<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 JUNE 30, 1999
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 83815-8788
- ---------------------------------------- ----------------------
(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.
Class Outstanding July 30, 1999
- ---------------------------- --------------------------
Common stock, par value 66,683,965 shares
$0.25 per share
<PAGE> 2
Hecla Mining Company and Subsidiaries
Form 10-Q
For The Quarter Ended June 30, 1999
I N D E X*
PAGE
PART I. - Financial Information
Item l - Consolidated Balance Sheets - June 30,
1999 and December 31, 1998 3
- Consolidated Statements of Operations
and Comprehensive Income (Loss) - Three
Months and Six Months Ended June 30,
1999 and 1998 4
- Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1999 and 1998 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 19
PART II. - Other Information
Item 1 - Legal Proceedings 44
Item 4 - Annual Meeting of Shareholders 49
Item 6 - Exhibits and Reports on Form 8-K 50
*Items omitted are not applicable.
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<PAGE> 3
Part I - Financial Information
Hecla Mining Company and Subsidiaries
Consolidated Balance Sheets (unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,831 $ 2,480
Accounts and notes receivable 36,117 25,919
Income tax refund receivable 16 1,087
Inventories 20,640 22,757
Other current assets 1,163 1,251
--------- ---------
Total current assets 69,767 53,494
Investments 2,173 3,406
Restricted investments 5,914 6,331
Properties, plants and equipment, net 197,604 178,168
Other noncurrent assets 11,178 10,663
--------- ---------
Total assets $ 286,636 $ 252,062
========= =========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 17,021 $ 12,172
Accrued payroll and related benefits 3,501 2,852
Preferred stock dividends payable 2,013 2,012
Accrued taxes 941 772
Accrued reclamation and closure costs 6,912 6,537
--------- ---------
Total current liabilities 30,388 24,345
Deferred income taxes 300 300
Long-term debt 48,503 42,923
Accrued reclamation and closure costs 20,407 23,216
Other noncurrent liabilities 10,107 9,542
--------- ---------
Total liabilities 109,705 100,326
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock, $0.25 par value,
authorized 5,000,000 shares, issued
and outstanding - 2,300,000 shares,
liquidation preference $117,012 575 575
Common stock, $0.25 par value,
authorized 100,000,000 shares;
issued 1999 - 66,746,075;
issued 1998 - 55,166,728 16,687 13,792
Capital surplus 399,966 374,017
Accumulated deficit (233,682) (230,493)
Accumulated other comprehensive loss (5,229) (5,269)
Less stock held by grantor trust;
1999 - 132,290 shares, 1998 - 0 shares (500) - -
Less treasury stock, at cost;
1999 and 1998 - 62,110 shares (886) (886)
--------- ---------
Total shareholders' equity 176,931 151,736
--------- ---------
Total liabilities and shareholders' equity $ 286,636 $ 252,062
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
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</TABLE>
<PAGE> 4
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)(Unaudited)
(Dollars and shares in thousands, except for per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales of products $ 46,058 $ 45,655 $ 87,716 $ 85,784
--------- --------- --------- ---------
Cost of sales and other direct production costs 35,081 36,487 66,427 67,014
Depreciation, depletion and amortization 5,892 5,048 11,944 10,174
--------- --------- --------- ---------
40,973 41,535 78,371 77,188
--------- --------- --------- ---------
Gross profit 5,085 4,120 9,345 8,596
--------- --------- --------- ---------
Other operating expenses:
General and administrative 1,802 2,136 3,813 4,277
Exploration 1,018 1,136 2,180 1,952
Depreciation and amortization 81 99 173 193
Provision for closed operations and
environmental matters 343 72 610 131
--------- --------- --------- ---------
3,244 3,443 6,776 6,553
--------- --------- --------- ---------
Income from operations 1,841 677 2,569 2,043
--------- --------- --------- ---------
Other income (expense):
Interest and other income 1,823 1,403 2,519 3,937
Miscellaneous expense (282) (94) (831) (651)
Gain on investments - - 1,155 - - 1,241
Interest expense:
Interest costs (958) (865) (1,882) (1,605)
Less amount capitalized - - 317 - - 588
--------- --------- --------- ---------
583 1,916 (194) 3,510
--------- --------- --------- ---------
Income before income taxes and cumulative effect
of change in accounting principle 2,424 2,593 2,375 5,553
Income tax benefit (provision) (89) 403 (154) 290
--------- --------- --------- ---------
Income before cumulative effect of change in
accounting principle 2,335 2,996 2,221 5,843
Cumulative effect of change in accounting principle,
net of income tax - - - - (1,385) - -
--------- --------- --------- ---------
Net income 2,335 2,996 836 5,843
Preferred stock dividends (2,013) (2,013) (4,025) (4,025)
--------- --------- --------- ---------
Income (loss) applicable to common shareholders 322 983 (3,189) 1,818
--------- --------- --------- ---------
Other comprehensive income, net of income tax:
Unrealized holding gains on securities 23 61 40 42
--------- --------- --------- ---------
Other comprehensive income 23 61 40 42
--------- --------- --------- ---------
Comprehensive income (loss) applicable to
common shareholders $ 345 $ 1,044 $ (3,149) $ 1,860
========= ========= ========= =========
Basic and diluted income (loss) per common share
before cumulative effect of change in
accounting principle $ 0.01 $ 0.02 $ (0.04) $ 0.03
Cumulative effect of change in accounting
principle - - - - (0.02) - -
--------- --------- --------- ---------
Basic and diluted income (loss) per common share $ 0.01 $ 0.02 $ (0.06) $ 0.03
========= ========= ========= =========
Cash dividends per common share $ - - $ - - $ - - $ - -
========= ========= ========= =========
Weighted average number of common
shares outstanding 60,687 55,102 57,944 55,098
========= ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements.
