, exceed the Highest Lawful Rate.
"Adjusted LIBOR Rate" means, with respect to each particular LIBOR
Portion and the associated LIBOR Rate and Reserve Percentage, the rate per
annum calculated by Agent (rounded upwards, if necessary, to the next higher
0.01%) determined on a daily basis pursuant to the following formula:
Adjusted LIBOR Rate =
LIBOR Rate + B
---------------------------
100.0% - Reserve Percentage
where B means the Spread then in effect. The Adjusted LIBOR Rate for any LIBOR
Portion shall change whenever B changes, but if the Reserve Percentage changes
during the Interest Period for a LIBOR Portion, Agent may, at its option,
either change the Adjusted LIBOR Portion or leave it unchanged for the duration
of such Interest Period. The Adjusted LIBOR Rate shall in no event, however,
exceed the Highest Lawful Rate.
<PAGE> 5
"Advance" has the meaning given it in Section 2.1.
"Affiliate" means, as to any Person, each other Person that directly
or indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of
directors or managing general partners; or
(b) to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise.
"Agent" means NationsBank, as Agent hereunder, and its successors in
such capacity.
"Assessment Rate" means, on any day, the net annual assessment rate,
as determined by Agent (expressed as a percentage rounded to the next higher
0.01%), which is in effect on such day under the regulations of the Federal
Deposit Insurance Corporation (or any successor) for insuring time deposits
made in dollars at the principal office of Agent in Dallas, Texas. If such net
assessment rate changes after the date hereof, the Assessment Rate shall be
automatically increased or decreased correspondingly, from time to time as of
the effective time of each change in such net assessment rate.
"Base Rate" means (a) on each day during the Commitment Period, (i)
the Prime Rate if the Loan Balance is equal to or less than $20,000,000 and
(ii) the Prime Rate plus 0.125% per annum if the Loan Balance is greater than
$20,000,000, and (b) on each day thereafter (iii) the Prime Rate plus 0.125%
per annum if the Loan Balance is equal to or less than $20,000,000 and (iv) the
Prime Rate plus 0.25% per annum if the Loan Balance is greater than
$20,000,000. If the Prime Rate or the Loan Balance changes after the date
hereof, the Base Rate shall be automatically increased or decreased, as the
case may be, without notice to Borrower from time to time as of the effective
time of each change in the Prime Rate or the Loan Balance. The Base Rate shall
in no event, however, exceed the Highest Lawful Rate.
"Base Rate Portion" means that portion of the unpaid principal balance
of the Loan which is not made up of Fixed Rate Portions.
"Borrower" means Hecla Mining Company, a Delaware corporation.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to CD
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<PAGE> 6
Portions (such as the day on which a CD Interest Period begins or ends) must
also be a day on which, in the judgment of Agent, significant transactions are
carried out in the market for certificates of deposit. Any Business Day in any
way relating to LIBOR Portions (such as the day on which a LIBOR Interest
Period begins or ends) must also be a day on which, in the judgment of Agent,
significant transactions in dollars are carried out in the interbank
eurocurrency market.
"Cash Collateral" has the meaning given it in Section 2A.8.
"Cash Earnings" means as of the end of any Fiscal Quarter, Borrower's
Consolidated net income for such Fiscal Quarter, minus nonrecurring gains and
plus nonrecurring losses for such Fiscal Quarter, plus other non cash charges
taken into account in determining such net income, minus cash dividend payments
on common and preferred stock made during such Fiscal Quarter.
"CD Interest Period" means, with respect to each particular CD Portion
of a Loan, a period of 30, 60, 90 or 180 days, as specified in the Rate
Election applicable thereto, beginning on and including the date specified in
such Rate Election (which must be a Business Day), and ending on but not
including the day which is 30, 60 or 90 days thereafter (e.g., a 30-day period
beginning on March 1 will end on but not include March 31), provided that each
CD Interest Period which would otherwise end on a day which is not a Business
Day shall end on the next succeeding Business Day. No CD Interest Period may
be elected which would extend past the date on which the associated Note is due
and payable in full.
"CD Portion" means any portion of the unpaid principal balance of a
Loan which Borrower designates as such in a Rate Election.
"CD Rate" means, with respect to each particular CD Portion within a
Tranche and with respect to the related Interest Period, the rate of interest
per annum determined by Agent in accordance with its customary general
practices to be representative of the bid rates quoted to NationsBank at
approximately 9:00 a.m. Dallas, Texas time on the first day of such Interest
Period (by certificate of deposit dealers of recognized standing selected by
NationsBank in accordance with its customary general practices) for the
purchase at face value of a domestic certificate of deposit issued by
NationsBank in an amount equal or comparable to the amount of NationsBank's CD
Portion within such Tranche and for a period of time equal or comparable to
such Interest Period. The CD Rate determined by Agent with respect to a
particular CD Portion shall be fixed at such rate for the duration of the
associated Interest Period. If Agent is unable so to determine the CD Rate for
any CD Portion, Borrower shall be deemed not to have elected such CD Portion.
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<PAGE> 7
"Commitment Period" means the period from and including the date
hereof until and including July 31, 1997 (or, if earlier, the day on which the
Notes first become due and payable in full).
"Consolidated" refers to the consolidation of any Person, in
accordance with GAAP, with its properly consolidated subsidiaries. References
herein to a Person's Consolidated financial statements, financial position,
financial condition, liabilities, etc. refer to the consolidated financial
statements, financial position, financial condition, liabilities, etc. of such
Person and its properly consolidated subsidiaries.
"Debt" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Disclosure Report" means either a notice given by Borrower under
Section 5.1(d) or a certificate given by Borrower's chief financial officer
under Section 5.1(b)(ii).
"Disclosure Schedule" means Schedule 1 hereto.
"EBITDA" means as of the end of any Fiscal Quarter, Borrower's
Consolidated net income for the four consecutive Fiscal Quarters then ended
plus interest, taxes, depreciation and amortization, nonrecurring losses and
cash reclamation charges, to the extent the foregoing have been deducted in
determining such net income, minus nonrecurring gains to the extent such gains
have been included in determining such net income.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
-4-
<PAGE> 8
"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any Related Person or any Affiliate thereof with
respect to which any Related Person has a fixed or contingent liability.
"Event of Default" has the meaning given it in Section 7.1.
"Final Maturity Date" means July 31, 1999.
"Fiscal Quarter" means a three-month period ending on March 31, June
30, September 30 or December 31, of any year.
"Fiscal Year" means a twelve-month period ending on December 31, of
any year.
"Fixed Charges" means as of the end of any Fiscal Quarter, the sum of
the following for the period of four consecutive Fiscal Quarters then ended (i)
Borrower's Consolidated interest expense for such period, plus (ii) Borrower's
Consolidated long-term debt scheduled to be paid during such period, plus (iii)
Borrower's Consolidated capital lease payments paid during such period, plus
(iv) dividends on common and preferred stock declared or paid (without
duplication) by Borrower during such period, plus (v) Borrower's Consolidated
reclamation expenditures paid during such period.
"Fixed Rate" means, with respect to any Fixed Rate Portion, the
related Adjusted CD Rate or Adjusted LIBOR Rate.
"Fixed Rate Portion" means any CD Portion or LIBOR Portion.
"Funded Debt" of any Person means Debt in the following categories:
(a) Debt for borrowed money or gold loans (excluding hedging
obligations) or,
(b) Debt evidenced by a bond, debenture, note or similar
instrument.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of
Borrower and its Consolidated subsidiaries, are applied for all periods after
the date hereof in a manner consistent with the manner in which such principles
and practices were applied to the audited Initial Financial Statements. If any
change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Borrower or with respect to Borrower and its Consolidated subsidiaries may
be prepared in accordance with such change, but all calculations and
determinations to be
-5-
<PAGE> 9
made hereunder may be made in accordance with such change only after notice of
such change is given to each Lender and Majority Lenders and Borrower agree to
such change insofar as it affects the accounting of Borrower or of Borrower and
its Consolidated subsidiaries.
"Guaranties" means, as to any Person, any direct or indirect guaranty
by such Person in respect of, or obligation (contingent or otherwise) to
purchase or otherwise acquire, or to otherwise assure a creditor against loss
in respect of, Debt of any other Person.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable law
to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately
for each Lender as appropriate to assure that the Loan Documents are not
construed to obligate any Person to pay interest to any Lender at a rate in
excess of the Highest Lawful Rate applicable to such Lender.
"Initial Financial Statements" means (i) the audited annual
Consolidated financial statements of Borrower dated as of December 31, 1993,
and (ii) the unaudited quarterly Consolidated financial statements of Borrower
dated as of June 30, 1994.
"Interest Period" means, with respect to any Fixed Rate Portion, the
related CD Interest Period or LIBOR Interest Period.
"Issuing Bank" means NationsBank in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity.
"Late Payment Rate" means, at the time in question, four percent
(4.0%) per annum plus the Base Rate then in effect. The Late Payment Rate
shall in no event, however, exceed the Highest Lawful Rate.
"LC Applications" means any applications for letters of credit
heretofore or hereafter made by Borrower to Issuing Bank.
"LC Collateral Account" has the meaning given it in Section 2A.8(b).
"LC Obligations" means at the time in question, the sum of the Matured
LC Obligations plus the Maximum Drawing Amount.
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<PAGE> 10
"Lenders" means each signatory hereto (other than Borrower and the
Subsidiary Guarantors), including NationsBank in its capacity as a lender
hereunder rather than as Agent, and the successors of each as holder of a Note.
"Letters of Credit" means the standby letters of credit issued by
Issuing Bank at the application of Borrower.
"LIBOR Interest Period" means, with respect to each particular LIBOR
Portion, a period of 1, 2, 3 or 6 months, as specified in the Rate Election
applicable thereto, beginning on and including the date specified in such Rate
Election (which must be a Business Day), and ending on but not including the
same day of the month as the day on which it began (e.g., a period beginning on
the third day of one month shall end on but not include the third day of
another month), provided that each LIBOR Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (unless such next succeeding Business Day is the first Business
Day of a calendar month, in which case such LIBOR Interest Period shall end on
the immediately preceding Business Day). No LIBOR Interest Period may be
elected which would extend past the date on which the associated Note is due
and payable in full.
"LIBOR Portion" means any portion of the unpaid principal balance of a
Loan which Borrower designates as such in a Rate Election.
"LIBOR Rate" means, with respect to each particular LIBOR Portion
within a Tranche and with respect to the related Interest Period, the rate of
interest per annum determined by Agent in accordance with its customary general
practices to be representative of the rates at which deposits of dollars are
offered to NationsBank at approximately 9:00 a.m. Dallas, Texas time two
Business Days prior to the first day of such Interest Period (by prime banks in
the interbank eurocurrency market which have been selected by NationsBank in
accordance with its customary general practices) for delivery on the first day
of such Interest Period in an amount equal or comparable to the amount of
NationsBank's LIBOR Portion within such Tranche and for a period of time equal
or comparable to the length of such Interest Period. The LIBOR Rate determined
by NationsBank with respect to a particular LIBOR Portion shall be fixed at
such rate for the duration of the associated Interest Period. If Agent is
unable so to determine the LIBOR Rate for any LIBOR Portion, Borrower shall be
deemed not to have elected such LIBOR Portion.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention
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<PAGE> 11
or conditional sale agreement or lease substantially equivalent thereto, tax
lien, mechanic's or materialman's lien, or any other charge or encumbrance for
security purposes, whether arising by law or agreement or otherwise, but
excluding any right of offset which arises without agreement in the ordinary
course of business. "Lien" also means any filed financing statement, any
registration of a pledge (such as with an issuer of uncertificated securities),
or any other arrangement or action which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement or action is
undertaken before or after such Lien exists.
"Loan" has the meaning given it in Section 2.1.
"Loan Balance" means the aggregate unpaid principal balance of the
Loans at the time in question.
"Loan Documents" means this Agreement, the Notes, the LC Applications
and all other agreements, certificates, documents, instruments and writings at
any time delivered in connection herewith or therewith (exclusive of term
sheets, commitment letters, correspondence and similar documents used in the
negotiation hereof, except to the extent the same contain information about
Borrower or its Affiliates, properties, business or prospects).
"Long-term LC" means a Letter of Credit having an expiration date
after the last day of the Commitment Period which has been agreed to by
Majority Lenders pursuant to Section 2A.8(b).
"Material Subsidiary" means each Subsidiary of Borrower that is
designated as a "Material Subsidiary" on Schedule 2 attached hereto.
"Majority Lenders" means at any time Lenders collectively having
Percentage Shares totalling in the aggregate at least sixty-six and two-thirds
percent (66 2/3%).
"Matured LC Obligations" means all amounts paid by Issuing Bank under
or reasonably purported to be under any Letter of Credit or under any LC
Application which have not been repaid to Issuing Bank.
"Maximum Drawing Amount" means the aggregate amounts which Issuing
Bank might be called upon to advance under all Letters of Credit issued at the
application of Borrower then outstanding.
"Maximum Guaranteed Amount" means with respect to any Subsidiary
Guarantor as of the date of determination, the lesser of (a) the amount of the
Obligations outstanding on such date and (b) the maximum amount which would not
result in such Subsidiary
-8-
<PAGE> 12
Guarantor's liability under Article VIA constituting a fraudulent transfer or
fraudulent conveyance under applicable state or federal law as determined by a
court of competent jurisdiction.
"Maximum Loan Amount" means the amount of $40,000,000.
"NationsBank" means NationsBank of Texas, N.A. and its successors and
assigns.
"Note" has the meaning given it in Section 2.1.
"Obligations" means all Debt from time to time owing by any of the
Related Persons to Agent or any Lender under or pursuant to any of the Loan
Documents, including without limitation all LC Obligations. "Obligation" means
any part of the Obligations.
"Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1 or 2.4, in any Request for Advances or when no Loans are
outstanding hereunder, the percentage set forth opposite such Lender's name on
the signature pages of this Agreement, and (b) when used otherwise, the
percentage obtained by dividing (i) the sum of the unpaid principal balance of
such Lender's Loan at the time in question plus the Matured LC Obligations
which such Lender has funded pursuant to Section 2A.3(b) plus the portion of
the Maximum Drawing Amount which such Lender might be obligated to fund under
Section 2A.3(b), divided by (ii) the sum of the aggregate unpaid principal
balance of all Loans at such time plus the aggregate amount of LC Obligations
outstanding at such time.
"Permitted Debt" means Funded Debt which matures after the Final
Maturity Date and is not subject to terms which are more restrictive than the
terms and conditions set forth in this Agreement, as determined by Majority
Lenders in their sole discretion.
"Permitted Investments" means investments of up to $5,000,000, plus
investments:
(a) in open market commercial paper, maturing within 270
days after acquisition thereof, which has the highest or second
highest credit rating given by either Standard & Poor's Corporation or
Moody's Investors Service, Inc.
(b) in marketable obligations, maturing within 24 months
after acquisition thereof, issued or unconditionally guaranteed by the
United States of America or an instrumentality or agency thereof and
entitled to the full faith and credit of the United States of America.
(c) in demand deposits, and time deposits (including
certificates of deposit) maturing within 24 months from the date of
deposit thereof, with (i) any office of any Lender, (ii) a domestic
office of any national or state bank or trust company which is
organized under the laws of the
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United States of America or any state therein, which has capital,
surplus and undivided profits of at least $500,000,000, and whose
certificates of deposit have at least the third highest credit rating
given by either Standard & Poor's Corporation or Moody's Investors
Service, Inc. or (iii) any other bank, provided that the aggregate
amount of all such deposits with all such other banks under this
clause (iii) shall not at any time exceed $5,000,000.
(d) in Subsidiary Guarantors.
(e) consisting of acquisitions of existing businesses
which are engaged in the business activities that are the same or
similar to those engaged in by Borrower and Subsidiary Guarantors.
(f) consisting of acquisitions of assets which are used
in businesses engaged in the business activities that are the same or
similar to those engaged in by Borrower and Subsidiary Guarantors.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, court
or governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"Prime Rate" means the rate of interest established by NationsBank
from time to time as its "prime rate". Such rate is set by NationsBank as a
general reference rate of interest, taking into account such factors as it may
deem appropriate, it being understood that many of NationsBank's commercial or
other loans are priced in relation to such rate, that it is not necessarily the
lowest or the best rate actually charged to any customer, that it may not
correspond with further increases or decreases in interest rates charged by
other lenders or market rates in general and that NationsBank may make various
commercial or other loans at rates of interest having no relationship to such
rate.
"Prohibited Lien" means any Lien not expressly allowed under Section
5.2(b).
"Rate Election" has the meaning given it in Section 2.4.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Related Person" means any of Borrower, each Subsidiary Guarantor and
each other Material Subsidiary of Borrower.
"Request for Advance" means a written or telephonic request, or a
written confirmation, made by Borrower which meets the requirements of Section
2.2.
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"Reserve Percentage" means, on any day with respect to each particular
Fixed Rate Portion in a Tranche, the maximum reserve requirement, as determined
by Agent (including without limitation any basic, supplemental, marginal,
emergency or similar reserves), expressed as a percentage and rounded to the
next higher 0.01%, which would then apply to NationsBank under Regulation D
with respect to: (a) if such Fixed Rate Portion is a CD Portion, any new
nonpersonal time deposit (as defined in Regulation D) equal in amount to
NationsBank's Fixed Rate Portion in such Tranche and with a maturity comparable
to the associated Interest Period, were NationsBank to take such a deposit, and
(b) if such Fixed Rate Portion is a LIBOR Portion, "Eurocurrency liabilities"
(as such term is defined in Regulation D) equal in amount to NationsBank's
Fixed Rate Portion in such Tranche, were NationsBank to have any such
"Eurocurrency liabilities". If such reserve requirement shall change after the
date hereof, the Reserve Percentage shall be automatically increased or
decreased, as the case may be, from time to time as of the effective time of
each such change in such reserve requirement.
"Spread" means (i) on each day during the Commitment Period, 0.80% per
annum if the Loan Balance is equal to or less than $20,000,000, and 0.925% per
annum if the Loan Balance is greater than $20,000,000 and (ii) on each day
thereafter 0.925% per annum if the Loan Balance is equal to or less than
$20,000,000, and 1.05% per annum if the Loan Balance is greater than
$20,000,000.
"Subsidiary Guarantor" means any Subsidiary who has guaranteed some or
all of the Obligations pursuant to Article VIA.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or
of any Affiliate of any Related Person from an ERISA Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or
the treatment of any ERISA Plan amendment as a termination under Section 4041
of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by
the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e)
any other event or condition which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any ERISA Plan.
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"Third Party Funds" has the meaning given it in Section 2A.8.
"Total Debt" means Borrower's Consolidated Debt in the following
categories:
(a) Obligations;
(b) Funded Debt (other than the Obligations);
(c) Debt constituting principal under leases capitalized
in accordance with GAAP;
(d) Debt with respect to letters of credit or
applications or reimbursement agreements therefor (other than the
Obligations); and
(e) Debt with respect to any operating, reclamation or
other bond not secured in whole or in part by a letter of credit or
cash deposit.
"Total Debt to Cash Earnings Ratio" means as of the end of any Fiscal
Quarter, the ratio of (i) Borrower's Consolidated Total Debt at the end of such
Fiscal Quarter to (ii) the sum of Borrower's Consolidated Cash Earnings for the
two consecutive Fiscal Quarters then ended plus the projected Cash Earnings for
Borrower and its Consolidated subsidiaries for the immediately succeeding two
Fiscal Quarters as set forth in the cash flow projections delivered to Agent
and approved by Majority Lenders in accordance with Section 2.8(b).
"Tranche" has the meaning given it in Section 2.4.