-4-
</TABLE>
<PAGE> 5
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Operating activities:
Net income $ 836 $ 5,843
Noncash elements included in net income:
Depreciation, depletion and amortization 12,117 10,367
Cumulative effect of change in accounting principle 1,385 - -
Gain on disposition of properties,
plants and equipment (1,347) (2,326)
Gain on sale of investments - - (1,241)
Provision for reclamation and closure costs 463 287
Change in assets and liabilities net of effects from
purchase of Monarch Resources Investments Limited:
Accounts and notes receivable (9,214) (10,252)
Income tax refund receivable 1,071 (294)
Inventories 3,075 3,027
Other current and noncurrent assets (394) (1,605)
Accounts payable and accrued expenses 41 671
Accrued payroll and related benefits 649 907
Accrued taxes 169 163
Accrued reclamation and closure costs and
other noncurrent liabilities (2,421) (4,149)
------- -------
Net cash provided by operating activities 6,430 1,398
------- -------
Investing activities:
Purchase of Monarch Resources Investments Limited,
net of cash acquired (9,183) - -
Additions to properties, plants and equipment (4,617) (10,437)
Proceeds from disposition of properties,
plants and equipment 1,687 3,506
Proceeds from sale of investments 311 1,241
Decrease in restricted investments 417 719
Purchase of investments and change in cash
surrender value of life insurance, net 37 (641)
Other, net (43) 2
------- -------
Net cash used by investing activities (11,391) (5,610)
------- -------
Financing activities:
Common stock issued under stock and stock option plans 20 54
Common stock issuance, net of offering costs 11,860 - -
Preferred stock dividends (4,025) (4,025)
Borrowings, net of repayments, against cash surrender
value of life insurance 925 - -
Borrowings on long-term debt 38,040 26,500
Repayments on long-term debt (32,508) (16,003)
------- -------
Net cash provided by financing activities 14,312 6,526
------- -------
Net increase in cash and cash equivalents 9,351 2,314
Cash and cash equivalents at beginning of period 2,480 3,794
------- -------
Cash and cash equivalents at end of period $11,831 $ 6,108
======= =======
The accompanying notes are an integral part of the consolidated financial statements.
-5-
</TABLE>
<PAGE> 6
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. The notes to the consolidated financial statements
as of December 31, 1998, as set forth in Hecla Mining
Company's 1998 Annual Report on Form 10-K,
substantially apply to these interim consolidated
financial statements and are not repeated here. For
additional information, please refer to such notes.
Note 2. The financial information given in the
accompanying unaudited interim consolidated financial
statements reflects all adjustments which, in the
opinion of management, are necessary to a fair
statement of the results for the interim periods
reported. All such adjustments are of a normal
recurring nature with the exception of an adjustment
recognized for the cumulative effect of a change in
accounting principle as described in Note 6. All
financial statements presented herein are unaudited.
However, the balance sheet as of December 31, 1998, was
derived from the audited consolidated balance sheet
referenced in Note 1 above. Certain consolidated
financial statement amounts have been reclassified to
conform to the 1999 presentation. These
reclassifications had no effect on the net income
(loss) or accumulated deficit as previously reported.
Note 3. On June 25, 1999, Hecla acquired from Monarch
Resources Limited all of the outstanding stock of
Monarch Resources Investments Limited, or MRIL, a
Bermuda company, as well as two subsidiaries owned by
MRIL. MRIL's principal assets include the La Camorra
gold mine, located in Bolivar State in Venezuela, and
the El Salidillo silver exploration property located in
the Durango region of Mexico. The acquisition price of
$25.0 million consisted of $9.0 million in cash and
6,700,250 Hecla common shares which are subject to
certain trading restrictions.
The acquisition of MRIL has been accounted
for as a purchase and, accordingly, Hecla's
consolidated financial statements include the financial
position, results of operations, and cash flows of MRIL
prospectively from June 25, 1999. Approximately $20.0
million of the total purchase price has been allocated
to the mineral properties at La Camorra and will be
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<PAGE> 7
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
amortized on a units-of-production basis over the
La Camorra mine life.
Note 4. The components of the income tax provision
(benefit) for the six months ended June 30, 1999 and
1998 are as follows (in thousands):
1999 1998
------ ------
Current:
State income taxes $ 135 $ 181
Federal income taxes - - (517)
Foreign income taxes 19 46
------ ------
Total $ 154 $ (290)
====== ======
Hecla's income tax provision (benefit) for
the first half of 1999 and 1998 varies from the amount
that would have been provided by applying the statutory
rate to the income before income taxes primarily due to
the availability of net operating losses.
Note 5. Inventories consist of the following (in thousands):
June 30, Dec. 31,
1999 1998
--------- --------
Concentrates, bullion, metals
in transit and other products $ 4,588 $ 3,879
Industrial mineral products 6,738 10,240
Materials and supplies 9,314 8,638
-------- --------
$ 20,640 $ 22,757
======== ========
Note 6. In April 1998, Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" was
issued. SOP 98-5 requires costs of start-up activities
and organizational costs to be expensed as incurred, as
well as the recognition of a cumulative effect of a
change in accounting principle for retroactive
application of the standard. Hecla adopted SOP 98-5
effective as of January 1, 1999. The impact of this
change in accounting principle related to unamortized
start-up costs associated with Hecla's 29.7% ownership
interest in the Greens Creek mine. SOP 98-5 requires
that these costs be expensed as incurred whereas
Hecla's previous policy was to capitalize these costs.
The $1.4 million cumulative effect of this change in
accounting principle is included in the consolidated
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<PAGE> 8
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
statement of operations for the six months ended
June 30, 1999.
Note 7. Contingencies
- Bunker Hill
In 1994, Hecla, as a potentially responsible
party under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA),
entered into a consent decree with the Environmental
Protection Agency and the State of Idaho, concerning
environmental remediation obligations at the Bunker
Hill Superfund site located at Kellogg, Idaho. The
consent decree settled Hecla's response-cost liability
under CERCLA at the Bunker Hill site. As of June 30,
1999, Hecla has estimated and accrued an allowance for
liability for remedial activity costs at the Bunker
Hill site of $4.6 million. These estimated
expenditures are anticipated to be made over the next
three to five years. Although Hecla believes the
allowance is adequate based upon current estimates of
aggregate costs, Hecla plans to reassess its
obligations under the consent decree as new information
is developed during 1999. Depending on the results of
the reassessment, it is reasonably possible that
Hecla's estimate of its obligations may change in the
near term.
Coeur d'Alene River Basin Natural Resource Damage
Claims
- Coeur d'Alene Tribe Claims
In July 1991, the Coeur d'Alene Indian Tribe
brought a lawsuit, under CERCLA, in Idaho Federal
District Court against Hecla and a number of other
mining companies asserting claims for damages to
natural resources downstream from the Bunker Hill site
over which the tribe alleges some ownership or control.