Section 1.2. Exhibits and Schedules. All Exhibits and Schedules
attached to this Agreement are a part hereof for all purposes.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in
this Agreement which refer to a particular agreement, instrument or document
also refer to and include all renewals, extensions, modifications, amendments
and restatements of such agreement, instrument or document, provided that
nothing contained in this section shall be construed to authorize any such
renewal, extension, modification, amendment or restatement.
Section 1.4. References and Titles. All references in this Agreement
to Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument",
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<PAGE> 16
"herein", "hereof", "hereby", "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless
expressly so limited. The phrases "this section" and "this subsection" and
similar phrases refer only to the sections or subsections hereof in which such
phrases occur. The word "or" is not exclusive, and the word "including" (in
its various forms) means "including without limitation". Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender, and words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
Section 1.5. Calculations and Determinations. All calculations under
the Loan Documents of fees and of interest shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 360
days. Each determination by Agent or a Lender of amounts to be paid under
Sections 2.10 through 2.14 or any other matters which are to be determined
hereunder by Agent or a Lender (such as any Adjusted CD Rate, Adjusted LIBOR
Rate, Assessment Rate, CD Rate, LIBOR Rate, Business Day, Interest Period, or
Reserve Percentage) shall, in the absence of manifest error, be conclusive and
binding. Unless otherwise expressly provided herein or unless Majority Lenders
otherwise consent all financial statements and reports furnished to Agent or
any Lender hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP.
ARTICLE II - The Loans
Section 2.1. Advances. Subject to the terms and conditions hereof,
each Lender agrees to make advances to Borrower (herein called such Lender's
"Advances") upon request from time to time during the Commitment Period so long
as (a) each Advance by such Lender does not exceed such Lender's Percentage
Share of the aggregate amount of Advances then requested from all Lenders, and
(b) the sum of (i) the aggregate amount of such Lender's Advances outstanding
at any time plus (ii) the Maximum Drawing Amount for which such Lender is
liable by virtue of Section 2A.3(b), plus (iii) the Matured LC Obligations
which have been funded by such Lender under such section, does not exceed such
Lender's Percentage Share of the Maximum Loan Amount determined as of the date
on which the requested Advance is to be made and (c) the making of such Advance
does not cause the Total Debt to Cash Earnings Ratio to exceed 4.0 to 1.0
(calculated using Total Debt as of the date of such Advance, and including the
amount of such Advance, and using Cash Earnings as of the end of the most
recent Fiscal Quarter). The aggregate amount of all Advances requested of all
Lenders in any Request for Advance must be greater than or equal to $500,000 or
must equal the unadvanced portion of the Maximum Loan Amount. The obligation
of Borrower to repay to each Lender the aggregate amount of all Advances made
by such Lender (herein called such Lender's "Loan"), together with interest
accruing in connection therewith, shall be evidenced by a single
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promissory note (herein called such Lender's "Note") made by Borrower payable
to the order of such Lender in the form of Exhibit A with appropriate
insertions. The amount of principal owing on any Lender's Note at any given
time shall be the aggregate amount of all Advances theretofore made by such
Lender minus all payments of principal theretofore received by such Lender on
such Note. Interest on each Note shall accrue and be due and payable as
provided herein and therein. Subject to the terms and conditions hereof,
Borrower may borrow, repay, and reborrow hereunder.
Section 2.2. Requests for Advances. Borrower must give to Agent at
least one Business Day's prior written notice, or telephonic notice promptly
confirmed in writing, of any requested Advances, after which Agent shall give
each Lender prompt notice thereof. Each such written request or confirmation
must be made in the form and substance of the "Request for Advance" attached
hereto as Exhibit B, duly completed. Each such telephonic request shall be
deemed a representation, warranty, acknowledgment and agreement by Borrower as
to the matters which are required to be set out in such written confirmation.
Notwithstanding the foregoing provisions of this Section 2.2, each payment of a
draft or demand for payment under a Letter of Credit honored by Issuing Bank
shall constitute a Request for Advance in the amount of such payment. If all
conditions precedent to the Advances requested in any manner described above
have been met, each Lender will on the date requested promptly remit to Agent
at Agent's office in Dallas, Texas the amount of such Lender's Advance in
immediately available funds, and upon receipt of such funds, unless to its
actual knowledge any conditions precedent to such Advances have been neither
met nor waived as provided herein, Agent shall promptly make the Advances
available to Borrower. Each Request for Advance shall be irrevocable and
binding on Borrower. Unless Agent shall have received prompt notice from a
Lender that such Lender will not make available to Agent such Lender's Advance,
Agent may in its discretion assume that such Lender has made such Advance
available to Agent in accordance with this section and Agent may if it chooses,
in reliance upon such assumption, make such Advance available to Borrower. If
and to the extent such Lender shall not so make its Advance available to Agent,
such Lender and Borrower severally agree to pay or repay to Agent within three
days after demand the amount of such Advance together with interest thereon,
for each day from the date such amount is made available to Borrower until the
date such amount is paid or repaid to Agent, at the interest rate applicable at
the time to the other Advances made on such date. The failure of any Lender to
make any Advance to be made by it hereunder shall not relieve any other Lender
of its obligation hereunder, if any, to make its Advance, but no Lender shall
be responsible for the failure of any other Lender to make any Advance to be
made by such other Lender.
Section 2.3. Use of Proceeds. Borrower shall use all funds from
Advances to finance the development of mineral reserves and
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other capital expenditures (including acquisitions) of Borrower and the
Subsidiary Guarantors and to provide working capital for the operations of
Borrower and the Subsidiary Guarantors and for other general business purposes,
including but not limited to extending credit to the Subsidiary Guarantors for
such purposes. In no event shall the funds from any Advance be used directly
or indirectly by any Persons for personal, family, household or agricultural
purposes or for the purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any "margin stock" or any "margin securities"
(as such terms are defined respectively in Regulation U and Regulation G
promulgated by the Board of Governors of the Federal Reserve System) or to
extend credit to others directly or indirectly for the purpose of purchasing or
carrying any such margin stock or margin securities. Borrower represents and
warrants that Borrower is not engaged principally, or as one of Borrower's
important activities, in the business of extending credit to others for the
purpose of purchasing or carrying such margin stock or margin securities.
Section 2.4. Rate Elections. Borrower may from time to time
designate all or any portions of the Loans (including any yet to be made
Advances which are to be made prior to or at the beginning of the designated
Interest Period but excluding any portions of the Loans which are required to
be repaid prior to the end of the designated Interest Period) as a "Tranche",
which term refers to a set of Fixed Rate Portions of the same type (either CD
Portions or LIBOR Portions) with identical Interest Periods and with each
Lender participating in such Tranche in accordance with its Percentage Share.
Without the consent of Majority Lenders, Borrower may make no such election
during the continuance of a Default, and Borrower may make such an election
with respect to already existing Fixed Rate Portions only if such election will
take effect at or after the termination of the Interest Period applicable
thereto. Each election by Borrower of a Tranche shall:
(a) Be made in writing in the form and substance of the "Rate
Election" attached hereto as Exhibit C, duly completed;
(b) Specify the aggregate amount of the Loans which Borrower
desires to designate as such Tranche, whether such Tranche is to
consist of LIBOR Portions or CD Portions, the first day of the
Interest Period which is to apply thereto, and the length of such
Interest Period; and
(c) If relating to CD Portions, be received by Agent not
later than 11:00 a.m., Dallas, Texas time, on the first Business Day
immediately preceding the first day of the specified Interest Period,
and if relating to a LIBOR Portion, be received by Agent not later
than 11:00 a.m., Dallas, Texas time, on the third Business Day
preceding the first day of the specified Interest Period.
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Promptly after receiving any such election (herein called a "Rate Election")
which meets the requirements of this section, Agent shall notify each Lender
thereof. Each Rate Election shall be irrevocable. Borrower may make no Rate
Election which does not specify an Interest Period complying with the
definition of "CD Interest Period" or "LIBOR Interest Period" in Section 1.1,
and the aggregate amount of the Tranche elected in any Rate Election must be
$2,000,000 or a higher integral multiple of $1,000,000. Upon the termination of
each Interest Period the portion of each Loan within the related Tranche shall,
unless the subject of a new Rate Election then taking effect, automatically
become a part of the Base Rate Portion of such Loan and become subject to all
provisions of the Loan Documents governing such Base Rate Portion. Borrower
shall have no more than ten (10) Tranches in effect at any time.
Section 2.5. Facility Fees. In consideration of each Lender's
commitment to make Advances, Borrower will pay to Agent for the account of
Lenders a nonrefundable annual facility fee in the amount of 0.325% of the
Maximum Loan Amount. Each such fee shall be payable in advance, on the date
hereof and on each anniversary of the date hereof until this Agreement shall
have been terminated.
Section 2.6. Agent's Fees. In addition to all other amounts due to
Agent under the Loan Documents, Borrower will pay a non-refundable annual fee
in an amount agreed to by Agent and Borrower. Each such fee shall be payable
in advance, on the date hereof and on each anniversary of the date hereof until
this Agreement shall have been terminated.
Section 2.7. Optional Prepayments. Borrower may, upon one Business
Day's notice to each Lender, from time to time and without premium or penalty
prepay the Notes, in whole or in part, so long as the aggregate amounts of all
partial prepayments of principal on the Notes equals $500,000 or any higher
integral multiple of $500,000, so long as Borrower does not prepay any Fixed
Rate Portion. Each partial prepayment of principal made after the end of the
Commitment Period shall be applied to the regular installments of principal due
under the Notes in the inverse order of their maturities. Each prepayment of
principal under this section shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid. Any principal or interest prepaid
pursuant to this section shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Loan Documents at the time of
such prepayment.
Section 2.8. Mandatory Prepayments; Determination of Total Debt to
Cash Earnings Ratio.
(a) If the Total Debt to Cash Earnings Ratio exceeds 4.0 to 1.0 as
of the end of any Fiscal Quarter, Borrower shall make a prepayment of the Loan
Balance to Agent for distribution to Lenders in the amount necessary to cause
the Total Debt to Cash Earnings Ratio to be equal to or less than 4.0 to 1.0
(in this
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section called the "Required Prepayment Amount"), all in accordance with the
following provisions of this Section 2.8. Before the end of the second
calendar month immediately following such Fiscal Quarter, Borrower shall give
written notice to Agent electing to pay the Required Prepayment Amount to Agent
for distribution to Lenders either (i) on the last day of the next calendar
month or (ii) in six (6) equal consecutive monthly installments due on the last
day of each of the next six calendar months beginning with the month following
the month in which such election is made. (For example, if the Total Debt to
Cash Earnings Ratio as of the end of the Fiscal Quarter ended September 30,
1994 were to exceed 4.0 to 1.0, Borrower would be required to elect by November
30, 1994 whether to pay the full Required Prepayment Amount on December 31,
1994 or to pay the Required Prepayment Amount in six equal consecutive
installments beginning on December 31, 1994.) If such installment payments are
elected, Borrower shall pay each such installment when due. Each such
prepayment made after the end of the Commitment Period shall be applied to the
regular installments of principal due under the Notes in the inverse order of
their maturities. Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so
prepaid. Any principal or interest prepaid pursuant to this section shall be
in addition to, and not in lieu of, all payments otherwise required to be paid
under the Loan Documents at the time of such prepayment.
(b) Agent and Lenders shall review the cash flow projections and
supporting information delivered pursuant to Section 5.1(b)(iii) (the "Borrower
Projections") and determine whether to approve the Borrower Projections for
purposes of calculating the Total Debt to Cash Earnings Ratio, which approval
shall not be unreasonably withheld. Within ten (10) days after receipt of the
Borrower Projections, Agent shall notify Borrower whether Majority Lenders have
approved the Borrower Projections, and if not approved (i) the reason for
withholding such approval and (ii) the Borrower Projections, as adjusted by
Majority Lenders in their reasonable discretion, as they deem necessary based
on the information concerning Borrower then available to Majority Lenders (the
"Adjusted Projections"). In the event that Majority Lenders do not approve the
Borrower Projections:
(1) the Adjusted Projections shall be used to calculate the Total
Debt to Cash Earnings Ratio for the Fiscal Quarter in question
to determine any Required Prepayment Amount for such Fiscal
Quarter as set forth in Section 2.8(a) above;
(2) Borrower, Agent and Majority Lenders will use their best
efforts to reach agreement as to such projections, and in
furtherance thereof, Lenders agree that upon the request of
Borrower, Lenders will consult with an independent mining
consultant regarding such projections, provided that the fees
and expenses of such consultant shall be paid by Borrower;
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(3) If Majority Lenders and Borrower subsequently agree as to cash
flow projections for the Fiscal Quarter in question (the
"Agreed Projections"), the Agreed Projections shall be used to
recalculate the Total Debt to Cash Earnings Ratio for such
Fiscal Quarter to determine any Required Prepayment Amount for
such Fiscal Quarter as set forth in Section 2.8(a) above; and
(4) In the event that (A) the aggregate amount of payments made by
Borrower pursuant to Section 2.8(a) hereof based upon a
Required Prepayment Amount for any Fiscal Quarter determined
pursuant to clause (1) above, exceeds (B) the Required
Prepayment Amount for such Fiscal Quarter as redetermined
pursuant to clause (3) above, Lenders shall promptly refund
such excess to Borrower.
In the event that cash flow projections are not delivered to Agent as required
under Section 5.1(b)(iii) for any Fiscal Quarter, Majority Lenders shall
themselves make such a cash flow projection for the relevant period based on
the information concerning Borrower then available to Majority Lenders, which
shall be used in calculating the Total Debt to Cash Earnings Ratio; provided
that any such determination by Majority Lenders shall not constitute any waiver
of any Default or Event of Default arising out of such failure to deliver such
projections.
Section 2.9. Payments to Lenders. Borrower will make each payment
which it owes under the Loan Documents to Agent for the account of the Lender
to whom such payment is owed. Each such payment must be received by Agent not
later than 11:00 a.m., Dallas, Texas time, on the date such payment becomes due
and payable, in lawful money of the United States of America, without set-off,
deduction or counterclaim, and in immediately available funds. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a
day other than a Business Day, the maturity of such payment shall be extended
to the next succeeding Business Day, and, in the case of a payment of principal
or past due interest, interest shall accrue and be payable thereon for the
period of such extension as provided in the Loan Document under which such
payment is due. Each payment under a Loan Document shall be due and payable at
the place provided therein and, if no specific place of payment is provided,
shall be due and payable at the place of payment of Agent's Note. When Agent
collects or receives money on account of the Obligations, Agent shall
distribute all money so collected or received, and Lenders shall apply all such
money they receive from Agent, as follows:
(a) first, for the payment of all Obligations which are then
due (and if such money is insufficient to pay all such Obligations,
first to any reimbursements due Agent under Section 5.1(i) or (j) and
then to the partial payment
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of all other Obligations then due in proportion to the amounts
thereof, or as Lenders shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by
Borrower;
(c) then for the prepayment of principal on the Notes,
together with accrued and unpaid interest on the principal so prepaid;
and
(d) last, for the payment or prepayment of any other
Obligations.
All payments applied to principal or interest on any Note shall be applied
first to any interest then due and payable, then to principal then due and
payable, and last to any prepayment of principal and interest in compliance
with Section 2.7. All distributions of amounts described in any of subsections
(b), (c) or (d) above shall be made by Agent pro rata to Agent and each Lender
then owed Obligations described in such subsection in proportion to all amounts
owed to Agent and all Lenders which are described in such subsection.
Section 2.10. Capital Reimbursement. If at any time after the date
hereof, and from time to time, any Lender determines that the adoption or
modification of any applicable law, rule or regulation regarding taxation, such
Lender's required levels of reserves, deposits, insurance or capital (including
any allocation of capital requirements or conditions), or similar requirements,
or any interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation,
administration or compliance of such Lender with any of such requirements, has
or would have the effect of (a) increasing such Lender's costs relating to the
Obligations owing to such Lender Lender's Commitment to make Advances or issue
Letters of Credit or Lender's participation in Issuing Banks obligations under
the Letters of Credit, or (b) reducing the yield or rate of return of such
Lender on such Obligations, to a level below that which such Lender could have
achieved but for the adoption or modification of any such requirements,
Borrower shall, within 15 days after any request sent by such Lender to
Borrower (with a copy to Agent), pay to Agent for the account of such Lender
such additional amounts as (in such Lender's sole judgment, after reasonable
computation which shall be delivered to Borrower with such request) will
compensate such Lender for such increase in costs or reduction in yield or rate
of return of such Lender. No failure by such Lender to immediately demand
payment of any additional amounts payable under this section shall constitute a
waiver of such Lender's right to demand payment of such amounts at any
subsequent time. Nothing herein contained shall be construed or so operate as
to require Borrower to pay any interest, fees, costs or charges not permitted
by Section 9.6.
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Section 2.11. Increased Cost of Fixed Rate Portions. If any
applicable domestic or foreign law, treaty, rule or regulation (whether now in
effect or hereinafter enacted or promulgated, including Regulation D) or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law):
(a) shall change the basis of taxation of payments to any
Lender of any principal, interest, or other amounts attributable to
any Fixed Rate Portion or otherwise due under this Agreement in
respect of any Fixed Rate Portion (other than taxes imposed on the
overall net income of such Lender or any lending office of such Lender
by any jurisdiction in which such Lender or any such lending office is
located); or
(b) shall change, impose, modify, apply or deem
applicable any reserve, special deposit or similar requirements in
respect of any Fixed Rate Portion of any Lender (excluding those for
which such Lender is fully compensated pursuant to adjustments made in
the definition of Adjusted CD Rate or Adjusted LIBOR Rate) or against
assets of, deposits with or for the account of, or credit extended by,
such Lender; or
(c) shall impose on any Lender, the certificate of
deposit market, or the interbank eurocurrency deposit market any other
condition relating to any Fixed Rate Portion, the result of which is
to increase the cost to any Lender of funding or maintaining any Fixed
Rate Portion or to reduce the amount of any sum receivable by any
Lender in respect of any Fixed Rate Portion by an amount deemed by
such Lender to be material,
then such Lender shall promptly notify Agent and Borrower in writing of the
happening of such event and of the amount required to compensate such Lender
for such event (on an after-tax basis, taking into account any taxes on such
compensation), whereupon (i) Borrower shall pay such amount to Agent for the
account of such Lender and (ii) Borrower may elect, by giving to Agent and
Lender not less than three Business Days' notice, to convert all (but not less
than all) of any such Fixed Rate Portion into a part of the Base Rate Portion.
Section 2.12. Availability. If (a) any change in applicable laws,
treaties, rules or regulations or in the interpretation or administration
thereof of or in any jurisdiction whatsoever, domestic or foreign, shall make
it unlawful or impracticable for any Lender to fund or maintain Fixed Rate
Portions, or shall materially restrict the authority of any Lender to purchase,
sell or take certificates of deposit or offshore deposits of dollars (i.e.,
"eurodollars"), or (b) any Lender determines that matching deposits appropriate
to fund or maintain any Fixed Rate Portion are not available to it, or
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(c) any Lender determines that the formula for calculating the Adjusted CD Rate
or Adjusted LIBOR Rate does not fairly reflect the cost to such Lender of
making or maintaining loans based on such rate, then, upon notice by such
Lender to Borrower and Agent, Borrower's right to elect Fixed Rate Portions of
such Lender's Loan shall be suspended to the extent and for the duration of
such illegality, impracticability or restriction and all Fixed Rate Portions of
such Lender's Loan (or portions thereof) which are then outstanding or are then
the subject of any Rate Election and which cannot lawfully or practicably be
maintained or funded shall immediately become or remain part of the Base Rate
Portion of such Lender's Loan. Borrower agrees to indemnify each Lender and
hold it harmless against all costs, expenses, claims, penalties, liabilities
and damages which may result from any such change in law, treaty, rule,
regulation, interpretation or administration. Such indemnification shall be on
an after-tax basis, taking into account any taxes imposed on the amounts paid
as indemnity.
Section 2.13. Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify Agent and each Lender against, and reimburse
Agent and each Lender on demand for, any loss or expense incurred or sustained
by Agent or such Lender (including any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by a Lender
to fund or maintain Fixed Rate Portions or Advances), as a result of (a) any
payment or prepayment (whether authorized or required hereunder or otherwise)
of all or a portion of a Fixed Rate Portion on a day other than the day on
which the applicable Interest Period ends, (b) any payment or prepayment,
whether required hereunder or otherwise, of a Loan made after the delivery, but
before the effective date, of a Rate Election, if such payment or prepayment
prevents such Rate Election from becoming fully effective, (c) the failure of
any Advance to be made or of any Rate Election to become effective due to any
condition precedent not being satisfied or due to any other action or inaction
of any Related Person, or (d) any conversion (whether authorized or required
hereunder or otherwise) of all or any portion of any Fixed Rate Portion into a
Base Rate Portion or into a different Fixed Rate Portion on a day other than
the day on which the applicable Interest Period ends. Such indemnification
shall be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
Section 2.14. Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify Agent and each Lender against
and reimburse Agent and each Lender for all present and future income,
stamp and other taxes, levies, costs and charges whatsoever imposed,
assessed, levied or collected on or in respect of this Agreement or
any Fixed Rate Portions (whether or not legally or correctly imposed,
assessed, levied or collected), excluding, however, any taxes imposed
on or measured by the overall net income of Agent or such
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Lender or any lending office of Agent or such Lender by any
jurisdiction in which Agent or such Lender or any such lending office
is located (all such non-excluded taxes, levies, costs and charges
being collectively called "Reimbursable Taxes" in this section). Such
indemnification shall be on an after-tax basis, taking into account
any taxes imposed on the amounts paid as indemnity.
(b) All payments on account of the principal of, and
interest on, each Lender's Loan and each Lender's Note, and all other
amounts payable by Borrower to Agent and each Lender hereunder, shall
be made in full without set-off or counterclaim and shall be made free
and clear of and without deductions or withholdings of any nature by
reason of any Reimbursable Taxes, all of which will be for the account
of Borrower. In the event of Borrower being compelled by law or other
regulations to make any such deduction or withholding from any payment
to Agent or any Lender, Borrower shall pay on the due date of such
payment, by way of additional interest, such additional amounts as are
needed to cause the amount receivable by Agent or such Lender after
such deduction or withholding to equal the amount which would have
been receivable in the absence of such deduction or withholding. If
Borrower should make any deduction or withholding as aforesaid,
Borrower shall within 60 days thereafter forward to Agent or such
Lender an official receipt or other official document evidencing
payment of such deduction or withholding.
(c) If Borrower is ever required to pay any Reimbursable
Tax with respect to any Fixed Rate Portion Borrower may elect, by
giving to Agent not less than three Business Days' notice (and Agent
shall so notify Lenders), to convert all (but not less than all) of
any such Fixed Rate Portion into a part of the Base Rate Portion, but
such election shall not diminish Borrower's obligation to pay all
Reimbursable Taxes.
ARTICLE IIA -- Letters of Credit
Section 2A.1. Letters of Credit. Subject to the terms and conditions
hereof, Issuing Bank agrees to issue, in reliance on the agreements of Lenders
set forth in Section 2A.3(b), at Borrower's application such Letters of Credit
as Borrower may from time to time request so long as:
(a) the sum of (i) the aggregate amount of LC Obligations at
such time, plus (ii) the amount of such Letter of Credit, does not
exceed $5,000,000;
(b) the sum of (i) the aggregate amount of Advances
outstanding at the time such Letter of Credit is issued plus (ii) the
aggregate amount of LC Obligations at such time,
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plus (iii) the amount of such Letter of Credit, does not exceed the
Maximum Drawing Amount;
(c) the form and terms of such Letter of Credit are
satisfactory to Issuing Bank in its sole and absolute discretion;
(d) the expiration date of such Letter of Credit is on or
before the Business Day immediately preceding the last day of the
Commitment Period, unless otherwise agreed to by Majority Lenders; and
(e) the issuance of such Letter of Credit shall not cause
the Total Debt to Cash Earnings Ratio to exceed 4.0 to 1.0 (calculated
using Total Debt as of the date of issuance of such Letter of Credit,
and including the amount of such Letter of Credit, and using Cash
Earnings as of the end of the most recent Fiscal Quarter).
Section 2A.2. Requesting Letters of Credit. Borrower must make
written application for any Letter of Credit at least three Business Days
before such Letter of Credit is issued by Issuing Bank or if otherwise, within
the time permitted by the agreements described below in this section. Each
such written application must be made in writing in the form and substance of
the "Standby Letter of Credit Application and Agreement" attached hereto as
Exhibit F, duly completed and signed by an Authorized Officer of Borrower, the
terms and provisions of such agreements being incorporated herein by reference.
By each such application for a Letter of Credit Borrower shall be deemed to
have made all representations and warranties set forth herein as of the date of
such application. If all conditions precedent to the issuance of such Letter
of Credit have been met, Issuing bank will, in reliance on the agreements of
Lenders set forth in Section 2A.3(b), on the date requested, issue such Letter
of Credit at Issuing Bank's office in Dallas, Texas. Provisions of any LC
Application shall be deemed to apply only to the related Letter of Credit;
provided, however, that any "default" or "event of default" under such LC
Application shall also constitute an Event of Default hereunder. If any
provisions of any LC Application conflict with any provisions of this
Agreement, the provisions of this Agreement shall govern and control.
Section 2A.3. Reimbursement.
(a) Reimbursement by Borrower. Each payment of a draft or demand for
payment honored by Issuing Bank shall constitute a loan to and obligation of
Borrower. Borrower promises to pay to Issuing Bank, or to Issuing Bank's order
at such Issuing Bank's office in Dallas, Texas on demand, in legal tender of
the United States of America, any and all amounts paid by Issuing Bank under or
purporting to be under any Letter of Credit, together with interest on any such
amounts (i) from the date payment is made by Issuing Bank under such Letter of
Credit until and including the first Business Day following such date of
payment, at the Base
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Rate and (ii) thereafter, provided that notice is given to Borrower of such
honor by Issuing Bank, until the repayment of such amounts to Issuing Bank, at
the Late Payment Rate. Borrower hereby promises to pay, when due, all present
and future taxes, levies, costs and charges whatsoever imposed, assessed,
levied or collected on, under or in respect of this Agreement or any Letter of
Credit and any payments of principal, interest or other amounts made on or in
respect of any thereof (excluding, however, any such taxes, levies, costs and
charges imposed on or measured by the overall net income of Issuing Bank).
Borrower promises to indemnify Issuing Bank against, and to reimburse Issuing
Bank on demand for, any of the foregoing taxes, levies, costs or charges paid
by Issuing Bank and any loss, liability, claim or expense, including interest,
penalties and legal fees, that Issuing Bank may incur because of or in
connection with the failure of Borrower to make any such payment of taxes,
levies, costs or charges when due or any payment of Matured LC Obligation when
due.
(b) Participation by Lenders. Issuing Bank irrevocably agrees to
grant and hereby grants to each Lender, and, to induce Issuing Bank to issue
Letters of Credit hereunder, each Lender irrevocably agrees to accept and
purchase and hereby accepts and purchases from Issuing Bank, on the terms and
conditions hereinafter stated, for such Lender's own account and risk an
undivided interest equal to such Lender's Percentage Share of Issuing Bank's
obligations and rights under each Letter of Credit issued hereunder and the
amount of each draft paid by Issuing Bank thereunder. In the event that
Borrower should fail to pay Issuing Bank on demand the amount of any draft or
other request for payment drawn under or purporting to be drawn under a Letter
of Credit as provided in subsection (a) above, each Lender shall, before 2:00
p.m. (Dallas Time) on the Business Day Issuing Bank shall have given notice to
Lenders of Borrower's failure to so pay Issuing Bank, if such notice is given
by 11:00 a.m., Dallas time (or on the Business Day immediately succeeding the
day such notice is given after 11:00 a.m. Dallas time), pay to Issuing Bank at
Issuing Bank's offices in Dallas, Texas, in legal tender of the United States
of America, in same day funds, such Lender's Percentage Share of the amount of
such draft or other request for payment, plus interest on such amount (i) from
the date Issuing Bank shall have paid such draft or request for payment until
and including the first Business Day following such date of payment, at the
Base Rate and (ii) thereafter, to the date of such payment by such Lender, at
the Late Payment Rate. Each Lender's obligation to reimburse Issuing Bank
pursuant to the terms of this Section 2A.3(b) is irrevocable and unconditional.
If any such amount required to be paid by any Lender pursuant to this Section
2A.3(b) is not in fact made available by such Lender to Issuing Bank within
three Business Days after the date such payment is due, Issuing Bank shall be
entitled to recover from such Lender, on demand, such amount required to be
paid by such Lender, plus interest thereon calculated from such due date at the
federal funds rate. A written advice(s) setting forth in reasonable detail the
amounts owing under this Section 2A.3,
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submitted by Issuing Bank to Borrower from time to time, shall be conclusive,
absent manifest error, as to the amounts thereof. Whenever, at any time after
Issuing Bank has made payment under any Letter of Credit, and has received from
any Lender its Percentage Share of such payment in accordance with this Section
2A.3(b), Issuing Bank receives any payment related to such Letter of Credit
(whether directly from Borrower or otherwise, including proceeds of Cash
Collateral applied thereto by Issuing Bank), or any payment of interest on
account thereof, Issuing Bank will distribute to such Lender its Percentage
Share thereof; provided, however, that in the event that any such payment
received by Issuing Bank shall be required to be returned by Issuing Bank, such
Lender shall return to Issuing Bank the portion thereof previously distributed
by Issuing Bank to it.
(c) Payment of Reimbursement Obligation with Advances. Each time
payment of a draft or demand for payment under a Letter of Credit is honored by
Issuing Bank, Borrower shall be deemed to have made a Request for Advance in
the amount of such payment pursuant to Section 2.2. If all conditions
precedent to the making of such Advance have been satisfied and such Advance is
made, the proceeds thereof shall be applied to the payment of Borrower's
obligation to reimburse Issuing Bank for such payment.
Section 2A.4. Transferees of Letters of Credit. Borrower agrees that
if any Letter of Credit provides that it is transferable, Issuing Bank is under
no duty to determine the proper identity of anyone appearing as transferee of
such Letter of Credit, nor shall Issuing Bank be charged with responsibility of
any nature or character for the validity or correctness of any transfer or
successive transfers, and payment by Issuing Bank to any purported transferee
or transferees as determined by Issuing Bank is hereby authorized and approved,
and Borrower further agrees to hold Issuing Bank and each Lender harmless and
indemnified against any liability or claim in connection with or arising out of
the foregoing.
Section 2A.5. Extension of Maturity. Borrower agrees that if the
maturity of any Letter of Credit is extended by its terms or by law or
governmental action, if any extension of the maturity or time for presentation
of drafts or any other modification of the terms of any Letter of Credit is
made at the request of Borrower, or if the amount of any such Letter of Credit
is increased at the request of Borrower, subject in each case to Section 2A.1,
this Agreement shall be binding upon Borrower with respect to such Letter of
Credit as so extended, increased or otherwise modified, with respect to drafts
and property covered thereby, and with respect to any action taken by Issuing
Bank or any of Issuing Bank's correspondents in accordance with such extension,
increase or other modification.
Section 2A.6. Restriction on Liability. The users of each Letter of
Credit shall be deemed the agents of Borrower and neither Issuing Bank, nor its
correspondents shall be responsible for:
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(a) the use which may be made of any Letter of Credit or for
any actions or omissions of the users of any Letter of Credit;
(b) the existence or nonexistence of a default under any
instrument secured or supported by any Letter of Credit or any other
event which gives rise to a right to call upon any Letter of Credit;
(c) the validity, sufficiency or genuineness of any document
delivered in connection with any Letter of Credit, even if such
document should in fact prove to be in any or all respects invalid,
fraudulent or forged;
(d) except as specifically required by a Letter of Credit,
failure of any instrument to bear any reference or adequate reference
to any Letter of Credit, or failure of documents to accompany any
draft at negotiation, or failure of any person to note the amount of
any draft on the reverse of any Letter of Credit or to surrender or
take up any Letter of Credit; or
(e) errors, omissions, interruptions or delays in
transmission or delivery of any messages by mail, cable, telegraph,
wireless, or otherwise.
Issuing Bank shall not be responsible for any act, error, neglect or default,
omission, insolvency or failure in the business of any of the correspondents of
Issuing Bank, for any refusal by Issuing Bank or any of its correspondents to
pay or honor drafts drawn under any Letter of Credit because of any applicable
law, decree or edict, legal or illegal, of any governmental agency now or
hereafter enforced, or for any matter beyond the control of Issuing Bank. The
happening of any one or more of the contingencies referred to in the preceding
clauses of this paragraph shall not affect, impair or prevent the vesting of
any of the rights or powers of Issuing Bank and or Lenders under this Agreement
or the obligation of Borrower to make reimbursement hereunder. In furtherance
and extension and not in limitation of the specific provisions hereinabove set
forth, Borrower agrees that any action, unless such action constitutes willful
misconduct or gross negligence, not contrary to the terms of any Letter of
Credit, which is taken by Issuing Bank or any Lender issuing such Letter of
Credit or by any correspondent under or in connection with such Letter of
Credit shall be binding on Borrower and shall not put Issuing Bank or any
Lender or any correspondent under any resulting liability to Borrower and
Borrower makes a like agreement as to any inaction or omission unless such
action or inaction constitutes gross negligence or willful misconduct.
Section 2A.7. No Duty to Inquire. Borrower agrees that Issuing Bank
is authorized and instructed to accept and pay drafts under any Letter of
Credit without requiring, and without responsibility for, the determination as
to the existence of any
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event giving rise to said draft, either at the time of acceptance of payment or
thereafter; provided that Issuing Bank and Lenders will comply with the
provisions of Article 15 of the Uniform Customs and Practices for Documentary
Credits (1994 Revision) International Chamber of Commerce Publication 500.
Borrower agrees that Issuing Bank is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit issued by Issuing Bank, and payment by
Issuing Bank to any such beneficiary when requested by any such purported
officer, representative or agent is hereby authorized and approved by Borrower.
Borrower agrees to hold Issuing Bank and each Lender harmless and indemnified
against any liability or claim in connection with or arising out of the
foregoing provisions and the subject matter of this section.
Section 2A.8. Payment of LC Obligations.
(a) Acceleration of LC Obligations. If the Obligations, or any part
thereof, become immediately due and payable pursuant to Article VII, then all
LC Obligations shall become immediately due and payable without regard for
actual drawings or payments on the Letters of Credit and Borrower shall
immediately pay to Agent for the account of the Issuing Bank an amount equal to
the aggregate LC Obligations then outstanding.
(b) LC Collateral Account. All amounts made due and payable by
Borrower under this Section 2A.8 shall be (i) first applied to Borrower's
Matured LC Obligations, and (ii) second held by Agent in an account established
at NationsBank designated the Hecla Mining Company LC Collateral Account (the
"LC Collateral Account"), from which Borrower shall not be entitled to withdraw
funds, as security for the remaining Obligations (in this Section 2A.8 all such
amounts held in the LC Collateral Account and all investments made with funds
in the LC Collateral Account in which Agent has a perfected, first priority
security interest, collectively, "Cash Collateral"). The Cash Collateral shall
be applied to Matured LC Obligations as they mature and when no LC Obligations
remain outstanding, the Cash Collateral shall be applied to all other
Obligations as they become due and payable at which time the Cash Collateral
shall be applied to such Obligations. At any time, and from time to time so
long as no Default or Event of Default has occurred and is continuing, Agent,
at the written request of Borrower, shall invest and reinvest funds held in the
LC Collateral Account in Permitted Investments at such prices, including any
premium and accrued interest, as are set forth in such request. Upon the
occurrence and during the continuance of an Event of Default, Agent shall
invest and reinvest funds held in the LC Collateral Account in Permitted
Investments at such prices as it in its sole discretion determines. Agent
shall have no liability for losses on any such Permitted Investments. Any
interest shall be retained in the LC Collateral Account and invested in the
same manner as other funds therein or applied to Obligations then due and
owing.
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(c) Grant of Security Interest. Borrower hereby assigns and grants
to Agent a continuing security interest for the benefit of Lenders in the Cash
Collateral and all proceeds thereof to secure the Obligations and agrees that
Agent shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code as adopted in the State of Texas with respect to such
security interest and that an Event of Default under this Agreement shall
constitute a default for purposes of such security interest.
(d) Account Transfers. When Borrower is required to make payments
under this Section 2A.8 and fails to do so on the day when due, Agent may
without notice to Borrower or any other Related Person make such payment
(whether by application of proceeds of Cash Collateral, by transfers from other
accounts maintained with Agent or otherwise) using any funds then available to
any Related Person or any other Person liable for all or any part of Borrower's
Obligations hereunder or under Borrower's LC Applications. Following any such
payment by such transfer of accounts and upon delivery to Agent by Borrower of
evidence satisfactory to Agent, in its sole discretion, that such accounts, at
the time of such application contained funds held in the legal capacity of
agent, operator or trustee for a third party (any funds so held, "Third Party
Funds"), Agent will remit to the Person or Persons in whose name the account is
held such Third Party Funds. Any amounts which are required to be paid
pursuant to this Section 2A.8 and which are not paid on the date due shall, for
purposes of each Loan Document, be considered past due Obligations owing
hereunder, and Agent is hereby authorized to liquidate Cash Collateral, demand
under any and all guarantees of all or part of the Obligations and otherwise
exercise its respective rights under each Loan Document to obtain such amounts.
ARTICLE III - Conditions Precedent to Lending
Section 3.1. Documents to be Delivered. No Lender has any obligation
to make its first Advance unless Agent shall have received all of the
following, at Agent's office in Dallas, Texas, duly executed and delivered and
in form, substance and date satisfactory to Agent:
(a) This Agreement and any other documents that Lenders are
to execute in connection herewith.
(b) Each Lender's Note.
(c) Certain certificates of Borrower including:
(i) An "Omnibus Certificate" of the Secretary or
Assistant Secretary and of the Chairman of the Board or
President or any Vice President of Borrower, which shall
contain the names and signatures of the officers of Borrower
authorized to execute Loan Documents and
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which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto:
(1) a copy of resolutions duly adopted by the Board of
Directors of Borrower and in full force and effect at the
time this Agreement is entered into, authorizing the
execution of this Agreement and the other Loan Documents
delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and
therein, (2) a copy of the charter documents of Borrower and
all amendments thereto, certified by the appropriate official
of Borrower's state of organization, and (3) a copy of any
bylaws of Borrower; and
(ii) A "Compliance Certificate" of the chief
financial officer, chief accounting officer, Treasurer or
Vice- President Finance of Borrower, of even date with such
Advance, in which such officers certify to the satisfaction of
the conditions set out in subsections (a), (b), (c) and (d) of
Section 3.2.
(d) A certificate (or certificates) of the due formation,
valid existence and good standing of Borrower in its state of
organization, issued by the appropriate authorities of such
jurisdiction.
(e) A favorable opinion of Michael B. White, Esq., general
counsel for Borrower, substantially in the form set forth in Exhibit
E, together with the certificate provided for in such Exhibit.
(f) Documents similar to those specified in subsections (c)
and (d) of this section with respect to each Subsidiary Guarantor and
the execution by it of its guaranty of Borrower's Obligations.
(g) Complete releases of all liens and security interests
in property of the Related Persons in favor of existing lenders.