Hecla answered the tribe's complaint denying liability
for natural resource damages (NRD). In October 1996,
following a court imposed four-year suspension of the
proceeding, the tribe's natural resource damage
litigation was consolidated with the United States
Natural Resources Damage litigation described below for
discovery and other limited pretrial purposes.
-8-
<PAGE> 9
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
- U.S. Government Claims
In March 1996, the United States filed a
lawsuit in Idaho Federal District Court against certain
mining companies that conducted historic mining
operations in the Silver Valley of northern Idaho,
including Hecla. The lawsuit asserts claims under
CERCLA and the Clean Water Act and seeks recovery for
alleged damages to or loss of natural resources located
in the Coeur d'Alene River Basin in northern Idaho for
which the United States asserts to be the trustee under
CERCLA. The lawsuit asserts that the defendants'
historic mining activity resulted in releases of
hazardous substances and damaged natural resources
within the Basin. The suit also seeks declaratory
relief that Hecla and other defendants are jointly and
severally liable for response costs under CERCLA for
historic mining impacts in the Basin outside the Bunker
Hill site. Hecla answered the complaint in May 1996,
denying liability to the United States under CERCLA and
the Clean Water Act and asserted a counterclaim against
the United States for the federal government's
involvement in mining activities in the Basin which
contributed to the releases and damages alleged by the
United States. Hecla believes it also has a number of
defenses to the United States' claims.
On September 30, 1998, the Federal District
Court granted Hecla's summary judgment motion with
respect to the applicable statute of limitations and
dismissed the United States' NRD claim due to the
failure of the EPA to comply with federal law and EPA
regulations in expanding the national priority list
site boundaries to include the entire Coeur d'Alene
River/Lake Coeur d'Alene Basin which would have the
effect of extending the statute of limitations. The
United States has appealed the Federal District Court's
decision to the Ninth Circuit Court of Appeals. The
case is proceeding through discovery. On March 31,
1999, the court issued a case management order setting
trial in this case for November 2000. Summary judgment
motions related to 1) the extent of federal trusteeship
over natural resources in the Basin and 2) a
constitutional challenge to the retroactive application
of Superfund liability at the site are currently
pending before the Federal District Court.
-9-
<PAGE> 10
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
In May 1998, the EPA announced that it had
commenced a remedial investigation/feasibility study
under CERCLA for the entire Basin, including Lake Coeur
d'Alene, in support of its response cost claims
asserted in its March 1996 lawsuit.
- State of Idaho Claims
In March 1996, Hecla entered into an
agreement with the State of Idaho pursuant to which
Hecla agreed to continue certain financial
contributions to environmental cleanup work in the
Basin being undertaken by a state trustees group. In
return, the state agreed not to sue Hecla for damage to
natural resources for which the state is a trustee for
a period of five years, to pursue settlement with Hecla
of the state's NRD claims and to grant Hecla credit
against any such state claims for all expenditures made
under the Idaho agreement and certain other Company
contributions and expenditures for environmental
cleanup in the Basin.
At June 30, 1999, Hecla's accrual for
remediation activity in the Basin, not including the
Bunker Hill site, totaled approximately $0.2 million.
These expenditures are anticipated to be expended
during 1999. Depending on the results of the
aforementioned lawsuits, it is reasonably possible that
Hecla's estimate of its obligation may change in the
near or longer term.
Insurance Coverage Litigation
In 1991, Hecla initiated litigation in the
Idaho State District Court in Kootenai County, Idaho,
against a number of insurance companies which provided
comprehensive general liability insurance coverage to
Hecla and its predecessors. Hecla believes that the
insurance companies have a duty to defend and indemnify
Hecla under their policies of insurance for all
liabilities and claims asserted against Hecla by the
EPA and the tribe under CERCLA related to the Bunker
Hill site and the Basin in northern Idaho. In 1992,
the Idaho State District Court ruled that the primary
insurance companies had a duty to defend Hecla in the
Tribe's lawsuit. During 1995 and 1996, Hecla entered
-10-
<PAGE> 11
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
into settlement agreements with a number of the
insurance carriers named in the litigation. Hecla has
received a total of approximately $7.2 million under
the terms of the settlement agreements. Thirty percent
of these settlements were paid to the EPA to reimburse
the U.S. government for past costs under the Bunker
Hill site consent decree. Litigation is still pending
against one insurer with trial suspended until the
underlying environmental claims against Hecla are
resolved or settled. The remaining insurer is
providing Hecla with a partial defense in all Basin
environmental litigation. As of June 30, 1999, Hecla
had not reduced its accrual for reclamation and closure
costs to reflect the receipt of any anticipated
insurance proceeds.
Other Claims
On October 22, 1998, Hecla and certain
affiliates were served with a lawsuit filed in Superior
Court of Kern County, California. The complaint
pertains to the Cactus Gold mine located near Mojave,
California. Seventy-four plaintiffs allege that during
the period from 1960 through the present, the named
defendants' operations and activities caused personal
injury and property damage to the plaintiffs. The
plaintiffs seek monetary damages of $29.6 billion for
general negligence, nuisance, trespass, statutory
violations, ultra-hazardous activities, strict
liability, and other torts. Hecla has provided notice
and demand for defense/indemnity to its insurance
carriers providing liability insurance coverage for the
Cactus Gold mine operation. The primary carrier has
denied coverage. Hecla is currently investigating the
advisability of seeking court enforcement of the
carrier's coverage obligations under the policies.
Hecla has retained outside counsel to defend Hecla.
Based on a prior health risk assessment completed for
the operation as required by the State of California
and a preliminary review with outside legal counsel of
the allegations in the complaint as it relates to the
historical operations of Hecla and its predecessors at
the Cactus Gold mine, Hecla believes the allegations
are without merit.
In 1997, Hecla's subsidiary, Kentucky-
Tennessee Clay, terminated shipments of 1% of annual
ball clay
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<PAGE> 12
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
production, sold to animal feed producers, when
the Food and Drug Administration determined trace
elements of dioxin were present in poultry. Dioxin is
inherently present in ball clays generally. Hecla
believes $11.0 million of insurance coverage is
available for approximately $8.0 million in claims to
date. Although the outcome cannot be assured, Hecla
believes that there will be no material adverse effect
on Hecla's results of operations, financial condition
or cash flows from this matter.
Hecla 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 there can be no assurance as to the ultimate
disposition of these matters and the proceedings
disclosed above, it is the opinion of Hecla's
management that the outcome of these matters will not
have a material adverse effect on the financial
condition of the Company. However, it is possible that
these matters could have a material effect on quarterly
or annual operating results, when they are resolved, in
future periods.