Section 3.2. Additional Conditions Precedent. No Lender has any
obligation to make any Advance (including its first) unless the following
conditions precedent have been satisfied:
(a) All representations and warranties made by any Related
Person in any Loan Document shall be true on and as of the date of
such Advance (except to the extent that the facts upon which such
representations are based have been changed by the extension of credit
hereunder) as if such representations and warranties had been made as
of the date of such Advance.
(b) No Default shall exist at the date of such Advance.
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(c) No material adverse change shall have occurred in
Borrower's Consolidated financial condition or results of operations,
other than any such change resulting from the matters designated as
(III)(1) or (III)(2) in the Disclosure Schedule.
(d) Each Related Person shall have performed and complied
with all agreements and conditions required in the Loan Documents to
be performed or complied with by it on or prior to the date of such
Advance.
(e) The making of such Advance shall not be prohibited by any
law or any regulation or order of any court or governmental agency or
authority and shall not subject any Lender to any penalty or other
onerous condition under or pursuant to any such law, regulation or
order.
(f) Agent shall have received all documents and instruments
which Agent has then requested, in addition to those described in
Section 3.1 (including opinions of legal counsel for the Related
Persons and Agent; corporate documents and records; documents
evidencing governmental authorizations, consents, approvals, licenses
and exemptions; and certificates of public officials and of officers
and representatives of Borrower and other Persons), as to (i) the
accuracy and validity of or compliance with all representations,
warranties and covenants made by any of the Related Persons in this
Agreement and the other Loan Documents, (ii) the satisfaction of all
conditions contained herein or therein, and (iii) all other matters
pertaining hereto and thereto. All such additional documents and
instruments shall be satisfactory to Agent in form, substance and
date.
(g) The making of such Advance or the issuance of such
Letter of Credit shall not cause the Total Debt to Cash Earnings Ratio
to exceed 4.0 to 1.0 (calculated using Total Debt as of the date of
such Advance or the issuance of such Letter of Credit, and including
the amount of such Advance or Letter of Credit, and using Cash
Earnings as of the end of the most recent Fiscal Quarter).
ARTICLE IV - Representations and Warranties
Section 4.1. Borrower's Representations and Warranties. To confirm
each Lender's understanding concerning Borrower and Borrower's business,
properties and obligations and to induce Agent and each Lender to enter into
this Agreement and to make the Loans, Borrower represents and warrants to Agent
and each Lender that:
(a) No Default. No Related Person is in default in the
performance of any of the covenants and agreements contained herein.
No event has occurred and is continuing which constitutes a Default.
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(b) Organization and Good Standing. Each Related Person
which is a corporation or partnership is duly organized, validly
existing and in good standing under the laws of its state of
organization, having all corporate or partnership powers required to
carry on its business and enter into and carry out the transactions
contemplated hereby. Each such Related Person is duly qualified, in
good standing, and authorized to do business in all other
jurisdictions within the United States wherein the character of the
properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary except where the
failure to do so would not result in a material adverse effect on the
business or operations of such Related Person. Each such Related
Person has taken all actions and procedures customarily taken in order
to enter, for the purpose of conducting business or owning property,
each jurisdiction outside the United States wherein the character of
the properties owned or held by it or the nature of the business
transacted by it makes such actions and procedures desirable except
where the failure to do so would not result in a material adverse
effect on the business or operations of such Related Person.
(c) Authorization. Each Related Person which is a
corporation or partnership has duly taken all corporate or partnership
action necessary to authorize the execution and delivery by it of the
Loan Documents to which it is a party and to authorize the
consummation of the transactions contemplated thereby and the
performance of its obligations thereunder. Borrower is duly
authorized to borrow funds hereunder.
(d) No Conflicts or Consents. The execution and delivery by
the various Related Persons of the Loan Documents to which each is a
party, the performance by each of its obligations under such Loan
Documents, and the consummation of the transactions contemplated by
the various Loan Documents, do not and will not (i) conflict with any
provision of (1) any domestic or foreign law, statute, rule or
regulation, (2) the articles or certificate of incorporation, bylaws,
charter, or partnership agreement or certificate of any Related
Person, or (3) any agreement, judgment, license, order or permit
applicable to or binding upon any Related Person, (ii) result in the
acceleration of any Debt owed by any Related Person, or (iii) result
in or require the creation of any Lien upon any assets or properties
of any Related Person except as expressly contemplated in the Loan
Documents. Except as expressly contemplated in the Loan Documents no
consent, approval, authorization or order of, and no notice to or
filing with, any court or governmental authority or third party is
required in connection with the execution, delivery or performance by
any Related Person of any Loan Document or to consummate any
transactions contemplated by the Loan Documents.
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(e) Enforceable Obligations. This Agreement is, and the
other Loan Documents when duly executed and delivered will be, legal,
valid and binding obligations of each Related Person which is a party
hereto or thereto, enforceable in accordance with their terms except
as such enforcement may be limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of
creditors' rights.
(f) Initial Financial Statements. The Initial Financial
Statements fairly present Borrower's Consolidated financial position
at the respective dates thereof and the Consolidated results of
Borrower's operations and Borrower's Consolidated cash flows for the
respective periods thereof. Since the date of the audited annual
Initial Financial Statements no material adverse change has occurred
in Borrower's financial condition or businesses or in Borrower's
Consolidated financial condition or businesses, except as reflected in
the quarterly Initial Financial Statements or in the Disclosure
Schedule. All Initial Financial Statements were prepared in
accordance with GAAP.
(g) Other Obligations and Restrictions. No Related Person
has any outstanding Debt of any kind (including contingent
obligations, tax assessments, and unusual forward or long-term
commitments) which is, in the aggregate, material to Borrower or
material with respect to Borrower's Consolidated financial condition
and not shown in the Initial Financial Statements or disclosed in the
Disclosure Schedule or a Disclosure Report. Except as shown in the
Initial Financial Statements or disclosed in the Disclosure Schedule
or a Disclosure Report, no Related Person is subject to or restricted
by any franchise, contract, deed, charter restriction, or other
instrument or restriction which is materially likely in the
foreseeable future to materially and adversely affect the businesses,
properties, prospects, operations, or financial condition of such
Related Person or of Borrower on a Consolidated basis.
(h) Full Disclosure. No certificate, statement or other
information delivered herewith or heretofore by any Related Person to
Agent or any Lender in connection with the negotiation of this
Agreement or in connection with any transaction contemplated hereby
contains any untrue statement of a material fact or omits to state any
material fact known to any Related Person (other than industry-wide
risks normally associated with the types of businesses conducted by
the Related Persons) necessary to make the statements contained herein
or therein not misleading as of the date made or deemed made. There
is no fact known to any Related Person (other than industry-wide risks
normally associated with the types of businesses conducted by the
Related Persons) that has not been disclosed to Agent and each Lender
in writing which could materially and adversely affect Borrower's
properties, business, prospects or
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condition (financial or otherwise) or Borrower's Consolidated
properties, businesses, prospects or condition (financial or
otherwise). Borrower has heretofore delivered to Agent and each
Lender true, correct and complete copies of the Initial Financial
Statements.
(i) Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (i) there are no actions,
suits or legal, equitable, arbitrative or administrative proceedings
pending, or to the knowledge of any Related Person threatened, against
any Related Person before any federal, state, municipal or other
court, department, commission, body, board, bureau, agency, or
instrumentality, domestic or foreign, which do or may reasonably be
expected to have a material adverse effect on Borrower or, on a
Consolidated basis, Borrower and its properly Consolidated
subsidiaries, their ownership or use of any of their assets or
properties, their businesses or financial condition or prospects, or
the right or ability of any Related Person to enter into the Loan
Documents to which it is a party or to consummate the transactions
contemplated thereby or to perform its obligations thereunder and (ii)
there are no outstanding judgments, injunctions, writs, rulings or
orders by any such governmental entity against any Related Person or
any Related Person's stockholders, partners, directors or officers
which have or may reasonably be expected to have any such effect.
(j) ERISA Liabilities. All currently existing ERISA Plans
are listed in the Disclosure Schedule or a Disclosure Report. Except
as disclosed in the Initial Financial Statements or in the Disclosure
Schedule or a Disclosure Report, no Termination Event has occurred
with respect to any ERISA Plan and the Related Persons are in
compliance with ERISA in all material respects. No Related Person is
required to contribute to, or has any other absolute or contingent
liability in respect of, any "multiemployer plan" as defined in
Section 4001 of ERISA. Except as set forth in the Disclosure Schedule
or a Disclosure Report: (i) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code of 1986, as
amended) exists with respect to any ERISA Plan, whether or not waived
by the Secretary of the Treasury or his delegate, and (ii) the current
value of each ERISA Plan's benefits does not exceed the current value
of such ERISA Plan's assets available for the payment of such benefits
by more than $500,000.
(k) Environmental and Other Laws. Except as disclosed in the
Disclosure Schedule or a Disclosure Report: (i) the Related Persons
are conducting their businesses in material compliance with all
applicable federal, state and local laws, including Environmental
Laws, and have and are in compliance in all material respects with all
licenses and permits required under any such laws; (ii) none of the
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operations or properties of any Related Person is the subject of
federal, state or local investigation regarding any release of any
Hazardous Materials into the environment or the improper storage or
disposal (including storage or disposal at offsite locations) of any
Hazardous Materials in which an adverse determination would
potentially result in a loss in excess of five percent (5%) of
Borrower's Consolidated net worth; (iii) no Related Person (and to the
best knowledge of Borrower, no other Person) has filed or received any
notice under any federal, state or local law of any actual or
potential violation of Environmental Laws or any violation of any
applicable license or permit, which violation would potentially result
in a loss in excess of five percent (5%) of Borrower's Consolidated
net worth; and (iv) no Related Person otherwise has any known
contingent liability under any Environmental Laws or in connection
with the release into the environment, or the storage or disposal, of
any Hazardous Materials in excess of five percent (5%) of Borrower's
Consolidated net worth.
(l) Names and Places of Business. Neither Borrower nor any
Subsidiary Guarantor, during the preceding five years, had, been known
by, or used any other corporate, trade, or fictitious name, except as
disclosed in the Disclosure Schedule. Except as otherwise indicated
in the Disclosure Schedule or a Disclosure Report, the chief executive
office and principal place of business of Borrower and each of the
Subsidiary Guarantors are (and for the preceding five years have been)
located at the address of Borrower set out in Section 9.3 or (if
different) the address of each such Related Person set out in the
Disclosure Schedule. Except as indicated in the Disclosure Schedule
or a Disclosure Report, neither Borrower nor any Subsidiary Guarantor
has any other office or place of business.
(m) Borrower's Subsidiaries. Borrower does not presently
have any Subsidiary that has assets in excess of $1,000,000
(calculated at net book value), other than Material Subsidiaries.
Except as otherwise revealed in a Disclosure Report, Borrower owns,
directly or indirectly, the equity interest in each of its
Subsidiaries which is indicated in Schedule 2.
(n) Title to Properties. Each Related Person has good
and defensible title to all of its material properties and assets,
free and clear of all Prohibited Liens.
(o) Government Regulation. Neither Borrower nor any
other Related Person owing Obligations is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Investment Company Act of 1940 (as any of the preceding acts have
been amended) or any other statute, law, regulation or decree which
regulates the incurring by such Person of Debt, including statutes,
laws,
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regulations or decrees relating to common contract carriers or the
sale of electricity, gas, steam, water or other public utility
services.
(p) Insider. Neither Borrower, nor any other Related
Person, nor any Person having "control" (as that term is defined in 12
U.S.C. Section 375b(9) or in regulations promulgated pursuant
thereto) of Borrower, is a "director" or an "executive officer" or
"principal shareholder" (as those terms are defined in 12 U.S.C.
Section 375b(8) or (9) or in regulations promulgated pursuant
thereto) of Lender, of a bank holding company of which Lender is a
Subsidiary or of any Subsidiary of a bank holding company of which
Lender is a Subsidiary.
(q) Officers and Directors. The officers and directors of
Borrower are those persons disclosed in the definitive proxy statement
prepared by Borrower and filed with the Securities and Exchange
Commission in connection with Borrower's most recent annual meeting,
copies of which proxy statement have been previously furnished in
connection with the negotiation hereof.
(r) Solvency. Neither Borrower nor any Subsidiary Guarantor
is "insolvent" on the date hereof (that is, the sum of such Person's
absolute and contingent liabilities, including the Obligations,
exceeds the fair market value of such Person's assets). Borrower's
and each Subsidiary Guarantor's capital is adequate for the businesses
in which such Person is engaged and intends to be engaged. Neither
Borrower nor any Subsidiary Guarantor has hereby incurred, nor does
Borrower nor any Subsidiary Guarantor intend to incur or believe that
it will incur, debts which will be beyond its ability to pay as such
debts mature. The direct or indirect value of the consideration
received and to be received by each Subsidiary Guarantor in connection
herewith is reasonably worth at least as much as the liability and
obligations of such Subsidiary Guarantor under Article VIA and the
incurrence of such liability and obligations in return for such
consideration may reasonably be expected to benefit each Subsidiary
Guarantor, directly or indirectly.
Section 4.2. Representation by Lenders. Each Lender hereby
represents that it will acquire its Note for its own account in the
ordinary course of its commercial lending business; however, the
disposition of such Lender's property shall at all times be and remain
within its control and, in particular and without limitation, such
Lender may sell or otherwise transfer its Note, any participation
interest or other interest in its Note, or any of its other rights and
obligations under the Loan Documents.
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ARTICLE V - Covenants of Borrower
Section 5.1. Affirmative Covenants. To conform with the terms and
conditions under which each Lender is willing to have credit outstanding to
Borrower, and to induce Agent and each Lender to enter into this Agreement and
make the Loans, Borrower warrants, covenants and agrees that until the full and
final payment of the Obligations and the termination of this Agreement, unless
Majority Lenders (or all Lenders as set forth in Section 9.1(a)) have
previously agreed otherwise:
(a) Payment and Performance. Borrower will pay all amounts
due under the Loan Documents in accordance with the terms thereof and
will observe, perform and comply with every covenant, term and
condition expressed in the Loan Documents. Borrower will cause the
other Related Persons to observe, perform and comply with every such
term, covenant and condition.
(b) Books, Financial Statements and Reports. Each Related
Person will at all times maintain full and materially accurate books
of account and records. Borrower will maintain and will cause its
Subsidiaries to maintain a standard system of accounting and will
furnish the following statements and reports to Agent and each Lender
at Borrower's expense:
(i) As soon as available, and in any event within 90
days after the end of each Fiscal Year, complete Consolidated
financial statements of Borrower together with all notes
thereto, prepared in reasonable detail in accordance with
GAAP, together with an opinion, based on an audit using
generally accepted auditing standards, by Coopers & Lybrand or
other independent certified public accountants selected by
Borrower and acceptable to Majority Lenders, stating that such
Consolidated financial statements have been so prepared.
These financial statements shall contain a Consolidated
balance sheet as of the end of such Fiscal Year and
Consolidated and consolidating statements of earnings, of cash
flows, and of changes in owners' equity for such Fiscal Year,
each setting forth in comparative form the corresponding
figures for the preceding Fiscal Year. In addition, within
100 days after the end of each Fiscal Year Borrower will
furnish a report signed by such accountants stating that they
have read this Agreement and further stating that in making
the examination and reporting on the Consolidated financial
statements described above they did not conclude that any
Default existed at the end of such Fiscal Year or at the time
of their report, or, if they did conclude that a Default
existed, specifying its nature and period of existence.
(ii) As soon as available, and in any event within 45
days after the end of each of the first three
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Fiscal Quarters in each Fiscal Year of Borrower's Consolidated
and consolidating balance sheet as of the end of such Fiscal
Quarter and Consolidated and consolidating statements of
Borrower's earnings and cash flows for the period from the
beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, all in reasonable detail and prepared in
accordance with GAAP, subject to changes resulting from normal
year-end adjustments. In addition Borrower will, together
with each such set of financial statements and each set of
financial statements furnished under subsection (b)(i) of this
section, furnish a certificate in the form of Exhibit D signed
by the chief financial officer of Borrower stating that such
financial statements are accurate and complete, stating that
he has reviewed the Loan Documents, containing calculations
showing compliance (or non-compliance) at the end of such
Fiscal Quarter with the requirements of Sections 5.2(a),
5.2(d), 5.2(k) and 5.2(l) and stating that no Default exists
at the end of such Fiscal Quarter or at the time of such
certificate or specifying the nature and period of existence
of any such Default.
(iii) Within 45 days after the end of each Fiscal
Quarter, cash flow projections based on a rolling four quarter
basis, to be used to calculate the Total Debt to Cash Earnings
Ratio as set forth in Section 2.8(b), and by November 30 of
each year annual five-year cash flow projections, together
with (A) information prepared by Borrower and/or its
geologists and/or consultants supporting such projections and
(B) as to such quarterly projections, any available
information regarding actual cash flow since the end of such
Fiscal Quarter.
(iv) Promptly upon their becoming available, copies
of all financial statements, reports, notices and proxy
statements sent by Borrower to its stockholders and all
registration statements, periodic reports and other statements
and schedules filed by Borrower with any securities exchange,
the Securities and Exchange Commission or any similar
governmental authority.
(c) Other Information and Inspections. Each Related Person
will furnish to Agent any information which Agent may from time to
time reasonably request in writing for itself or on behalf of any
Lender concerning any covenant, provision or condition of the Loan
Documents or any matter in connection with the Related Persons'
businesses and operations. Each Related Person will permit
representatives appointed by Agent (including independent accountants,
agents, attorneys, appraisers and any other Persons) to visit and
inspect any of such Related Person's property,
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including its books of account, other books and records, and any
facilities or other business assets, and to make extra copies
therefrom and photocopies and photographs thereof, and to write down
and record any information such representatives obtain, and each
Related Person shall permit Agent or its representatives to
investigate and verify the accuracy of the information furnished to
Agent or any Lender in connection with the Loan Documents and to
discuss all such matters with its officers, employees and
representatives. Each of Agent and Lenders agrees that, until the
occurrence of an Event of Default, it will take all reasonable steps
to keep confidential any proprietary information given to it by any
Related Person, provided, however, that this restriction shall not
apply to information which (i) has at the time in question entered the
public domain by means other than any Lender's or Agent's breach of
the provisions of this Section 5.1(c), (ii) is required to be
disclosed by law or by any order, rule or regulation (which Agent or
such Lender reasonably believes to be valid) of any court or
governmental agency or authority, (iii) is disclosed to Agent's or any
Lender's Affiliates, auditors, attorneys, or agents, or (iv) is
furnished to any other Lender or to any purchaser or prospective
purchaser of participations or other interests in any Loan or Loan
Document, provided that such Affiliates, auditors (other than bank
examiners), attorneys, agents, Lenders and purchasers agree to be
bound by the confidentiality provisions of this subsection.
(d) Notice of Material Events and Changes of Name or Address.
Borrower will promptly notify Agent:
(i) of any material adverse change in Borrower's
financial condition or Borrower's Consolidated financial
condition,
(ii) of the occurrence of any Default,
(iii) of the acceleration of the maturity of any
Debt owed by any Related Person or of any default by any
Related Person under any indenture, mortgage, agreement,
contract or other instrument to which any of them is a party
or by which any of them or any of their properties is bound,
if such acceleration or default might have a material adverse
effect upon Borrower's Consolidated financial condition,
(iv) of the occurrence of any Termination Event,
(v) of any suit, action or proceeding reasonably
anticipated to result in a claim in excess of $1,000,000, any
notice of potential liability under any Environmental Laws
which might exceed such amount, or any other material adverse
claim asserted against any
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Related Person or with respect to any Related Person's
properties, and
(vi) of any labor controversy resulting in or
threatening to result in a strike against any Related Person;
and
(vii) of the filing of any suit or proceeding
against any Related Person in which an adverse decision could
have a material adverse effect upon any Related Person's
financial condition, business or operations.
Upon the occurrence of any of the foregoing the Related Persons will
take all necessary or appropriate steps to remedy promptly any such
material adverse change, Default, acceleration, default or Termination
Event, to protect against any such adverse claim, to defend any such
suit or proceeding, and to attempt to resolve or properly contest all
controversies on account of any of the foregoing.
BORROWER WILL ALSO NOTIFY AGENT AND AGENT'S COUNSEL IN WRITING
AT LEAST TWENTY BUSINESS DAYS PRIOR TO THE DATE THAT ANY RELATED
PERSON CHANGES ITS NAME OR THE LOCATION OF ITS CHIEF EXECUTIVE OFFICE
OR PRINCIPAL PLACE OF BUSINESS.
(e) Maintenance of Properties. Each Related Person will
maintain, preserve, protect, and keep all property material to the
conduct of its business in good condition and in substantial
compliance with all applicable laws, rules and regulations.
(f) Maintenance of Existence and Qualifications. Each
Related Person which is a corporation or partnership will maintain and
preserve its corporate or partnership existence and its rights and
franchises in full force and effect and will qualify to do business as
a foreign corporation or partnership in all states or jurisdictions
where required by applicable law, except where the failure so to
qualify will not have any material adverse effect on Borrower or any
Subsidiary Guarantor.
(g) Payment of Trade Debt, Taxes, etc. Each Related Person
will (i) timely file all required tax returns; (ii) timely pay all
taxes, assessments, and other governmental charges or levies imposed
upon it or upon its income, profits or property; (iii) within ninety
days after the same becomes due pay all Debt owed by it on ordinary
trade terms to vendors, suppliers and other Persons providing goods
and services used by it in the ordinary course of its business; (iv)
pay and discharge when due all other Debt now or hereafter owed by it;
and (v) maintain appropriate accruals and reserves for all of the
foregoing in accordance with GAAP. Each Related Person may, however,
delay paying or discharging any of the foregoing so long as it is in
good faith contesting the validity thereof by
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appropriate proceedings and has set aside on its books adequate
reserves therefor in accordance with GAAP.
(h) Insurance. Each Related Person will keep or cause to be
kept adequately insured by financially sound and reputable insurers
its property (including without limitation "all-risk" (earthquake,
boiler, machinery) insurance on general property, and insurance on
office contents, mobile equipment, metals, ores and the like on
premises, property-in-transit and mobile service equipment) in amounts
that are customary in the type of businesses in which the Related
Persons are engaged, and such other endorsements as are customary in
the type of businesses in which the Related Persons are engaged. Upon
demand by Agent any insurance policies covering any such property
shall be endorsed (i) to provide that such policies may not be
cancelled, reduced or affected in any manner for any reason without
fifteen days prior notice to Agent, and (ii) to provide for any other
matters which Agent may reasonably require and as are customary in
transactions of this type. Each Related Person shall at all times
maintain adequate insurance against its liability for injury to
persons or property, which insurance shall be by financially sound and
reputable insurers and shall without limitation provide the following
coverages: comprehensive general liability and automobile liability.
Borrower self insures for workers compensation.
(i) Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, Borrower will promptly
(and in any event, within 30 days after any invoice or other statement
or notice) pay all reasonable costs and expenses incurred by or on
behalf of (i) Agent (including attorneys' fees) in connection with (1)
the negotiation, preparation, execution and delivery of the Loan
Documents, and any and all consents, waivers or other documents or
instruments relating thereto, (2) the filing, recording, refiling and
re-recording of any Loan Documents and any other documents or
instruments or further assurances required to be filed or recorded or
refiled or re-recorded by the terms of any Loan Document, and (3) the
borrowings hereunder and other action reasonably required in the
course of administration hereof, and (ii) Agent or any Lender
(including attorneys' fees) in connection with the defense or
enforcement of the Loan Documents or the defense of Agent's or any
Lender's exercise of its rights thereunder (including costs and
expenses of determining whether and how to carry out such defense or
enforcement).
(j) Performance on Borrower's Behalf. If any Related Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees
or other amounts it is required to pay under any Loan Document, Agent
may pay the same. Borrower shall immediately reimburse Agent for any
such payments and each amount paid by Agent shall constitute an
Obligation owed
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hereunder which is due and payable on the date such amount is paid by
Agent.
(k) Interest. Borrower hereby promises to Agent and Lenders
to pay interest at the Late Payment Rate on all Obligations which
Borrower has in this Agreement promised to pay (including Obligations
to pay fees or to reimburse or indemnify Agent or any Lender) and
which are not paid when due. Such interest shall accrue from the date
such Obligations become due until they are paid.
(l) Compliance with Agreements and Law. Each Related Person
will perform all material obligations it is required to perform under
the terms of each indenture, mortgage, deed of trust, security
agreement, lease, franchise, agreement, contract or other instrument
or obligation to which it is a party or by which it or any of its
properties is bound. Each Related Person will conduct its business
and affairs in compliance with all laws, regulations, and orders
applicable thereto, including Environmental Laws, in all material
respects.
(m) Evidence of Compliance. Each Related Person will furnish
to Agent at such Related Person's or Borrower's expense all evidence
which Agent from time to time reasonably requests in writing as to the
accuracy and validity of or compliance with all representations,
warranties and covenants made by any Related Person in the Loan
Documents, the satisfaction of all conditions contained therein, and
all other matters pertaining thereto.
(n) Subsidiary Guarantors. Borrower shall cause each of
its Subsidiaries now existing or created, acquired or coming into
existence after the date hereof, that has assets at any time in excess
of $1,000,000 (calculated at net book value) or having net income
constituting more than ten percent (10%) of Cash Earnings for any
Fiscal Quarter, to become a Subsidiary Guarantor and a party hereto at
such time, and shall cause such Subsidiary to deliver at such time
written evidence satisfactory to Agent and its counsel that such
Subsidiary has taken all corporate or partnership action necessary to
duly approve and authorize its joinder hereto and the performance of
its obligations as a Subsidiary Guarantor hereunder. Notwithstanding
the foregoing, in the event it is impracticable for any Subsidiary
organized under the laws of a jurisdiction other than the United
States to become a Subsidiary Guarantor as set forth above, such
Subsidiary shall not be required to become a Subsidiary Guarantor.
Section 5.2. Negative Covenants. To conform with the terms and
conditions under which each Lender is willing to have credit outstanding to
Borrower, and to induce Agent and each Lender to enter into this Agreement and
make the Loans, Borrower warrants, covenants and agrees that until the full and
final payment of the
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Obligations and the termination of this Agreement, unless Majority Lenders have
previously agreed otherwise:
(a) Limitation on Debt. No Related Person will in any manner
owe or be liable for any Funded Debt or any Debt under any Guaranty of
any Funded Debt except;
(i) Permitted Debt owed by Borrower.
(ii) Funded Debt (other than Funded Debt permitted
in clause (i) above) and Debt under any Guaranties of any
Funded Debt, that, in the aggregate for all such Funded Debt
and Debt under Guaranties for all Related Persons, does not
exceed $5,000,000.
(b) Limitation on Liens. No Related Person will create,
assume or permit to exist any Lien upon any of the properties or
assets which it now owns or hereafter acquires, except:
(i) Liens which secure Obligations only.
(ii) statutory Liens for taxes, statutory mechanics'
and materialmen's Liens incurred in the ordinary course of
business, and other similar statutory Liens incurred in the
ordinary course of business, provided such Liens do not
secure Restricted Debt and secure only Debt which is not
delinquent or which is being contested as provided in Section
5.1(g).
(iii) deposits or pledges of cash or cash equivalents
to secure the payment of workers' compensation, unemployment
insurance or other social security or retirement benefits or
obligations, or to secure the performance of bids, trade
contracts, leases, public or statutory obligations, surety or
appeal bonds and other obligations of a like nature incurred
in the ordinary course of business.
(iv) Liens disclosed in the Disclosure Schedule.
(v) Liens securing the purchase price of equipment or
filed in connection with leases of equipment.
(vi) Liens granted to operators of mining joint
ventures to secure the obligations of Related Persons that are
not operators.
(c) Limitation on Mergers, Issuances of Securities. Except
as expressly provided in this subsection no Related Person will merge
or consolidate with or into any other business entity. Any Person may
be merged into Borrower, so long as Borrower is the surviving business
entity, and any Subsidiary of Borrower, including Material
Subsidiaries, may
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be merged into or consolidated with (i) another Subsidiary of
Borrower, so long as a Subsidiary Guarantor is the surviving business
entity, or (ii) Borrower, so long as Borrower is the surviving
business entity. Borrower will not issue any securities other than
Permitted Debt and shares of its common stock and any options or
warrants giving the holders thereof only the right to acquire such
shares. No Material Subsidiary of Borrower will issue any additional
shares of its capital stock or other securities or any options,
warrants or other rights to acquire such additional shares or other
securities except to Borrower and only to the extent not otherwise
forbidden under the terms hereof. No Material Subsidiary of Borrower
which is a partnership will allow any diminution of Borrower's
interest (direct or indirect) therein.
(d) Limitation on Sales of Property. No Related Person will
sell, transfer, lease, exchange, alienate or dispose of any of its
material assets or properties or any material interest therein except:
(i) equipment which is worthless or obsolete or
which is replaced by equipment of equal suitability and value
or is sold in the ordinary course of business.
(ii) inventory which is sold in the ordinary course of
business on ordinary trade terms.
(iii) properties or assets, or interests therein,
the value of which does not exceed in the aggregate during any
Fiscal Year 10% of the net book value of all of Borrowers
tangible properties and assets; provided that immediately upon
any such sale the Total Debt to Cash Earnings Ratio shall be
recalculated excluding the Cash Earnings attributable to the
properties and assets so sold (excluding any gain or including
any losses attributable to such sale).
Neither Borrower nor any of Borrower's Subsidiaries will sell,
transfer or otherwise dispose of capital stock of any of Borrower's
Subsidiaries except that any Material Subsidiary of Borrower may sell
or issue its own capital stock to the extent not otherwise prohibited
hereunder. No Related Person will discount, sell, pledge or assign
any notes payable to it, accounts receivable or future income except
to the extent expressly permitted under the Loan Documents.
(e) Limitation on Dividends and Redemptions. No Related
Person will declare or pay any dividends on, or make any other
distribution in respect of, any class of its capital stock or any
partnership or other interest in it, nor will any Related Person
directly or indirectly make any capital contribution to or purchase,
redeem, acquire or retire any shares of the capital stock of or
partnership
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interests in any Related Person (whether such interests are now or
hereafter issued, outstanding or created), or cause or permit any
reduction or retirement of the capital stock of any Related Person,
except as expressly provided in this section. Such dividends,
distributions, contributions, purchases, redemptions, acquisitions,
retirements or reductions may be made by the Related Persons (i)
without limitation to Borrower; and (ii) to Subsidiary Guarantors. In
addition to the foregoing each Related Person may declare and pay to
any Persons (x) cash dividends so long as no Default or Event of
Default has occurred and is continuing, and (y) dividends payable only
in common stock, so long as no Related Person's interest in any of its
Subsidiaries is thereby reduced. If no Default or Event of Default
has occurred and is continuing, Borrower may pay dividends on its
preferred stock.
(f) Limitation on Investments and New Businesses. No Related
Person will (i) make any expenditure or commitment or incur any
obligation or enter into or engage in any transaction except in the
ordinary course of business, (ii) engage directly or indirectly in any
business or conduct any operations except in connection with or
incidental to its present businesses and operations, or (iii) make any
acquisitions of or capital contributions to or other investments in
any Person, other than Permitted Investments.
(g) Limitation on Credit Extensions. Except for Permitted
Investments, no Related Person will extend credit, make advances or
make loans other than (i) normal and prudent extensions of credit to
customers buying goods and services in the ordinary course of
business, which extensions shall not be for longer periods than those
extended by similar businesses operated in a normal and prudent
manner, (ii) loans to Borrower or to any Subsidiary Guarantor, (iii)
loans in an aggregate outstanding principal amount not to exceed
$1,000,000 to third parties.
(h) Transactions with Affiliates. No Related Person will
engage in any material transaction with any of its Affiliates on terms
which are less favorable to it than those which would have been
obtainable at the time in arm's-length dealing with Persons other than
such Affiliates, provided that such restriction shall not apply to
transactions among Borrower and its wholly owned Subsidiaries.
(i) ERISA Plans. No Related Person will incur any obligation
to contribute to any "multiemployer plan" as defined in Section 4001
of ERISA.
(j) Fiscal Year. Neither Borrower nor any Subsidiary
Guarantor will change its fiscal year.
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(k) Working Capital and Current Ratio. The ratio of
Borrower's Consolidated current assets to Borrower's Consolidated
current liabilities will never be less than 1.5 to 1.0. For purposes
of this subsection, Borrower's Consolidated current liabilities will
be calculated without including any payments of principal on the Note
which are required to be repaid within one year from the time of
calculation.
(l) Fixed Charge Coverage Ratio. The ratio of (1) Borrower's
Consolidated EBITDA as of the end of each Fiscal Quarter to (2)
Borrower's Consolidated Fixed Charges as of the end of such Fiscal
Quarter will never be less than (A) 1.0 to 1.0 at any time after the
date hereof and (B) 1.5 to 1.0 at any time after December 31, 1994.
ARTICLE VI - Bank Accounts, Etc.
Section 6.1. Bank Accounts; Offset. To secure the repayment of the
Obligations Borrower and each Subsidiary Guarantor hereby grants to Agent and
each Lender and to each financial institution which hereafter acquires a
participation or other interest in any Loan or Note (in this section called a
"Participant") a security interest, a lien, and a right of offset, each of
which shall be in addition to all other interests, liens, and rights of Agent
or any Lender or Participant at common law, under the Loan Documents, or
otherwise, and each of which shall be upon and against (a) any and all moneys,
securities or other property (and the proceeds therefrom) of Borrower or such
Subsidiary Guarantor now or hereafter held or received by or in transit to
Agent or any Lender or Participant from or for the account of Borrower or such
Subsidiary Guarantor, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special, time or
demand, provisional or final) of Borrower or such Subsidiary Guarantor with
Agent or any Lender or Participant, and (c) any other credits and claims of
Borrower or such Subsidiary Guarantor at any time existing against Agent or any
Lender or Participant, including claims under certificates of deposit. Upon
the occurrence of any Default, each of Agent and Lenders and Participants is
hereby authorized to foreclose upon, offset, appropriate, and apply, at any
time and from time to time, without notice to Borrower or any Subsidiary
Guarantor, any and all items hereinabove referred to against the Obligations
then due and payable.
ARTICLE VIA - Guaranty
Section 6A.1. Guaranty.
(a) Each Subsidiary Guarantor hereby irrevocably, absolutely,
and unconditionally guarantees to Lenders the prompt, complete, and
full payment when due, and no matter how the same shall become due, of
all Obligations. Without limiting the generality of the foregoing,
each Subsidiary
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Guarantor's liability hereunder shall extend to and include all
post-petition interest, expenses, and other duties and liabilities of
Borrower described above in this subsection (a), or below in the
following subsection (b), which would be owed by Borrower but for the
fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization, or similar proceeding involving
Borrower.
(b) Each Subsidiary Guarantor hereby irrevocably, absolutely,
and unconditionally guarantees to Lenders the prompt, complete and
full performance, when due, and no matter how the same shall become
due, of all obligations and undertakings of Borrower to Lenders under,
by reason of, or pursuant to any of the Loan Documents.
(c) If Borrower shall for any reason fail to pay any
Obligation, as and when such Obligation shall become due and payable,
whether at its stated maturity, as a result of the exercise of any
power to accelerate, or otherwise, each Subsidiary Guarantor will,
forthwith upon demand by Agent, pay such Obligation in full to Agent
for distribution to Lenders. If Borrower shall for any reason fail to
perform promptly any Obligation, each Subsidiary Guarantor will,
forthwith upon demand by Agent, cause such Obligation to be performed
or, if specified by Agent or Lenders, provide sufficient funds, in
such amount and manner as Agent shall in good faith determine, for the
prompt, full and faithful performance of such Obligation by Agent or
such other Person as Agent shall designate.
(d) If either Borrower or any Subsidiary Guarantor fails to
pay or perform any Obligation as described in the immediately
preceding subsections (a), (b), or (c), each Subsidiary Guarantor will
incur the additional obligation to pay to Agent, and each Subsidiary
Guarantor will forthwith upon demand by Agent pay to Agent for
distribution to Lenders, the amount of any and all expenses, including
fees and disbursements of Agent's and Lender's counsel and of any
experts or agents retained by Agent, which Agent or Lenders may incur
as a result of such failure.
(e) Notwithstanding the foregoing or any other provisions
of this Agreement, it is agreed and understood that no Subsidiary
Guarantor shall be required to pay hereunder at any time more than the
Maximum Guaranteed Amount determined with respect to such Subsidiary
Guarantor as of such time. Each Subsidiary Guarantor agrees that the
Obligations may at any time exceed the sum of the Maximum Guaranteed
Amount plus the aggregate maximum amount of all Obligations of all
other Subsidiary Guarantors, without affecting or impairing the
Obligations of such Subsidiary Guarantor.
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Section 6A.2. Unconditional Guaranty.
(a) No action which Agent or Lenders may take or omit to take
in connection with any of the Loan Documents, any of the Obligations
(or any other indebtedness owing by Borrower to Agent or Lenders), or
any Cash Collateral, and no course of dealing of Agent or Lenders with
any other Person, shall release or diminish any Subsidiary Guarantor's
obligations, liabilities, agreements or duties hereunder, affect any
Subsidiary Guarantor's guaranty any way, or afford any Subsidiary
Guarantor any recourse against Agent or Lenders, regardless of whether
any such action or inaction may increase any risks to or liabilities
of Agent or Lender or any other Person or increase any risk to or
diminish any safeguard of any Cash Collateral. Without limiting the
foregoing, each Subsidiary Guarantor hereby expressly agrees that
Agent or Lenders may, from time to time, without notice to or the
consent of any Subsidiary Guarantor, do any or all of the following:
(i) Amend, change or modify, in whole or in part,
any one or more of the Loan Documents and give or refuse to
give any waivers or other indulgences with respect thereto.
(ii) Neglect, delay, fail, or refuse to take or
prosecute any action for the collection or enforcement of any
of the Obligations, to foreclose or take or prosecute any
action in connection with any Cash Collateral or Loan
Document, to bring suit against any Person, or to take any
other action concerning the Obligations or the Loan Documents.
(iii) Accelerate, change, rearrange, extend, or
renew the time, terms, or manner for payment or performance of
any one or more of the Obligations.
(iv) Compromise or settle any unpaid or unperformed
Obligation or any other obligation or amount due or owing, or
claimed to be due or owing, under any one or more of the Loan
Documents.
(v) Take, exchange, amend, eliminate, surrender,
release, or subordinate any or all Cash Collateral for any or
all of the Obligations, accept additional or substituted Cash
Collateral therefor, and perfect or fail to perfect Lenders'
rights in any or all Cash Collateral.
(vi) Discharge, release, substitute or add obligors.
(vii) Apply all monies received from obligors or
others, or from any Cash Collateral for any of the
Obligations, as Agent or Lenders may determine to be in
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its best interest, without in any way being required to
marshall Cash Collateral or assets or to apply all or any
part of such monies upon any particular Obligations.