Note 8. At June 30, 1999, there was $25.0 million
outstanding under Hecla's $55.0 million bank agreement
classified as long-term debt. On May 7, 1999, Hecla
amended its bank agreement. Under the revised terms of
the bank agreement, the amount available to borrow will
remain at $55.0 million, subject to certain
limitations. On June 25, 1999, Hecla entered into a
first amendment to the bank agreement which provided
for the waiver of certain restrictive covenants,
allowing Hecla to enter into a project financing
facility to acquire MRIL, as discussed below. Hecla
was in compliance with all restrictive covenants
pursuant to the bank agreement as of June 30, 1999.
Hecla also has outstanding $9.8 million aggregate
principal amount of tax-exempt, solid waste disposal
revenue bonds as of June 30, 1999. The amount
available to borrow under the bank agreement is reduced
by the $9.8 million principal amount of these bonds.
At June 30, 1999, the Company had the ability to borrow
an additional $20.2 million under the bank agreement.
On June 25, 1999, Hecla's newly acquired,
wholly owned subsidiary, MRIL, entered into a credit
agreement
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<PAGE> 13
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
to provide project financing of up to $11.0
million nonrecourse to Hecla to finance the acquisition
of MRIL. MRIL granted a security interest over the
stock of its Venezuelan subsidiary, certain Venezuelan
real property assets and all cash proceeds of the newly
acquired La Camorra mine. MRIL must maintain
compliance with certain financial and other restrictive
covenants related to the available ore reserves and
financial performance of the La Camorra mine. MRIL
borrowed $10.5 million pursuant to the terms of the
project financing agreement, which is repayable in nine
semiannual payments beginning June 30, 2000. At
June 30, 1999, MRIL had outstanding pursuant to the
project financing agreement $10.5 million principal
amount. In connection with the project financing
agreement, as of June 25, 1999, Hecla entered into a
subordinated loan agreement which provided a $3.0
million zero coupon loan, subordinate to Hecla's
existing $55.0 million credit agreement, repayable in
three annual payments beginning June 30, 2003. The
entire $3.0 million subordinated loan was outstanding
at June 30, 1999. The terms of the subordinated loan
agreement provide that Hecla must maintain compliance
with the financial covenants of Hecla's $55.0 million
credit agreement. The interest rates in the
subordinated loan agreement and the project financing
agreement are based on the London Interbank Offered
Rates. Additionally, MRIL sold forward 306,045 ounces
of gold on a quarterly basis over the period December
1999 to December 2004, at a flat forward price of
$288.25 per ounce, and as a portion of the sale entered
into an agreement specifying a quarterly Gold Lease
Rate Swap at a fixed rate of 1.5% on the outstanding
volume of the above forward sales, commencing June
2000.
Note 9. The following table presents a reconciliation of
the numerators (net income (loss)) and denominators
(shares) used in the basic and diluted income (loss)
per common share computations. Also shown is the
effect that has been given to preferred dividends in
arriving at income (loss) applicable to common
shareholders for the three months and six months ended
June 30, 1999 and 1998 in computing basic and diluted
income (loss) per common share (dollars and shares in
thousands, except per share amounts).
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<PAGE> 14
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended June 30,
-----------------------------------------------------------
1999 1998
---------------------------- ----------------------------
Net Per-Share Net Per-Share
Income Shares Amount Income Shares Amount
------- ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net income before preferred
stock dividends $ 2,335 $ 2,996
Less: Preferred
stock dividends (2,013) (2,013)
------- -------
Basic income applicable to
common shareholders 322 60,687 $ 0.01 983 55,102 $ 0.02
Effect of dilutive
securities - - - - - - - - 10 - -
------- ------ ------ ------- ------ ------
Diluted income applicable
to common shareholders $ 322 60,687 $ 0.01 $ 983 55,112 $ 0.02
======= ====== ====== ======= ====== ======
Six Months Ended June 30,
-----------------------------------------------------------
1999 1998
---------------------------- ----------------------------
Net Per-Share Net Per-Share
Income Shares Amount Income Shares Amount
------- ------ ------ ------- ------ ------
Net income before preferred
stock dividends $ 836 $ 5,843
Less: Preferred
stock dividends (4,025) (4,025)
------- -------
Basic income (loss) applicable
to common shareholders (3,189) 57,944 $ (0.06) 1,818 55,098 $ 0.03
Effect of dilutive
securities - - - - - - - - - - - -
------- ------ ------- ------- ------ ------
Diluted income (loss) applicable
to common shareholders $(3,189) 57,944 $ (0.06) $ 1,818 55,098 $ 0.03
======= ====== ======= ======= ====== ======
</TABLE>
These calculations of diluted earnings per
share for the three months and six months ended June
30, 1999 and 1998 exclude the effects of $115,000,000
of convertible preferred stock as such conversion would
be antidilutive. Also excluded from these calculations
are the effects of common stock issuable upon exercise
of stock options as of June 30, 1999 and 1998, as their
exercise would be antidilutive, as follows:
Three Months Ended Six Months Ended
--------------------- -----------------------
June 30, June 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
2,316,000 1,198,000 2,316,000 1,678,500
The calculations of diluted earnings per share
for the three and six months ended June 30, 1999, also
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<PAGE> 15
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
exclude 1,603,988 warrants to purchase common
stock, as their exercise would be antidilutive.
Note 10. In March 1999, Hecla issued 155,955 shares of its
common stock realizing proceeds of approximately
$478,000, net of issuance costs of approximately
$22,000. In May 1999, Hecla issued 4,582,852 shares of
its common stock realizing proceeds of approximately
$11.4 million, net of approximately $0.6 million of
issuance costs. In connection with the shares sold in
May, Hecla issued 1,603,998 warrants to purchase Hecla
common stock. Each warrant entitles the holder to
purchase one share of common stock at an exercise price
equal to the lesser of (i) $3.19 and (ii) 102% of the
volume weighted average price on the NYSE for each
trading day during the ten consecutive trading days
immediately preceding the date that notice of exercise
is given to Hecla. These warrants are exercisable
until May 11, 2002. Shares of both equity offerings
were sold under Hecla's existing Registration Statement
on Form S-3 which provides for the issuance of up to
$100.0 million of equity and debt securities. Hecla
used the net proceeds for general corporate purposes
including repayment of indebtedness under the existing
$55.0 million bank credit agreement.
Note 11. Hecla has a nonqualified deferred compensation
plan which permits eligible officers, directors, and
key employees to defer a portion of their compensation.
In November 1998, Hecla amended the plan to permit
participants to irrevocably transfer all or a portion
of their deferred compensation amounts into a Hecla
common stock account to be held in trust until
distribution. As of June 30, 1999, a total of 132,290
shares of Hecla's common stock are held in the grantor
trust. Shares held in the grantor trust are valued at
fair value at the time of issuance, are recorded in the
contra equity account "Stock held by grantor trust,"
and are legally outstanding for registration purposes
and dividend payments. The shares held in the grantor
trust are considered outstanding for purposes of
calculating earnings (loss) per share.
Note 12. During the first quarter of 1999, Hecla sold call
options for 1,350,000 ounces of silver through
December 31, 1999, at an average strike price of $5.33.
Hecla received a premium of $460,000 for the sale of
-15-
<PAGE> 16
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
the call options. These contracts are designed to
provide some price protection, to the extent of the
amount of the premium received, in the event of a
decline in the price of silver. They also limit the
maximum price Hecla may receive for a portion of
Hecla's silver production to the strike price of the
call options plus the premium received. The options
are considered to be held for trading purposes, and as
such the premiums received are deferred until the
expiration of the contract or exercise of the option
contract by the counterparties. Due to the trading
nature of the option contracts, Hecla recognizes, in
revenue, a mark to market adjustment at the end of each
reporting period for the change in the fair value of
the remaining outstanding option contracts. During the
first six months of 1999, Hecla recognized $183,000 of
revenue from these call options based upon a mark to
market adjustment as of June 30, 1999. During the
second quarter of 1999, Hecla recognized a $24,000 loss
from these call options based upon a mark to market
adjustment as of June 30, 1999. Also in the second
quarter of 1999, contracts for 450,000 ounces expired
and Hecla recognized an additional $29,000 of revenue
from the expired contracts.
Note 13. Hecla is organized and managed primarily on the
basis of the principal products being produced from its
eleven operating units. Three of the operating units
have been aggregated into the Metals-Gold segment, two
of the operating units have been aggregated into the
Metals-Silver segment, and six operating units have
been combined to form the Industrial Minerals segment.
General corporate activities not associated with
operating units as well as idle properties are
presented as Other.
-16-
<PAGE> 17
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
The tables below present information about
reportable segments for the three months and six months
ended June 30 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- --------------------
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers:
Metals-Gold $ 5,600 $ 8,375 $ 11,991 $ 17,630
Metals-Silver 11,790 9,914 24,359 20,036
Industrial Minerals 28,668 27,366 51,366 48,118
-------- -------- -------- --------
$ 46,058 $ 45,655 $ 87,716 $ 85,784
======== ======== ======== ========
Three Months Ended Six Months Ended
---------------------- --------------------
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income (loss) from operations:
Metals-Gold $ (763) $ 556 $ (1,175) $ 1,913
Metals-Silver 784 (376) 1,659 (77)
Industrial Minerals 4,046 2,804 6,681 4,808
Other (2,226) (2,307) (4,596) (4,601)
-------- -------- -------- --------
$ 1,841 $ 677 $ 2,569 $ 2,043
======== ======== ======== ========
</TABLE>
The table below presents identifiable assets by
reportable segment as of June 30, 1999, and December 31,
1998 (in thousands):
June 30, December 31,
1999 1998
--------- ------------
Identifiable assets:
Metals-Gold(1) $ 61,518 $ 23,808
Metals-Silver 124,373 127,499
Industrial Minerals 76,295 71,593
Other 24,450 29,162
--------- ---------
$ 286,636 $ 252,062
========= =========
(1) Includes assets of La Camorra mine acquired June 25, 1999.
Note 14. In June 1998, Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued. SFAS
133 establishes accounting and reporting standards for
-17-
<PAGE> 18
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
derivative instruments, including certain
derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for
hedging activities. It requires that an entity
recognizes all derivatives as either assets or
liabilities in the statement of financial position and
measures those instruments at fair value. In June
1999, SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" was issued.
SFAS 137 defers the effective date of SFAS 133 to all
fiscal quarters of all fiscal years beginning after
June 15, 2000; however, earlier application is
encouraged as of the beginning of any fiscal quarter.
Hecla is presently evaluating the effect the adoption
of this standard will have on Hecla's financial
condition, results of operations, and cash flows.
-18-
<PAGE> 19
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
------------
Hecla Mining Company is involved in the
exploration, development, mining, and processing of
gold, silver, lead, zinc, and industrial minerals.
Hecla's gold and silver segment 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 Hecla's
control, including inflation and worldwide forces of
supply and demand for precious and base metals. The
aggregate effect of these factors is not possible to
accurately predict. In the current metals price
environment, Hecla's industrial minerals segment has
been a significant contributor to overall revenues,
including 59% of total revenue during the first six
months of 1999. In the following descriptions, where
there are changes that are attributable to more than
one factor, Hecla presents each attribute in descending
order relative to the attribute's importance to the
overall change.
Except for the historical information
contained in this Management's Discussion and Analysis
of Financial Condition and Results of Operations, the
matters discussed below are forward-looking statements
that involve risks and uncertainties, including:
- the timely development of existing properties
and reserves and future projects,
- the impact of metal prices and metal
production volatility,
- changing market conditions and the regulatory
environment, and
- the other risks detailed from time to time in
Hecla's Form 10-K and Form 10-Qs filed with
the Securities and Exchange Commission (see
also "Investment Considerations" of Part I,
Item 1 of Hecla's 1998 Annual Report on Form
10-K).
-19-
<PAGE> 20
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
As a result of the above factors and
potentially others, actual results may differ
materially from those projected, forecasted or implied.
These forward-looking statements represent Hecla's
judgment as of the date of this filing. Hecla
disclaims, however, any intent or obligation to update
these forward-looking statements as circumstances may
change or develop.
On June 25, 1999, Hecla completed its
acquisition of Monarch Resources Investments Limited,
or MRIL, which was treated as a purchase for financial
statement and accounting purposes. The $25.0 million
purchase price consisted of $9.0 million in cash and
6,700,250 Hecla common shares. In addition, MRIL's
seller, Monarch Resources Limited, will receive a
royalty payment on future production from purchased
assets that exceed the current resource. MRIL's
significant assets include the La Camorra gold mine in
Venezuela and the El Salidillo silver exploration
property in Mexico. Hecla has temporarily discontinued
production at the La Camorra mine to construct a new
tailings impoundment and to perform additional mine
development. Hecla currently anticipates that
production will resume in the fourth quarter of 1999.