(b) No action or inaction of any Person, and no change of law
or circumstances, shall release or diminish any Subsidiary Guarantor's
obligations, liabilities, agreements, or duties hereunder, affect this
guaranty in any way, or afford any Subsidiary Guarantor any recourse
against Agent or Lenders. Without limiting the foregoing, the
obligations, liabilities, agreements, and duties of Subsidiary
Guarantors under this Guaranty shall not be released, diminished,
impaired, reduced, or affected by the occurrence of any or all of the
following from time to time, even if occurring without notice to or
without the consent of any Subsidiary Guarantor:
(i) Any voluntary or involuntary liquidation,
dissolution, sale of all or substantially all assets,
marshalling of assets or liabilities, receivership,
conservatorship, assignment for the benefit of creditors,
insolvency, bankruptcy, reorganization, arrangement, or
composition of Borrower or any Subsidiary Guarantor or any
other proceedings involving Borrower or any Subsidiary
Guarantor or any of the assets of Borrower or any Subsidiary
Guarantor under laws for the protection of debtors, or any
discharge, impairment, modification, release, or limitation of
the liability of, or stay of actions or lien enforcement
proceedings against, Borrower or any Subsidiary Guarantor, any
properties of Borrower or any Subsidiary Guarantor, or the
estate in bankruptcy of Borrower or any Guarantor in the
course of or resulting from any such proceedings.
(ii) The failure by Agent or Lenders to file or
enforce a claim in any proceeding described in the immediately
preceding subsection (i) or to take any other action in any
proceeding to which Borrower or any Subsidiary Guarantor is a
party.
(iii) The release by operation of law of Borrower or
any Subsidiary Guarantor from any of the Obligations or any
other obligations to Lender.
(iv) The invalidity, deficiency, illegality, or
unenforceability of any of the Obligations or the Loan
Documents, in whole or in part, any bar by any statute of
limitations or other law of recovery on any of the
Obligations, or any defense or excuse for failure to perform
on account of force majeure, act of God, casualty,
impossibility, impracticability, or other defense or excuse
whatsoever.
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(v) The failure of Borrower or any Subsidiary
Guarantor or any other Person to sign any guaranty or other
instrument or agreement within the contemplation of Borrower
or any Subsidiary Guarantor, Agent or Lender.
(vi) The fact that any Subsidiary Guarantor may have
incurred directly part of the Obligations or is otherwise
primarily liable therefor.
(vii) Without limiting any of the foregoing, any
fact or event (whether or not similar to any of the foregoing)
which in the absence of this provision would or might
constitute or afford a legal or equitable discharge or release
of or defense to a guarantor or surety other than the actual
payment and performance by any Subsidiary Guarantor under this
guaranty.
(c) Agent and Lenders may invoke the benefits of this Article
against any Subsidiary Guarantor before pursuing any remedies against
Borrower or any other Subsidiary Guarantor or any other Person. Agent
or Lenders may maintain an action against any Subsidiary Guarantor
hereunder without joining Borrower or any other Subsidiary Guarantor
therein and without bringing separate action against Borrower or any
other Subsidiary Guarantor.
(d) If any payment to Agent or Lenders by Borrower or any
Subsidiary Guarantor is held to constitute a preference or a voidable
transfer under applicable state or federal laws, or if for any other
reason Agent or any Lender is required to refund such payment to the
payor thereof or to pay the amount thereof to any other Person, such
payment to Agent or Lenders shall not constitute a release of any
guarantor from any liability hereunder, and each guarantor agrees to
pay such amount to Agent or Lenders on demand and agrees and
acknowledges that this guaranty shall continue to be effective or
shall be reinstated, as the case may be, to the extent of any such
payment or payments. Any transfer by subrogation which is made as
contemplated in Section 6A.6 prior to any such payment or payments
shall (regardless of the terms of such transfer) be automatically
voided upon the making of any such payment or payments, and all rights
so transferred shall thereupon revert to and be vested in Agent and
Lenders.
(e) This is a continuing guaranty and shall apply to and
cover all Obligations and renewals and extensions thereof and
substitutions therefor from time to time.
Section 6A.3. Waiver. Each Subsidiary Guarantor hereby waives, with
respect to the Obligations, this guaranty, and the other Loan Documents:
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(a) notice of the incurrence of any Obligation by Borrower.
(b) notice that Agent, Lenders, Borrower, any Subsidiary
Guarantor, or any other Person has taken or omitted to take any action
under any Loan Document or any other agreement or instrument relating
thereto or relating to any Obligation.
(c) notice of acceptance of this guaranty and all rights of
Subsidiary Guarantor under Section 34.02 of the Texas Business and
Commerce Code.
(d) demand, presentment for payment, and notice of demand,
dishonor, nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of
acceleration, protest, notice of protest, and all other notices of any
kind whatsoever.
Section 6A.4. No Subrogation. No Subsidiary Guarantor shall have any
right of subrogation with respect hereto (including any right of subrogation
under Section 34.04 of the Texas Business and Commerce Code). Each Subsidiary
Guarantor hereby waives any rights to enforce any remedy which such Subsidiary
Guarantor may have against Borrower with respect to its obligations under this
Article VI or under applicable laws. Each Subsidiary Guarantor hereby
irrevocably agrees, to the fullest extent permitted by law, that it will not
exercise (and herein waives) any rights against Borrower or any other Person
which it may acquire by way of subrogation, contribution, reimbursement,
indemnification or exoneration under or with respect to this Agreement, the
other Loan Documents or applicable law, by any payment made hereunder or
otherwise. If the foregoing waivers are adjudicated unenforceable by a court
of competent jurisdiction, then each Subsidiary Guarantor agrees that no
liability or obligation of Borrower that shall accrue by virtue of any right to
subrogation, contribution, indemnity, reimbursement or exoneration shall be
paid, nor shall any such liability or obligation be deemed owed, until all of
the Obligations shall have been paid in full.
Section 6A.5. Subordination. Each Subsidiary Guarantor hereby
subordinates and makes inferior to the Obligations any and all indebtedness now
or at any time hereafter owed by Borrower to any Subsidiary Guarantor. Each
Subsidiary Guarantor agrees that after the occurrence of any Default or Event
of Default it will neither permit Borrower to repay such indebtedness or any
part thereof nor accept payment from Borrower of such indebtedness or any part
thereof without the prior written consent of Majority Lender. If any
Subsidiary Guarantor receives any such payment without the prior written
consent of Majority Lenders, the amount so paid shall be held in trust for the
benefit of Agent and Lenders, shall be segregated from the other funds of such
Subsidiary Guarantor, and shall forthwith be paid over to Agent
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and Lenders to be held by Agent and Lenders as collateral for, or then or at
any time thereafter applied in whole or in part by Agent and Lenders against,
all or any portions of the Obligations, whether matured or unmatured, in such
order as Agent and Lenders shall elect.
ARTICLE VII - Events of Default and Remedies
Section 7.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Any Related Person fails to pay any Obligation
constituting interest within five (5) days after the date when due or
any Related Person fails to pay any other Obligation when due and
payable in each case, whether at a date for the payment of a fixed
installment or as a contingent or other payment becomes due and
payable or as a result of acceleration or otherwise;
(b) Any "default" or "event of default" occurs under any Loan
Document which defines either such term, and the same is not remedied
within the applicable period of grace (if any) provided in such Loan
Document;
(c) Any Related Person fails to duly observe, perform or
comply with any covenant, agreement or provision of Section 5.1(d),
Section 5.2 or Section 6A.1;
(d) Any Related Person fails (other than as referred to in
subsections (a), (b) or (c) above) to duly observe, perform or comply
with any covenant, agreement, condition or provision of any Loan
Document, and such failure remains unremedied for a period of thirty
(30) days after notice of such failure is given by Agent to Borrower;
(e) Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Related Person in
connection with any Loan Document shall prove to have been false or
incorrect in any material respect on any date on or as of which made,
or any Loan Document at any time ceases to be valid, binding and
enforceable as warranted in Section 4.1(e) for any reason other than
its release or subordination by Agent;
(f) Any Related Person fails to duly observe, perform or
comply with any agreement with any Person or any term or condition of
any instrument, if such agreement or instrument is materially
significant to Borrower or materially significant to any Subsidiary
Guarantor, and such failure is not remedied within the applicable
period of grace (if any) provided in such agreement or instrument;
(g) Any Related Person (i) fails to pay any portion, when
such portion is due, of any of its Debt in excess of
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$1,000,000, or (ii) breaches or defaults in the performance of any
agreement or instrument by which any such Debt is issued, evidenced,
governed, or secured, which breach would entitle the holder thereof to
accelerate such Debt, and any such failure, breach or default
continues beyond any applicable period of grace provided therefor;
(h) Any Related Person:
(i) suffers the entry against it of a judgment,
decree or order for relief by a court of competent
jurisdiction in an involuntary proceeding commenced under any
applicable bankruptcy, insolvency or other similar law of any
jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such
proceeding commenced against it which remains undismissed for
a period of thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar law now or hereafter in
effect, including the federal Bankruptcy Code, as from time to
time amended; or applies for or consents to the entry of an
order for relief in an involuntary case under any such law; or
makes a general assignment for the benefit of creditors; or
fails generally to pay (or admits in writing its inability to
pay) its debts as such debts become due; or takes corporate or
other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking
possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of all or a
substantial part of its assets in a proceeding brought against
or initiated by it, and such appointment is neither made
ineffective nor discharged within thirty days after the making
thereof, or such appointment or taking possession is at any
time consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final
judgment for the payment of money in excess of $1,000,000 (not
covered by insurance satisfactory to Agent in its discretion),
unless the same is discharged within thirty days after the
date of entry thereof or an appeal or appropriate proceeding
for review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any
similar process to be issued by any court against all or any
substantial part of its property, and such writ or warrant of
attachment or any similar process is not stayed or released
prior to the seizure thereunder
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of any such property (and in any event within thirty days
after the entry or levy thereof or after any stay is vacated
or set aside);
(i) Either (i) any "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code of 1986, as
amended) in excess of $3,000,000 exists with respect to any ERISA
Plan, whether or not waived by the Secretary of the Treasury or his
delegate, or (ii) any Termination Event occurs with respect to any
ERISA Plan and the then current value of such ERISA Plan's benefit
liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than
$3,000,000 (or in the case of a Termination Event involving the
withdrawal of a substantial employer, the withdrawing employer's
proportionate share of such excess exceeds such amount); and
(j) Any material adverse change occurs in Borrower's
Consolidated financial condition or results of operations, other than
any such change resulting from the matters designated as (III)(1) or
(III)(2) in the Disclosure Schedule.
Upon the occurrence of an Event of Default described in subsection (h)(i),
(h)(ii) or (h)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person who at any time
ratifies or approves this Agreement. During the continuance of any other Event
of Default, Agent at any time and from time to time may (and upon written
instructions from Majority Lenders, Agent shall), without notice to Borrower or
any other Related Person, declare any or all of the Obligations immediately due
and payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of
any kind, all of which are hereby expressly waived by Borrower and each Related
Person who at any time ratifies or approves this Agreement. After any such
acceleration (whether automatic or due to any declaration by Agent), any
obligation of any Lender to make any further Advances shall be permanently
terminated.
Section 7.2. Remedies. If any Default shall occur and be continuing
(a) Agent shall, upon written instructions from Majority Lenders, protect and
enforce Lenders' rights under the Loan Documents by any appropriate proceedings
and enforce the payment of any Obligations due Lenders or enforce any other
legal or equitable right which Lenders may have, provided Agent shall not be
required to exercise any discretion or take any action which exposes it to a
risk of personal liability that it considers unreasonable or which is contrary
to the Loan Documents or to applicable law, and (b) each Lender may protect and
enforce
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its rights under the Loan Documents by any appropriate proceedings, including
proceedings for specific performance of any covenant or agreement contained in
any Loan Document, and may enforce the payment of any Obligations due it or
enforce any other legal or equitable right which it may have. All rights,
remedies and powers conferred upon Agent and Lenders under the Loan Documents
shall be deemed cumulative and not exclusive of any other rights, remedies or
powers available under the Loan Documents or at law or in equity.
Section 7.3. INDEMNITY. BORROWER AGREES TO INDEMNIFY AGENT AND EACH
LENDER, UPON DEMAND, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
CLAIMS, LOSSES, DAMAGES, PENALTIES, FINES, ACTIONS, JUDGMENTS, SUITS,
SETTLEMENTS, COSTS, EXPENSES OR DISBURSEMENTS (INCLUDING REASONABLE FEES OF
ATTORNEYS, ACCOUNTANTS, EXPERTS AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER
(IN THIS SECTION COLLECTIVELY CALLED "LIABILITIES AND COSTS") WHICH TO ANY
EXTENT (IN WHOLE OR IN PART) MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED
AGAINST AGENT OR SUCH LENDER GROWING OUT OF, RESULTING FROM OR IN ANY OTHER WAY
ASSOCIATED WITH ANY OF THE LOAN DOCUMENTS AND THE TRANSACTIONS AND EVENTS
(INCLUDING THE ENFORCEMENT OR DEFENSE THEREOF) AT ANY TIME ASSOCIATED THEREWITH
OR CONTEMPLATED THEREIN (INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH ANY
ENVIRONMENTAL LAWS BY ANY RELATED PERSON OR ANY LIABILITIES OR DUTIES OF ANY
RELATED PERSON, AGENT OR ANY LENDER WITH RESPECT TO HAZARDOUS MATERIALS FOUND
IN OR RELEASED INTO THE ENVIRONMENT). THE FOREGOING INDEMNIFICATION SHALL
APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY
AGENT OR ANY LENDER, PROVIDED ONLY THAT NEITHER AGENT NOR ANY LENDER SHALL BE
ENTITLED UNDER THIS SECTION TO RECEIVE INDEMNIFICATION FOR THAT PORTION, IF
ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY ITS OWN
INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL
JUDGMENT. IF ANY PERSON (INCLUDING BORROWER OR ANY OF ITS AFFILIATES) EVER
ALLEGES SUCH GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY AGENT OR ANY LENDER, THE
INDEMNIFICATION PROVIDED FOR IN THIS SECTION SHALL NONETHELESS BE PAID UPON
DEMAND, SUBJECT TO LATER ADJUSTMENT OR REIMBURSEMENT, UNTIL SUCH TIME AS A
COURT OF COMPETENT JURISDICTION ENTERS A FINAL JUDGMENT AS TO THE EXTENT AND
EFFECT OF THE ALLEGED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. AS USED IN THIS
SECTION THE TERMS "AGENT" AND "LENDER" SHALL REFER NOT ONLY TO THE PERSONS
DESIGNATED AS SUCH IN SECTION 1.1 BUT ALSO TO EACH DIRECTOR, OFFICER, AGENT,
ATTORNEY, EMPLOYEE, REPRESENTATIVE AND AFFILIATE OF SUCH PERSON.
ARTICLE VIII - Agent
Section 8.1. Appointment and Authority. Each Lender hereby
irrevocably authorizes Agent, and Agent hereby undertakes, to receive payments
of principal, interest and other amounts due hereunder as specified herein and
to take all other actions and to exercise such powers under the Loan Documents
as are specifically delegated to Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. The relationship of Agent
to Lenders is only that of one commercial bank acting as administrative agent
for others, and nothing in the Loan Documents shall be construed to constitute
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Agent a trustee or other fiduciary for any holder of any of the Notes or of any
participation therein nor to impose on Agent duties and obligations other than
those expressly provided for in the Loan Documents. With respect to any
matters not expressly provided for in the Loan Documents and any matters which
the Loan Documents place within the discretion of Agent, Agent shall not be
required to exercise any discretion or take any action, and it may request
instructions from Lenders with respect to any such matter, in which case it
shall be required to act or to refrain from acting (and shall be fully
protected and free from liability to all Lenders in so acting or refraining
from acting) upon the instructions of Majority Lenders (including itself),
provided, however, that Agent shall not be required to take any action which
exposes it to a risk of personal liability that it considers unreasonable or
which is contrary to the Loan Documents or to applicable law. Upon receipt by
Agent from Borrower of any communication calling for action on the part of
Lenders or upon notice from any Lender to Agent of any Default or Event of
Default, Agent shall promptly notify each Lender thereof.
Section 8.2. Exculpation, Agent's Reliance, Etc. NEITHER AGENT NOR
ANY OF ITS DIRECTORS, OFFICERS, AGENTS, ATTORNEYS, OR EMPLOYEES SHALL BE LIABLE
FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY ANY OF THEM UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS, INCLUDING THEIR NEGLIGENCE OF ANY KIND,
EXCEPT THAT EACH SHALL BE LIABLE FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. Without limiting the generality of the foregoing, Agent (a) may
treat the payee of any Note as the holder thereof until Agent receives written
notice of the assignment or transfer thereof in accordance with this Agreement,
signed by such payee and in form satisfactory to Agent; (b) may consult with
legal counsel (including counsel for Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of
such counsel, accountants or experts; (c) makes no warranty or representation
to any Lender and shall not be responsible to any Lender for any statements,
warranties or representations made in or in connection with the Loan Documents;
(d) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of the Loan Documents
on the part of any Related Person or to inspect the property (including the
books and records) of any Related Person; (e) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Loan Document or any instrument or document
furnished in connection therewith; (f) may rely upon the representations and
warranties of the Related Persons and the Lenders in exercising its powers
hereunder; and (g) shall incur no liability under or in respect of the Loan
Documents by acting upon any notice, consent, certificate or other instrument
or writing (including any telecopy, telegram, cable or telex) believed by it to
be genuine and signed or sent by the proper Person or Persons.
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Section 8.3. Lenders' Credit Decisions. Each Lender acknowledges
that it has, independently and without reliance upon Agent or any other Lender,
made its own analysis of Borrower and the transactions contemplated hereby and
its own independent decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents.
Section 8.4. Indemnification. Each Lender agrees to indemnify Agent
(to the extent not reimbursed by Borrower within ten (10) days after demand)
from and against such Lender's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts, and advisors) of any kind or nature
whatsoever (in this section collectively called "liabilities and costs") which
to any extent (in whole or in part) may be imposed on, incurred by, or asserted
against Agent growing out of, resulting from or in any other way associated
with any of the Loan Documents and the transactions and events (including the
enforcement thereof) at any time associated therewith or contemplated therein
(including any violation or noncompliance with any Environmental Laws by any
Person or any liabilities or duties of any Person with respect to Hazardous
Materials found in or released into the environment). THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN
ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY AGENT, PROVIDED ONLY THAT NO LENDER SHALL BE OBLIGATED
UNDER THIS SECTION TO INDEMNIFY AGENT FOR THAT PORTION, IF ANY, OF ANY
LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY AGENT'S OWN INDIVIDUAL
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL JUDGMENT.
Cumulative of the foregoing, each Lender agrees to reimburse Agent promptly
upon demand for such Lender's Percentage Share of any costs and expenses to be
paid to Agent by Borrower under Section 5.1(i) to the extent that Agent is not
timely reimbursed for such expenses by Borrower as provided in such section.
As used in this section the term "Agent" shall refer not only to the Person
designated as such in Section 1.1 but also to each director, officer, agent
attorney, employee, representative and Affiliate of such Person.
Section 8.5. Rights as Lender. In its capacity as a Lender, Agent
shall have the same rights and obligations as any Lender and may exercise such
rights as though it were not Agent. Agent may accept deposits from, lend money
to, act as Trustee under indentures of, and generally engage in any kind of
business with any of the Related Persons or their Affiliates, all as if it were
not Agent hereunder and without any duty to account therefor to any other
Lender.