In order to finance the acquisition and anticipated
capital expenditures at La Camorra, a project-financed
credit facility was secured for $11.0 million, of which
$10.5 million was advanced at June 30, 1999. In
addition, $3.0 million was borrowed under a subordinate
note to fund the acquisition.
In the first six months of 1999, Hecla
produced approximately 55,000 ounces of gold compared
to approximately 67,000 ounces of gold production in
the first six months of 1998. The following table
displays the actual gold production (in ounces) by
operation for the six months ended June 30, 1999 and
1998, projected gold production for the year ending
December 31, 1999, and actual gold production for the
year ended December 31, 1998:
-20-
<PAGE> 21
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Actual Actual Projected Actual
June 30, June 30, Dec. 31, Dec. 31,
Operation 1999 1998 1999 1998
- --------- -------- -------- --------------- --------
Rosebud 33,000 32,000 58,000-60,000 65,000
Greens Creek 13,000 8,000 21,000-23,000 18,000
La Camorra (1) - - - - 16,000-18,000 - -
La Choya (2) 8,000 23,000 11,000 40,000
Other sources 1,000 4,000 1,000 4,000
-------- -------- --------------- --------
Totals 55,000 67,000 107,000-113,000 127,000
======== ======== =============== ========
(1) Production is anticipated to resume during the
fourth quarter of 1999 at the La Camorra mine.
(2) Mining at La Choya was completed in December
1998. Gold production in 1999 is from residual
recoveries from the heap leach pads.
In the first six months of 1999, the Company
produced approximately 3.7 million ounces of silver
compared to the first six months of 1998 silver
production of 3.2 million ounces. The following table
displays the actual silver production (in ounces) by
operation for the six months ended June 30, 1999 and
1998, projected silver production for the year ending
December 31, 1999, and actual silver production for the
year ended December 31, 1998 (in thousands):
Actual Actual Projected Actual
June 30, June 30, Dec. 31, Dec. 31,
Operation 1999 1998 1999 1998
- --------- -------- -------- --------------- --------
Lucky Friday 2,159 1,817 4,250-4,500 4,137
Greens Creek 1,481 1,279 2,750-2,900 2,824
Rosebud 81 122 160-170 278
Other sources 1 4 2 6
-------- -------- ------------- --------
Totals 3,722 3,222 7,162-7,572 7,245
======== ======== ============= ========
In 1998, Hecla shipped approximately
1,005,000 tons of product from the Kentucky-Tennessee
Clay group, including ball clay, kaolin, and feldspar.
Hecla's shipments of industrial minerals are expected
to increase in 1999 to approximately 1,101,000 tons.
During the first six months of 1999, Hecla shipped
-21-
<PAGE> 22
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
approximately 51,000 tons of specialty aggregates
from the Colorado Aggregate division of our subsidiary
MWCA, and approximately 719,000 cubic yards of
landscape material from the Mountain West Products
division of MWCA. In order to provide funds for
possible metals and other industrial minerals
expansion, as well as to reduce indebtedness, Hecla has
decided to attempt to sell MWCA. Hecla anticipates
closing on a sales transaction in the second half of
1999, although there can be no assurance that Hecla
will be successful.
Results of Operations
---------------------
First Six Months 1999 Compared to First Six Months 1998
-------------------------------------------------------
Hecla recorded income before the cumulative
effect of a change in accounting principle of
approximately $2.2 million, or $0.04 per common share,
in the first six months of 1999 compared to net income
of approximately $5.8 million, or $0.11 per common
share, in the same period of 1998. After recognizing a
$1.4 million charge from an accounting change to write
off unamortized start-up costs associated with the
Greens Creek mine, and after $4.0 million in dividends
to holders of Hecla's Series B cumulative convertible
preferred stock, Hecla's loss applicable to common
shareholders for the first six months of 1999 was
approximately $3.2 million, or $0.06 per common share,
compared to income of $1.8 million, or $0.03 per common
share, in the comparable 1998 period. The change in
income (loss) applicable to common shareholders during
1999 was attributable to a variety of factors, the most
significant which are discussed below.
Depreciation, depletion, and amortization
increased $1.8 million, or 17%, from the first six
months of 1998 to the first six months of 1999
principally due to:
- increased depreciation at the La
Choya mine ($0.9 million), the result of
depreciating costs associated with the La Choya
pit expansion completed in 1998,
- increased depreciation at the
Lucky Friday mine ($0.5 million) due to
increased production in the 1999 period, and
-22-
<PAGE> 23
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
- increased depreciation at the
Greens Creek mine ($0.5 million) due to
increased production in the 1999 period.
Interest and other income decreased
approximately $1.4 million, from $3.9 million in the
1998 period to $2.5 million in the 1999 period. The
decrease in 1999 was principally the result of a
nonrecurring 1998 gain of $2.3 million on sale of land
located near Hecla's corporate headquarters in Coeur
d'Alene, Idaho, partly offset by a $1.3 million gain on
the sale of the corporate airplane in 1999.
The cumulative effect of change in accounting
principle totaled $1.4 million in 1999, due to the
write off of unamortized start-up costs relating to
Hecla's 29.7% ownership interest in the Greens Creek
mine. The adjustment was the result of application of
Statement of Position No. 98-5, "Accounting for Start-
up Activities."
Gain on investments decreased $1.2 million as
a result of the sale of Metaline Contact Mine stock in
1998 which was nonrecurring in 1999.
Interest expense, net of amounts capitalized
increased $0.9 million in the first six months of 1999
as compared to the same period in 1998. The $0.9
million increase was the result of decreased
capitalized interest of $0.6 million, associated with
the Lucky Friday expansion project in 1998, and
increased interest expense under Hecla's bank loan
($0.3 million), as a result of higher borrowings in the
1999 period.
Hecla's provision for closed operations and
environmental matters increased $0.5 million, from $0.1
million in the first six months of 1998 to $0.6 million
in the 1999 period. The increase resulted principally
from expenditures for technical studies and legal costs
associated with the Coeur d'Alene River Basin area. For
further information on the Coeur d'Alene River Basin
area, see Item 3, "Legal Proceedings" of this Form
10-Q.