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Section 8.6. Sharing of Set-Offs and Other Payments. Each of Agent
and Lender agrees that if it shall, whether through the exercise of rights
under Loan Documents or rights of banker's lien, set off, or counterclaim
against Borrower or otherwise, obtain payment of a portion of the aggregate
Obligations owed to it which, taking into account all distributions made by
Agent under Section 2.9, causes Agent or such Lender to have received more than
it would have received had such payment been received by Agent and distributed
pursuant to Section 2.9, then (a) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the Obligations as
necessary to cause Agent and all Lenders to share all payments as provided for
in Section 2.9, and (b) such other adjustments shall be made from time to time
as shall be equitable to ensure that Agent and all Lenders share all payments
of Obligations as provided in Section 2.9; provided, however, that nothing
herein contained shall in any way affect the right of Agent or any Lender to
obtain payment (whether by exercise of rights of banker's lien, set-off or
counterclaim or otherwise) of indebtedness other than the Obligations.
Borrower expressly consents to the foregoing arrangements and agrees that any
holder of any such interest or other participation in the Obligations, whether
or not acquired pursuant to the foregoing arrangements, may to the fullest
extent permitted by law exercise any and all rights of banker's lien, set-off,
or counterclaim as fully as if such holder were a holder of the Obligations in
the amount of such interest or other participation. If all or any part of any
funds transferred pursuant to this section is thereafter recovered from the
seller under this section which received the same, the purchase provided for in
this section shall be deemed to have been rescinded to the extent of such
recovery, together with interest, if any, if interest is required pursuant to
court order to be paid on account of the possession of such funds prior to such
recovery.
Section 8.7. Investments. Whenever Agent in good faith determines
that it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lenders about how such funds should be distributed, Agent may choose to
defer distribution of the funds which are the subject of such uncertainty or
dispute. If Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Agent is otherwise required to invest funds
pending distribution to Lenders, Agent shall invest such funds pending
distribution; all interest on any such investment shall be distributed upon the
distribution of such investment and in the same proportion and to the same
Persons as such investment. All moneys received by Agent for distribution to
Lenders (other than to the Person who is Agent in its separate capacity as a
Lender) shall be held by Agent pending such distribution solely as Agent for
such Lenders, and Agent shall have no equitable title to any portion thereof.
Section 8.8. Benefit of Article VIII. The provisions of this Article
(other than the following Section 8.9) are intended solely for the benefit of
Agent and Lenders, and no Related
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Person shall be entitled to rely on any such provision or assert any such
provision in a claim or defense against Agent or any Lender. Agent and Lenders
may waive or amend such provisions as they desire without any notice to or
consent of Borrower or any Related Person.
Section 8.9. Resignation. Agent may resign at any time by giving
written notice thereof to Lenders and Borrower. Each such notice shall set
forth the date of such resignation. Upon any such resignation Majority Lenders
shall have the right to appoint a successor Agent. A successor must be
appointed for any retiring Agent, and such Agent's resignation shall become
effective when such successor accepts such appointment. If, within thirty days
after the date of the retiring Agent's resignation, no successor Agent has been
appointed and has accepted such appointment, then the retiring Agent may
appoint a successor Agent, which shall be a commercial bank organized or
licensed to conduct a banking or trust business under the laws of the United
States of America or of any state thereof. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, the retiring Agent shall
be discharged from its duties and obligations under this Agreement and the
other Loan Documents. After any retiring Agent's resignation hereunder the
provisions of this Article VIII shall continue to inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under the
Loan Documents.
Section 8.10. Withholding Tax.
(a) If any Lender is a "foreign corporation" within the
meaning of the United States Internal Revenue Code of 1936 (the
"Code"), such Lender shall deliver to the Agent, along with such other
form or forms as may be required under the Code or other laws of the
United States as a condition to exemption from, or reduction of,
United States withholding tax, either: (i) if such Lender claims an
exemption from, or a reduction of, United States withholding tax under
a tax treaty, a properly completed Internal Revenue Service ("IRS")
Form 1001 before the payment of any interest in the first calendar
year and in each third succeeding calendar year during which interest
may be paid under this Agreement; or (ii) if such Lender claims that
interest paid under this Agreement is exempt from United States
withholding tax because it is effectively connected with a United
States trade or business of such Lender, two (2) properly completed
and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender, and in each
succeeding taxable year of such Lender, during which interest may be
paid under this Agreement. Such Lender agrees to notify the Agent of
any change in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b) Where any Lender is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any
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interest payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the
forms or other documentation required by subparagraph (a) above are
not delivered to the Agent, then the Agent may withhold from any
interest payment to the Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(c) If the IRS or any authority of the United States or
other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or properly executed,
or because such Lender failed to notify the Agent of a change in
circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Lender
shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and
interest, together with all expenses incurred, including legal
expenses, allocated staff costs, and any out of pocket expenses.
(d) In the event that any Lender sells, assigns, grants
participations in, or otherwise transfers its rights under this
Agreement or its respective Note, the Participant shall comply and be
bound by the terms, of subparagraphs (a), (b) and (c) above as though
it were such Lender.
ARTICLE IX - Miscellaneous
Section 9.1. Waivers and Amendments; Acknowledgements.
(a) Waivers and Amendments. No failure or delay (whether by
course of conduct or otherwise) by Agent or any Lender in exercising
any right, power or remedy which Agent or such Lender may have under
any of the Loan Documents shall operate as a waiver thereof or of any
other right, power or remedy, nor shall any single or partial exercise
by Agent or such Lender of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no
consent to any departure therefrom shall ever be effective unless it
is in writing and signed as provided below in this section, and then
such waiver or consent shall be effective only in the specific
instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Related
Person shall in any case of itself entitle any Related Person to any
other or further notice or demand in similar or other circumstances.
This Agreement and the other Loan Documents set forth the entire
understanding between the parties hereto with respect to the
transactions contemplated herein and therein and supersede all prior
discussions and understandings with respect to the subject matter
hereof and thereof, and no waiver, consent, release,
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modification or amendment of or supplement to this Agreement or the
other Loan Documents shall be valid or effective against any party
hereto unless the same is in writing and signed by (i) if such party
is Borrower, by Borrower, (ii) if such party is Agent, by Agent and
(iii) if such party is a Lender, by such Lender or by Agent on behalf
of Lenders with the written consent of Majority Lenders (which consent
regarding the termination of the Loan Documents has already been given
as provided in Section 9.7). Notwithstanding the foregoing or
anything to the contrary herein, Agent shall not, without the prior
consent of each individual Lender, execute and deliver on behalf of
such Lender any waiver or amendment which would: (1) waive any of the
conditions specified in Article III (provided that Agent may in its
discretion withdraw any request it has made under Section 3.2(f)), (2)
increase the amount of such Lender's Percentage Share of the Maximum
Loan Amount or subject such Lender to any additional obligations, (3)
reduce any fees hereunder, or the principal of, or interest on, such
Lender's Note, (4) postpone any date fixed for any payment of any fees
hereunder, or principal of, or interest on, such Lender's Note, (5)
amend the definition herein of "Majority Lenders" or otherwise change
the aggregate amount of Percentage Shares which is required for Agent,
Lenders or any of them to take any particular action under the Loan
Documents, or (6) release Borrower from its obligation to pay such
Lender's Note and Subsidiary Guarantor from its guaranty of such
payment.
(b) Acknowledgements and Admissions. Borrower hereby
represents, warrants, acknowledges and admits that (i) it has been
advised by counsel in the negotiation, execution and delivery of the
Loan Documents to which it is a party, (ii) it has made an independent
decision to enter into this Agreement and the other Loan Documents to
which it is a party, without reliance on any representation, warranty,
covenant or undertaking by Agent or any Lender, whether written, oral
or implicit, other than as expressly set out in this Agreement or in
another Loan Document delivered on or after the date hereof, (iii)
there are no representations, warranties, covenants, undertakings or
agreements by Agent or any Lender as to the Loan Documents except as
expressly set out in this Agreement or in another Loan Document
delivered on or after the date hereof, (iv) neither Agent nor any
Lender has any fiduciary obligation toward Borrower with respect to
any Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the Loan Documents between Borrower, on one
hand, and Agent and each Lender, on the other hand, is and shall be
solely that of debtor and creditor, respectively, (vi) no partnership
or joint venture exists with respect to the Loan Documents between any
of Borrower, Agent and Lenders, (vii) Agent is not Borrower's Agent,
but Agent for Lenders, (viii) should an Event of Default or Default
occur or exist Agent and each Lender will determine in its sole
discretion and for its own reasons
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what remedies and actions it will or will not exercise or take at that
time, (ix) without limiting any of the foregoing, Borrower is not
relying upon any representation or covenant by Agent or any Lender, or
any representative thereof, and no such representation or covenant has
been made, that Agent or any Lender will, at the time of an Event of
Default or Default, or at any other time, waive, negotiate, discuss,
or take or refrain from taking any action permitted under the Loan
Documents with respect to any such Event of Default or Default or any
other provision of the Loan Documents, and (x) Agent and all Lenders
have relied upon the truthfulness of the acknowledgements in this
section in deciding to execute and deliver this Agreement and to make
their Loans.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 9.2. Survival of Agreements; Cumulative Nature. All of the
Related Persons' various representations, warranties, covenants and agreements
in the Loan Documents shall survive the execution and delivery of this
Agreement and the other Loan Documents and the performance hereof and thereof,
including the making or granting of the Loans and the delivery of the Notes
and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to Agent and Lenders and all of Agent's and
Lenders' obligations to Borrower are terminated. All statements and agreements
contained in any certificate or other instrument delivered by any Related
Person to Agent or any Lender under any Loan Document shall be deemed
representations and warranties by Borrower or agreements and covenants of
Borrower under this Agreement. The representations, warranties, indemnities,
and covenants made by the Related Persons in the Loan Documents, and the
rights, powers, and privileges granted to Agent and Lenders in the Loan
Documents, are cumulative, and, except for expressly specified waivers and
consents, no Loan Document shall be construed in the context of another to
diminish, nullify, or otherwise reduce the benefit to Agent or any Lender of
any such representation, warranty, indemnity, covenant, right, power or
privilege. In particular and without limitation, no exception set out in this
Agreement to any representation, warranty, indemnity, or covenant herein
contained shall apply to any similar representation, warranty, indemnity, or
covenant contained in any other Loan Document, and each such similar
representation, warranty, indemnity, or covenant shall be subject only to those
exceptions which are expressly made applicable to it by the terms of the
various Loan Documents.
Section 9.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically
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provided in such Loan Document (provided that Agent may give telephonic notices
to Lenders), and shall be deemed sufficiently given or furnished if delivered
by personal delivery, by telecopy or telex, by delivery service with proof of
delivery, or by registered or certified United States mail, postage prepaid, to
Borrower and the Related Persons at the address of Borrower specified on the
signature pages hereto and to Agent and the other Lenders at their addresses
specified on the signature pages hereto (unless changed by similar notice in
writing given by the particular Person whose address is to be changed). Any
such notice or communication shall be deemed to have been given (a) in the case
of personal delivery or delivery service, as of the date of first attempted
delivery at the address provided herein, (b) in the case of telecopy or telex,
upon receipt, or (c) in the case of registered or certified United States mail,
three days after deposit in the mail; provided, however, that no Request for
Advance or Rate Election shall become effective until actually received by
Agent.
Section 9.4. Joint and Several Liability; Parties in Interest. All
Obligations which are incurred by two or more Related Persons shall be their
joint and several obligations and liabilities subject to the limitations
expressly set forth in Article 6A. All grants, covenants and agreements
contained in the Loan Documents shall bind and inure to the benefit of the
parties thereto and their respective successors and assigns; provided, however,
that no Related Person may assign or transfer any of its rights or delegate any
of its duties or obligations under any Loan Document without the prior consent
of Majority Lenders. Neither Borrower nor any Affiliates of Borrower shall
directly or indirectly purchase or otherwise retire any Obligations owed to any
Lender nor will any Lender accept any offer to do so, unless each Lender shall
have received substantially the same offer with respect to the same Percentage
Share of the Obligations owed to it. If Borrower or any Affiliate of Borrower
at any time purchases some but less than all of the Obligations owed to Agent
and all Lenders, such purchaser shall not be entitled to any rights of Agent or
Lender under the Loan Documents unless and until Borrower or its Affiliates
have purchased all of the Obligations.
Section 9.5. Governing Law; Submission to Process. Except to the
extent that the law of another jurisdiction is expressly elected in a Loan
Document, the Loan Documents shall be deemed contracts and instruments made
under the laws of the State of Texas and shall be construed and enforced in
accordance with and governed by the laws of the State of Texas and the laws of
the United States of America, without regard to principles of conflicts of law.
Chapter 15 of Texas Revised Civil Statutes Annotated Article 5069 (which
regulates certain revolving credit loan accounts and revolving tri-party
accounts) does not apply to this Agreement or to the Notes. Each of Borrower
and the Subsidiary Guarantors hereby irrevocably submits itself to the
non-exclusive jurisdiction of the state and federal courts sitting in the State
of Texas and agrees and consents that
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service of process may be made upon it or any of the Related Persons in any
legal proceeding relating to the Loan Documents or the Obligations by any means
allowed under Texas or federal law. Each Related Person agrees to appoint an
agent for service of process in Texas.
Section 9.6. Limitation on Interest. Agent, Lenders, the Related
Persons and any other parties to the Loan Documents intend to contract in
strict compliance with applicable usury law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by applicable
law from time to time in effect. Neither any Related Person nor any present or
future guarantors, endorsers, or other Persons hereafter becoming liable for
payment of any Obligation shall ever be liable for unearned interest thereon or
shall ever be required to pay interest thereon in excess of the maximum amount
that may be lawfully charged under applicable law from time to time in effect,
and the provisions of this section shall control over all other provisions of
the Loan Documents which may be in conflict or apparent conflict herewith.
Agent and Lenders expressly disavow any intention to charge or collect
excessive unearned interest or finance charges in the event the maturity of any
Obligation is accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) Agent or any Lender or any other holder of any or all of the
Obligations shall otherwise collect moneys which are determined to constitute
interest which would otherwise increase the interest on any or all of the
Obligations to an amount in excess of that permitted to be charged by
applicable law then in effect, then all sums determined to constitute interest
in excess of such legal limit shall, without penalty, be promptly applied to
reduce the then outstanding principal of the related Obligations or, at Agent's
or such Lender's or holder's option, promptly returned to Borrower or the other
payor thereof upon such determination. In determining whether or not the
interest paid or payable, under any specific circumstance, exceeds the maximum
amount permitted under applicable law, Agent, Lenders and the Related Persons
(and any other payors thereof) shall to the greatest extent permitted under
applicable law, (i) characterize any non-principal payment as an expense, fee
or premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts outstanding from time
to time thereunder and the maximum legal rate of interest from time to time in
effect under applicable law in order to lawfully charge the maximum amount of
interest permitted under applicable law. In the event applicable law provides
for an interest ceiling under Texas Revised Civil
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Statutes Annotated article 5069-1.04, that ceiling shall be the indicated rate
ceiling and shall be used when appropriate in determining the Highest Lawful
Rate. As used in this section the term "applicable law" means the laws of the
State of Texas or the laws of the United States of America, whichever laws
allow the greater interest, as such laws now exist or may be changed or amended
or come into effect in the future.
Section 9.7. Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Related Person in any Loan Document, any Obligations under Sections 2.10
through 2.14, and any obligations which any Person may have to indemnify or
compensate Agent or any Lender shall survive any termination of this Agreement
or any other Loan Document. At the request and expense of Borrower, Agent
shall prepare and execute all necessary instruments to reflect and effect such
termination of the Loan Documents. Agent is hereby authorized to execute all
such instruments on behalf of all Lenders, without the joinder of or further
action by any Lender.
Section 9.8. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 9.9. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
SECTION 9.10. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
BORROWER, AGENT AND LENDERS HEREBY (a) KNOWINGLY, VOLUNTARILY, INTENTIONALLY,
AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (b) IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (c) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
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FOREGOING WAIVERS, AND (d) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION. BORROWER HEREBY REPRESENTS AND
ACKNOWLEDGES THAT IT IS A "BUSINESS CONSUMER" FOR THE PURPOSES OF THE TEXAS
DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, THAT IT HAS ASSETS OF
$5,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL STATEMENTS PREPARED
IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, THAT IT HAS
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF CREDIT TRANSACTIONS GENERALLY AND OF THE
TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS IN PARTICULAR, AND THAT IT IS
NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH RESPECT TO THE
PARTIES TO AND THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS; BORROWER
HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER
PROTECTION ACT (OTHER THAN SECTION 17.555 THEREOF), AS FROM TIME TO TIME
AMENDED.
Section 9.11. Assignments and Participations
(a) Assignments. Each Lender shall have the right to sell, assign
or transfer all or any part of such Lender's Notes, Advances, Loans and rights
and Obligations relating to Letters of Credit and the associated rights and
obligations under all Loan Documents to one or more financial institutions,
pension plans, investment funds, or similar purchasers; provided that each such
sale, assignment, or transfer shall be with the consent of Agent, Issuing Bank
and Borrower, which consent will not be unreasonably withheld, and the
assignee, transferee or recipient shall have, to the extent of such sale,
assignment, or transfer, the same rights, benefits and obligations as it would
if it were signatory hereof and a holder of such Notes, including, without
limitation, the right to vote on decisions requiring consent or approval of all
Lenders or Majority Lenders and the obligation to fund its Percentage Share of
any Advances or Loans and payments made under Letters of Credit directly to
Agent; provided further that (i) each Lender in making each such sale,
assignment, or transfer must dispose of a pro rata portion of each Loan made by
such Lender and LC Obligations, (ii) each Lender may not offer to sell its
Notes and Loans or interests therein in violation of any securities laws, and
(iii) no such assignments shall become effective until the assigning Lender
delivers to Agent copies of all written assignments and other documents
evidencing any such assignment or related thereto, providing for the assignee's
ratification and agreement to be bound by the terms of this Agreement and the
other Loan Documents. Within five (5) Business Days after its receipt of
notice that the Agent has received copies of any assignment and the other
documents relating thereto, Borrower shall execute and deliver to the Agent
(for delivery to the relevant assignee) new Notes evidencing such assignee's
assigned Loans and, if the assignor Lender has retained a portion of its Loans,
replacement Notes in the principal amount of the Loans
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retained by the assignor Lender (such Notes to be in exchange for, but not in
payment of, the Notes held by such Lender).
(b) Participations. Each Lender shall have the right to grant
participations in all or any part of such Lender's Notes, Advances, Loans and
rights and obligations relating to Letters of Credit and the associated rights
and obligations under all Loan Documents hereunder to one or more pension
plans, investment funds, financial institutions or similar purchasers; provided
that (i) each such participation shall be with the consent of Agent and Issuing
Bank, which consent shall not be unreasonably withheld, (ii) each Lender
granting a participation shall use its best efforts to give prior notice of any
such participation, but in any event shall promptly notify Agent and Borrower
thereof, (iii) each Lender granting a participation shall retain the right to
vote hereunder, and no participant shall be entitled to vote hereunder on
decisions requiring consent or approval of Majority Lenders (except as set
forth in (v) below), (iv) each Lender and Borrower shall be entitled to deal
with the Lender granting a participation in the same manner as if no
participation had been granted, and (v) no participant shall ever have any
right by reason of its participation to exercise any of the rights of Lenders
hereunder, except that any Lender may agree with any participant that such
Lender will not, without the consent of such participant, consent to any
amendment or waiver described in Section 10.1(a) requiring approval of 100% of
the Lenders.
(c) It is understood and agreed that any Lender may provide to
assignees and participants and prospective assignees and participants financial
information and reports and data concerning Borrower's properties and
operations (provided such Persons have agreed in writing to the confidentiality
provisions set forth in Section 5.1(c) regarding such information and reports
and data).
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
HECLA MINING COMPANY, Borrower
By: /s/ John P. Stilwell
--------------------------------
John P. Stilwell
Vice President-Finance
and Treasurer
Address (for Borrower and
Subsidiary Guarantors):
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
Attention: Vice President-Finance
Telephone: (208) 769-4100
Telecopy: (208) 769-7612
COLORADO AGGREGATE COMPANY OF NEW
MEXICO INC., Subsidiary Guarantor
By: /s/ Joseph T. Heatherly
-------------------------------
Joseph T. Heatherly
Vice President
KENTUCKY-TENNESSEE CLAY COMPANY,
Subsidiary Guarantor
By: /s/ Joseph T. Heatherly
-------------------------------
Joseph T. Heatherly
Vice President
K-T FELDSPAR CORPORATION,
Subsidiary Guarantor
By: /s/ Joseph T. Heatherly
-------------------------------
Joseph T. Heatherly
Vice President
MOUNTAIN WEST PRODUCTS, INC.
Subsidiary Guarantor
By: /s/ Michael B. White
-------------------------------
Michael B. White, Vice President
-67-
<PAGE> 71
<TABLE>
<CAPTION>
Percentage NATIONSBANK OF TEXAS, N.A.,
Share of Agent and Lender
Percentage Maximum
Share Loan Amount
----------- -----------
<S> <C> <C>
By: /s/ David Rubenking
---------------------------------
Name:
Title:
62.5% $25,000,000
Address:
NationsBank Plaza
901 Main Street, 49th Floor (75202)
Post Office Box 830104
Dallas, Texas 75383
Attention: Energy Lending Group
Telephone: (214) 508-1200
Telecopy: (214) 508-1286
with a copy to:
NationsBank of Texas, N.A.
Denver Energy Group
370 Seventeenth, Suite 3250
Denver, Colorado 80202-5632
Attention: David Rubenking
Telephone: (303) 629-6969
Telecopy: (303) 629-6303
SEATTLE-FIRST NATIONAL BANK, Lender
25% $10,000,000
By: /s/ J. Mike Sullivan
---------------------------------
J. Mike Sullivan, Vice President
Address:
Corporate Banking, Spokane Office
West 601 Riverside Ave., Fl. SFC-5
Spokane, Washington 99201
Attention: Joe Poole, Vice Pres.
Telephone: (509) 353-1469
Telecopy: (509) 353-1492
</TABLE>
-68-
<PAGE> 72
<TABLE>
<S> <C> <C>
BANK OF AMERICA, IDAHO, N.A., Lender
12.5% $5,000,000
By: /s/ John A. MacPhee
---------------------------------
John A. MacPhee, Vice President
Address:
401 Front Avenue
P.O. Box 6700
Coeur d'Alene, Idaho, 83816-1934
Attention: John A. MacPhee
Telephone: (208) 667-2571
Telecopy: (208) 667-842044
</TABLE>
-69-
<PAGE> 1
EX-13.1
[HECLA MINING COMPANY LOGO]
THIRD QUARTER REPORT TO SHAREHOLDERS
FOR THE QUARTER ENDING SEPTEMBER 30, 1994
FOR RELEASE: NOVEMBER 3, 1994
COEUR D'ALENE, Idaho -- Hecla Mining Company today reported
net income for the third quarter ended Sept. 30, 1994, of $0.8 million on
revenue of $36 million prior to payment of preferred dividends. After a $2
million dividend to preferred shareholders, the company recorded a net loss
for the quarter of $1.2 million, or 3 cents per common share.
For the first nine months of 1994, Hecla lost $10.1 million,
or 24 cents per common share, on revenue of $103.8 million after a $6
million dividend to preferred shareholders. This compares with a loss of
$12 million, or 32 cents per common share, on revenue of $74.4 million for
the same period in 1993. Preferred shares were issued on June 22, 1993.
Preferred dividends of $2 million were paid in the first nine months of
1993, compared with $6 million in the first nine months of 1994.
During the quarter, Hecla's flagship silver operation, the
Lucky Friday Unit, celebrated the production milestone of 100 million
ounces. "This landmark in the history of the Lucky Friday is especially
significant in light of our decision to proceed with the development of the
Lucky Friday-Gold Hunter deposit," said Arthur Brown, Hecla's chairman and
chief executive officer. Production from Gold Hunter could more than
double Lucky Friday's silver output, returning the mine to historic
production levels in the range of 5 million ounces annually.
Unfortunately, operations at the Lucky Friday have been on temporary
suspension since Aug. 30, 1994, when a hoisting accident caused an
ore-conveyance unit to fall to the bottom of the Lucky Friday Silver Shaft.
No one was injured, and repairs are under way. The mine is scheduled to
resume production in early December. The majority of the costs associated
with the incident are covered by the company's insurance.
Turning to Hecla's gold operations, the new La Choya Unit in
Mexico processed a higher-grade ore zone during the quarter, producing
19,000 ounces at a cash cost of $157 per ounce.
The company's other new gold mine, Grouse Creek in central
Idaho, began a phased start-up in late October. Mining of the underground
high-grade zone and the Sunbeam pit has been under way since midyear. The
mill commenced operation on October 25, and Grouse Creek's first gold pour
is expected in November. Current estimates call for 25,000 to 30,000
ounces of gold production prior to year end. Hecla owns 80 percent of
Grouse Creek, and Great Lakes Minerals Inc. of Toronto owns 20 percent.
The company's 47 percent-owned American Girl joint venture in
California has been working a lower-grade deposit, which has adversely
impacted results. The operating partner, MK Gold of Boise, Idaho, is in
the process of permitting an adjacent higher- grade deposit that would
improve profitability and extend the mine's life.
Mining costs at Republic also were higher as the mine moves
toward depletion of the ore body and ultimate closure scheduled for early
1995. "Closure of the Republic Unit is being done with great regret,
particularly in view of the many contributions by every member of the work
force over the years," Brown said. Recent drilling in the Republic
District has shown encouraging results, and the company intends to continue
exploration efforts there. However, even if an economic ore body is found,
it could take up to two years before production could be resumed.
The industrial minerals segment of the company continued to
report exceptional performance with third quarter sales of $15.3 million,
up 43 percent compared to the same period last year. The company's latest
acquisition in this segment, Mountain West Products Inc. of Rexburg, Idaho,
was not represented in last year's figures and has exceeded sales
expectations. Additionally, feldspar operations in North Carolina continue
to run near total milling capacity.
Hecla is a 103-year-old mining company with operations
principally in the United States and Mexico. The company is a well-known
silver producer with a growing gold profile and a major supplier of ball
clay, kaolin and feldspar. The common and preferred shares of Hecla are
traded on the New York Stock Exchange under the symbols HL and HL-B,
respectively.
-HL-
Contact Bill Booth, vice president-investor and public affairs,
or Mike Callahan, investor relations assistant
6500 Mineral Drive * Coeur d'Alene, Idaho 83814-8788 *
208/769-4100 * FAX 208/769-4159
<PAGE> 2
HECLA MINING COMPANY
(dollars in thousands, except per-share amounts)
(unaudited)
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
--------------------------- -------------------------------
SEPT. 30, Sept. 30, SEPT. 30, Sept. 30,
HIGHLIGHTS 1994 1993 (1) 1994 1993 (1)
- - - ----------------------------------------------------------------------------------------------------------------------
FINANCIAL DATA
- - - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 36,072 $ 23,951 $ 103,779 $ 74,371
Gross profit (loss) 5,846 799 8,916 (81)
Net income (loss) 806 (1,672) (4,143) (9,943)
Loss applicable to common shareholders (1,207) (3,729) (10,181) (12,000)
Loss per common share (0.03) (0.09) (0.24) (0.32)
Cash flow from operating properties (2) 11,607 1,664 14,382 10,504
- - - ----------------------------------------------------------------------------------------------------------------------
SALE OF PRODUCTS BY SEGMENT
- - - ----------------------------------------------------------------------------------------------------------------------
Gold operations $ 16,655 $ 9,261 $ 37,689 $ 25,454
Silver operations 2,488 2,163 8,633 11,097
Industrial minerals 15,302 10,707 50,514 34,288
Specialty metals 834 474 2,830 1,567
---------- ---------- ----------- -------------
Total sales $ 35,279 $ 22,605 $ 99,666 $ 72,406
- - - ----------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) BY SEGMENT
- - - ----------------------------------------------------------------------------------------------------------------------
Gold operations $ 4,522 $ 1,945 $ 5,728 $ 3,598
Silver operations (658) (2,198) (3,494) (7,534)
Industrial minerals 2,176 1,192 6,820 4,149
Specialty metals (194) (140) (138) (294)
----------- ---------- ------------ -------------
Total gross profit (loss) $ 5,846 $ 799 $ 8,916 $ (81)
- - - ----------------------------------------------------------------------------------------------------------------------
PRODUCTION SUMMARY - TOTALS
- - - ----------------------------------------------------------------------------------------------------------------------
Gold - Ounces 40,780 23,908 91,052 74,055
Silver - Ounces 413,439 540,760 1,512,564 2,438,103
Lead - Tons 3,012 4,296 12,734 17,163
Zinc - Tons 490 810 2,335 6,980
Average cost per ounce of gold produced:
Cash production costs $213 $233 $270 $235
Full costs $279 $299 $331 $302
Average cost per ounce of silver produced:
Cash production costs $4.50 $6.69 $5.73 $5.21
Full costs $5.84 $8.03 $7.00 $6.64
- - - ----------------------------------------------------------------------------------------------------------------------
AVERAGE METAL PRICES
- - - ----------------------------------------------------------------------------------------------------------------------
Gold - Realized ($/oz.) 389 375 387 357
Gold - London Final ($/oz.) 386 375 384 355
Silver - Handy & Harman ($/oz.) 5.34 4.67 5.33 4.20
Lead - LME Cash (c./pound) 26.7 17.4 23.3 18.3
Zinc - LME Cash (c./pound) 43.9 40.6 43.6 44.0
</TABLE>
<PAGE> 3
HECLA MINING COMPANY
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
SEPT. 30, Sept. 30,
1994 1993 (1)
- - - --------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
- - - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss $ (4,143) $ (9,943)
Noncash elements included in net loss:
Depreciation, depletion and amortization 10,936 10,867
Loss on disposition of properties, plants and equipment 14 28
Loss (gain) on early retirement of long-term debt 833 (323)
Accretion of interest on production notes and long-term debt 2,000 3,403
Provision for reclamation and closure costs 905 (455)
Minority interest in net loss of consolidated subsidiary - - 43
Change in:
Accounts and notes receivable (7,182) 812
Income tax refund receivable (785) 390
Inventories 300 1,967
Other current assets (145) 145
Accounts payable and accrued liabilities (356) 176
Dividends payable - - 2,057
Accrued payroll and related benefits 548 (192)
Accrued taxes 319 391
Noncurrent liabilities (181) (2,297)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,063 7,069
----------- -----------
- - - --------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
- - - --------------------------------------------------------------------------------------------------------------------
Additions to properties, plants and equipment (57,511) (22,203)
Proceeds from disposition of properties, plants and equipment 13,406 234
Proceeds from sale of investments 30,769 - -
Purchase of restricted investments (13,497) - -
Purchase of investments and increase in cash surrender value of
life insurance (1,926) (539)
Other, net (2,795) (3,786)
----------- -----------
NET CASH APPLIED TO INVESTING ACTIVITIES (31,554) (26,294)
----------- -----------
- - - --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
- - - ---------------------------------------------------------------------------------------------------------------------
Common stock issued under stock option plans 1,726 853
Issuance of common stock 63,499 6,975
Early retirement of long-term debt (50,169) - -
Dividends on preferred stock (6,038) (2,057)
Issuance of preferred stock - - 110,360
Decrease in deferred revenue (36) - -
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,982 116,131
----------- -----------
Net increase (decrease) in cash and cash equivalents (19,509) 96,906
Cash and cash equivalents at beginning of period 40,031 3,967
----------- -----------
Cash and cash equivalents at end of period $ 20,522 $ 100,873
=========== ===========
</TABLE>
<PAGE> 4
HECLA MINING COMPANY
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
SEPT. 30, Dec. 31,
1994 1993 (1)
(UNAUDITED)
- - - ----------------------------------------------------------------------------------------------------------------------
ASSETS
- - - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,522 $ 40,031
Short-term investments 84 27,636
Accounts and notes receivable 26,023 18,841
Income tax refund receivable 785 - -
Inventories 14,720 15,020
Other current assets 2,148 2,003
------------- -------------
Total current assets 64,282 103,531
Investments 5,274 6,565
Investments - restricted cash 13,497 - -
Properties, plants and equipment, net 261,743 229,055
Other noncurrent assets 5,310 7,002
------------- -------------
TOTAL ASSETS $ 350,106 $ 346,153
============= =============
- - - ----------------------------------------------------------------------------------------------------------------------
LIABILITIES
- - - ----------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 16,956 $ 17,312
Accrued payroll and related benefits 2,604 2,056
Preferred stock dividends payable 2,012 2,012
Accrued taxes 1,247 928
------------- -------------
Total current liabilities 22,819 22,308
Deferred income taxes 359 359
Long-term debt 1,821 50,009
Accrued reclamation costs 21,932 24,947
Other noncurrent liabilities 3,641 3,858
------------- -------------
TOTAL LIABILITIES 50,572 101,481
------------- -------------
- - - ----------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- - - ----------------------------------------------------------------------------------------------------------------------
Preferred stock 575 575
Common stock 12,035 10,080
Capital surplus 328,957 265,687
Retained deficit (40,954) (30,774)
Net unrealized loss on securities (8) (8)
Cumulative translation adjustment (182) - -
Treasury stock (889) (888)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 299,534 244,672
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 350,106 $ 346,153
============= =============
</TABLE>
<PAGE> 5
HECLA MINING COMPANY
Consolidated Statements of Operations
(dollars in thousands, except per-share amounts)
(unaudited)
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
------------------------ -----------------------
SEPT. 30, Sept. 30, SEPT. 30, Sept. 30,
1994 1993 (1) 1994 1993 (1)
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Sales of products $ 35,279 $ 22,605 $ 99,666 $ 72,406
---------- ---------- --------- ----------
Cost of sales and other direct
productions costs 25,216 18,775 80,257 62,121
Depreciation, depletion and amortization 4,217 3,031 10,493 10,366
---------- ---------- --------- ----------
29,433 21,806 90,750 72,487
---------- ---------- --------- ----------
Gross profit (loss) 5,846 799 8,916 (81)
---------- ---------- --------- ----------
Other operating expenses:
General and administrative 2,611 1,783 8,950 5,318
Exploration 2,403 1,477 6,502 3,331
Depreciation and amortization 81 196 443 501
Provision for closed operations and
environmental matters 449 464 1,073 912
---------- ---------- --------- ----------
5,544 3,920 16,968 10,062
---------- ---------- --------- ----------
Income (loss) from operations 302 (3,121) (8,052) (10,143)
---------- ---------- --------- ----------
Other income (expense):
Interest and other income 793 1,346 4,113 1,965
Miscellaneous income - - 169 - - 152
Gain (loss) on investments 38 27 1,129 (162)
Minority interest - - - - - - 43
Interest expense:
Total interest cost (476) (1,070) (2,523) (3,990)
Less amount capitalized - - 855 1,751 2,226
---------- ---------- --------- ----------
355 1,327 4,470 234
---------- ---------- --------- ----------
Income (loss) before income taxes and
extraordinary item 657 (1,794) (3,582) (9,909)
Extraordinary item loss on early retirement of
long-term debt (10) - - (833) - -
Income tax (provision) benefit 159 122 272 (34)
---------- ---------- --------- ----------
Net income (loss) 806 (1,672) (4,143) (9,943)
Preferred stock dividends 2,013 2,057 6,038 2,057
---------- ---------- --------- ----------
Net loss applicable to common shareholders $ (1,207) $ (3,729) $ (10,181) $ (12,000)
========== ========== ========= ==========
Net loss per common share $ (0.03) $ (0.09) $ (0.24) (0.32)
========== ========== ========= ==========
Weighted number of common shares
outstanding 48,075 39,576 42,957 37,471
========== ========== ========= ==========
Common shares outstanding at end of period 48,076 39,576
========== ==========
</TABLE>
<PAGE> 6
HECLA MINING COMPANY
PRODUCTION DATA
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
------------------------- --------------------------
SEPT. 30, Sept. 30, SEPT. 30, Sept. 30,
1994 1993 (1) 1994 1993 (1)
- - - ----------------------------------------------------------------------------------------------------------------------
LA CHOYA UNIT (3)
- - - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tons of ore mined 575,444 1,547,944
Ore grade mined - Gold (oz./ton) 0.055 0.054
Gold produced (oz.) 19,074 31,992
Silver produced (oz.) 2,169 3,926
Average cost per ounce of gold produced:
Cash production costs $157 $255
Full cost $254 $353
- - - ----------------------------------------------------------------------------------------------------------------------
REPUBLIC UNIT
- - - ----------------------------------------------------------------------------------------------------------------------
Tons of ore milled 30,517 28,867 86,741 81,370
Ore grade milled - Gold (oz./ton) 0.43 0.48 0.39 0.51
Gold produced (oz.) 12,064 13,739 30,475 38,360
Silver produced (oz.) 77,324 75,065 212,957 206,147
Average cost per ounce of gold produced:
Cash production costs $198 $187 $234 $200
Full cost $249 $236 $294 $253
- - - ----------------------------------------------------------------------------------------------------------------------
AMERICAN GIRL UNIT (REFLECTS HECLA'S 47% SHARE)
- - - ----------------------------------------------------------------------------------------------------------------------
Tons of ore milled 30,807 28,685 90,261 87,967
Tons of ore to heap 168,449 70,442 408,172 231,878
Ore grade milled - Gold (oz./ton) 0.162 0.192 0.170 0.205
Ore grade to heap - Gold (oz./ton) 0.024 0.034 0.025 0.036
Gold produced (oz.) 7,644 7,977 22,496 26,185
Silver produced (oz.) 4,279 3,875 12,234 13,090
Average cost per ounce of gold produced:
Cash production costs $375 $310 $344 $286
Full cost $402 $404 $368 $375
- - - ----------------------------------------------------------------------------------------------------------------------
LUCKY FRIDAY UNIT
- - - ----------------------------------------------------------------------------------------------------------------------
Tons of ore milled 30,839 39,264 119,398 140,152
Ore grade milled - Silver (oz./ton) 10.20 11.69 10.88 11.96
Silver produced (oz.) 325,148 456,106 1,268,364 1,647,933
Lead produced (short tons) 3,012 4,296 12,734 15,865
Average cost per ounce of silver produced:
Cash production costs $4.50 $6.69 $5.73 $5.24
Full cost $5.84 $8.03 $7.00 $6.47
</TABLE>
(1)Financial information and production data previously reported have been
restated to reflect the acquisition of Equinox Resources Ltd.,
accounted for as a pooling of interests.
(2)Consists of income (loss) from operating properties plus depreciation,
adjusted for changes in working capital.
(3)Production began during February 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 20,522
<SECURITIES> 84
<RECEIVABLES> 26,023
<ALLOWANCES> 0
<INVENTORY> 14,720
<CURRENT-ASSETS> 64,282
<PP&E> 446,295
<DEPRECIATION> (184,552)
<TOTAL-ASSETS> 350,106
<CURRENT-LIABILITIES> 22,819
<BONDS> 0
<COMMON> 12,035
0
575
<OTHER-SE> 286,924
<TOTAL-LIABILITY-AND-EQUITY> 350,106
<SALES> 99,666
<TOTAL-REVENUES> 103,779
<CGS> 80,257
<TOTAL-COSTS> 90,750
<OTHER-EXPENSES> 21,877
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 772
<INCOME-PRETAX> (9,620)
<INCOME-TAX> 272
<INCOME-CONTINUING> (9,348)
<DISCONTINUED> 0
<EXTRAORDINARY> (833)
<CHANGES> 0
<NET-INCOME> (10,181)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