-23-
<PAGE> 24
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Exploration expense increased $0.2 million,
or 12%, during the first six months of 1999 as compared
to the same period of 1998 principally due to increased
expenditures at the Cacique property in Chile ($0.4
million) and increased expenditures in Mexico ($0.2
million). These increases were partly offset by
decreased expenditures at other South American targets
($0.3 million).
Income tax expense increased $0.5 million
from a benefit of $0.3 million in the first six months
of 1998 to a provision of $0.2 million in the
comparable 1999 period. The benefit in 1998 related to
the carryback of certain 1998 expenditures to reduce
U.S. income taxes previously provided, partly offset by
a provision for state income taxes. The provision in
1999 primarily represents a provision for state income
taxes.
Cost of sales and other direct production
costs decreased approximately $0.6 million, or 1%, from
the first six months of 1998 to the comparable 1999
period primarily due to:
- decreased cost of sales at the
La Choya mine ($2.7 million) due to completion
of mining in December 1998,
- decreased cost of sales at the
Greens Creek mine ($2.0 million) principally
due to the timing of concentrate shipments,
- elimination of cost of sales
at the American Girl mine ($0.6 million) due to
final gold sales in 1998,
- decreased cost of sales at the Rosebud mine ($0.4 million)
due to decreased tons mined and milled,
- increased cost of sales at the industrial minerals segment
($1.6 million) associated with increased sales of $3.2 million,
and
- increased cost of sales at the Lucky Friday mine ($3.6
million) due to increased production.
-24-
<PAGE> 25
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Cost of sales and other direct production
costs as a percentage of sales from products decreased
from 78% in the first six months of 1998 to 76% in the
comparable 1999 period. The decrease was principally a
result of improved margins in the silver and industrial
minerals segments, partly offset by decreased margins
in the gold segment.
Sales of products increased by approximately
$1.9 million, or 2%, in the first six months of 1999 as
compared to the same period in 1998 primarily due to:
- increased sales totaling
approximately $4.3 million from silver
operations primarily as a result of increased
production and sales,
- increased sales totaling
approximately $3.2 million from Hecla's
industrial minerals segment principally the
result of increased shipments at both the K-T
Clay group and the MWCA group, and
- decreased sales of $5.6
million from gold operations principally a
result of completion of mining operations at
the La Choya mine in December 1998.
The following table compares the average
metal prices for the first six months of 1999 with the
comparable 1998 period:
Metal 1999 1998 $ Change % Change
---------------- ------ ------ -------- ---------
Gold-Realized ($/oz.) $ 294 $ 303 $ (9) (3)%
Gold-London Final ($/oz.) 280 297 (17) (6)
Silver-Handy & Harman ($/oz.) 5.23 5.97 (0.74) (12)
Lead-LME Cash (cents/pound) 0.232 0.246 (0.014) (6)
Zinc-LME Cash (cents/pound) 0.457 0.480 (0.023) (5)
Cash operating and total cash cost per gold
ounce decreased from $170 and $181 for the first six
months of 1998 to $160 and $173 for the first six
months of 1999, respectively. The decreases in the
cash operating and total cash cost per gold ounce were
primarily attributable to a greater share of 1999
production coming from the lower cost Rosebud mine.
Total production costs per gold ounce increased from
$239 per ounce in 1998 to $273 per ounce in 1999. The
-25-
<PAGE> 26
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
increase in the total production cost per gold
ounce was attributable to increased depreciation
charges associated with the La Choya pit expansion that
was completed in 1998.
Cash operating, total cash, and total
production cost per silver ounce decreased from $4.06,
$4.06 and $5.53 in the first six months of 1998 to
$3.73, $3.73, and $5.29 in the first six months of
1999, respectively. The decreases in the cost per
silver ounce are due primarily to positive impacts of
increased by-product production, as well as increased
silver production, partly offset by lower by-product
metal prices. Gold, lead, and zinc are by-products of
Hecla's silver production, the revenues from which are
netted against production costs in the calculation of
production cost per ounce of silver.
Three Months Ended June 30, 1999 Compared to
--------------------------------------------
Three Months Ended June 30, 1998
--------------------------------
Hecla recorded net income of approximately
$2.3 million, or $0.04 per common share, in the second
quarter of 1999 compared to net income of approximately
$3.0 million, or $0.05 per common share, in the same
period of 1998. After $2.0 million in dividends to
holders of Hecla's Series B cumulative convertible
preferred stock, Hecla's income applicable to common
shareholders for the second quarter of 1999 was
approximately $0.3 million, or $0.01 per common share,
compared to income of $1.0 million, or $0.02 per common
share, in the comparable 1998 period. The change in
income applicable to common shareholders during 1999
was attributable to a variety of factors, the most
significant which are discussed below.
Gain on investments decreased $1.2 million as
a result of the sale of Metaline Contact Mine stock in
1998 which was nonrecurring in 1999.
Depreciation, depletion, and amortization
increased $0.8 million, or 17%, from the second quarter
of 1998 to the second quarter of 1999 principally due
to:
-26-
<PAGE> 27
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
- increased depreciation at the
Lucky Friday mine ($0.3 million) due to
increased production in the 1999 period,
- increased depreciation at the
La Choya mine ($0.3 million), the result of
depreciating costs associated with the La Choya
pit expansion completed in 1998, and
- increased depreciation at the
Greens Creek mine ($0.2 million) due to
increased production in the 1999 period.
Income taxes changed by $0.5 million from a
tax benefit of approximately $0.4 million in 1998 to an
approximate $0.1 million tax provision in 1999. The
benefit in 1998 related to the carryback of certain
1998 expenditures to reduce U.S. income taxes
previously provided, partly offset by a provision for
various state income taxes. The 1999 provision
primarily represents a provision for state income
taxes.
Interest expense, net of amounts capitalized
increased $0.4 million in the second quarter of 1999 as
compared to the second quarter of 1998. The $0.4
million increase was the result of decreased
capitalized interest of $0.3 million, associated with
the Lucky Friday expansion project in 1998, and
increased interest expense under Hecla's bank loan
($0.1 million), as a result of higher borrowings in the
1999 period.
Hecla's provision for closed operations and
environmental matters increased $0.2 million, from
approximately $0.1 million in the second quarter of
1998 to $0.3 million in the 1999 period. The increase
resulted principally from expenditures for technical
studies and legal costs associated with the Coeur
d'Alene River Basin area. For further information on
the Coeur d'Alene River Basin area, see Item 3, "Legal
Proceedings" of this Form 10-Q.
Sales of products increased by approximately
$0.4 million, or 1%, in the second quarter of 1999 as
compared to the same period in 1998 primarily due to:
-27-
<PAGE> 28
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
- increased sales totaling
approximately $1.9 million from silver
operations primarily as a result of increased
production and shipments,
- increased sales totaling
approximately $1.3 million from Hecla's
industrial minerals segment principally the
result of increased shipments at both the K-T
Clay group and the MWCA group, and
- decreased sales of $2.8
million from gold operations principally a
result of completion of mining operations at
the La Choya mine in December 1998, combined
with a lower gold price in the 1999 period.
The following table compares the average
metal prices for the second quarter of 1999 with the
comparable 1998 period:
Metal 1999 1998 $ Change % Change
---------------- ------ ------ -------- --------
Gold-Realized ($/oz.) $ 288 $ 307 $ (19) (6)%
Gold-London Final ($/oz.) 273 300 (27) (9)
Silver-Handy & Harman ($/oz.) 5.16 5.71 (0.55) (10)
Lead-LME Cash (cents/pound) 0.233 0.248 (0.015) (6)
Zinc-LME Cash (cents/pound) 0.463 0.479 (0.016) (3)
Interest and other income increased
approximately $0.4 million, from $1.4 million in the
1998 period to $1.8 million in the 1999 period. The
increase in 1999 was principally the result of a 1999
gain of $1.3 million on the sale of Hecla's corporate
airplane, partly offset by a nonrecurring 1998 gain on
sale of land located near Hecla's Coeur d'Alene office
($0.5 million) and other items totaling $0.4 million.
Cost of sales and other direct production
costs decreased approximately $1.4 million, or 4%, from
the second quarter of 1998 to the comparable 1999
period primarily due to:
- decreased cost of sales at the
Greens Creek mine ($1.7 million) principally
due to the timing of concentrate shipments,
-28-
<PAGE> 29
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
- decreased cost of sales at the
La Choya mine ($1.3 million) due to completion
of mining in December 1998,
- decreased cost of sales at the
Rosebud mine ($0.3 million) due to decreased
tons mined and milled,
- elimination of cost of sales at the American
Girl mine ($0.2 million) due to final gold
sales in 1998,
- increased cost of sales at the
industrial minerals segment ($0.3 million)
associated with increased sales of $1.3
million, and
- increased cost of sales at the
Lucky Friday mine ($1.9 million) due to
increased production and shipments from the
Lucky Friday expansion area.
Cost of sales and other direct production
costs as a percentage of sales from products decreased
from 80% in the second quarter of 1998 to 76% in the
comparable 1999 period. The improvement was
principally a result of improved margins in the silver
and industrial minerals segments.
Cash operating and total cash cost per gold
ounce decreased from $179 and $192 for the second
quarter of 1998 to $163 and $178 for the second quarter
of 1999, respectively. The decreases in the cash
operating and total cash cost per gold ounce were
primarily attributable to a greater share of 1999
production coming from the lower cost Rosebud mine.
Total production costs per gold ounce increased from
$253 per ounce in 1998 to $277 per ounce in 1999. The
increase in the total production cost per gold ounce
was attributable to increased depreciation charges
associated with the La Choya pit expansion that was
completed in 1998.
Cash operating, total cash, and total
production cost per silver ounce increased from $3.70,
$3.70 and $5.14 in the second quarter of 1998 to $3.75,
$3.75, and $5.30 in the second quarter of 1999,
respectively. The increases in the cost per silver
ounce are due to lower by-product metal prices, partly
offset by
-29-
<PAGE> 30
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
increased by-product and silver production. Gold,
lead, and zinc are by-products of Hecla's silver
production, the revenues from which are netted against
production costs in the calculation of production cost
per ounce of silver.
Financial Condition and Liquidity
---------------------------------
A substantial portion of Hecla's revenue is
derived from the sale of products, the prices of which
are affected by numerous factors beyond Hecla's
control. Prices may change dramatically in short
periods of time and such changes have a significant
effect on revenues, profits and liquidity of Hecla.
Hecla is subject to many of the same inflationary
pressures as the U.S. economy in general. Hecla
continues to implement cost-cutting measures in an
effort to reduce per unit production costs. Management
believes, however, that Hecla 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 Hecla have a
much greater impact than inflation on 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.
The variability of metals prices requires
that Hecla, in assessing the impact of prices on
recoverability of its metals segment assets, exercise
judgment as to whether price changes are temporary or
are likely to persist. Hecla performs a comprehensive
evaluation of the recoverability of its assets on a
periodic basis. This evaluation includes a review of
estimated future net cash flows against the carrying
value of Hecla's 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 Hecla determines that the
carrying values attributed to individual assets are not
recoverable given reasonable expectations for future
production and market conditions.
-30-
<PAGE> 31
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
At June 30, 1999, assets totaled
approximately $287 million and shareholders' equity
totaled approximately $177 million. Cash and cash
equivalents increased by $9.3 million to $11.8 million
at June 30, 1999 from $2.5 million at December 31,
1998.
During the first six months of 1999,
approximately $14.3 million of cash was provided by
financing activities. The major sources of cash were
borrowings of long-term debt of $38.0 million and
proceeds from common stock issuances, net of offering
costs, of $11.9 million. These sources were partially
offset by uses of cash, including repayments of long-
term debt of $32.5 million, and payment of preferred
stock dividends of $4.0 million.
Operating activities provided approximately
$6.4 million of cash during the first half of 1999.
The primary sources of cash were from Rosebud, Lucky
Friday, the industrial minerals segment, and Greens
Creek. Significant uses of cash included (1) a $9.2
million increase in accounts and notes receivable
principally due to seasonal sales at MWCA, increased
sales at the K-T Clay group and timing of shipments and
cash receipts at Greens Creek, and (2) $2.4 million for
reclamation activities and other noncurrent
liabilities. Principal noncash charges included
depreciation, depletion, and amortization of
approximately $12.1 million, the cumulative effect of
change in accounting principle of $1.4 million, and
provision for reclamation and closure costs of $0.5
million.
Hecla's investing activities used $11.4
million of cash during the first half of 1999. The
most significant uses of cash were (1) the purchase of
Monarch Resources Investments Limited, net of cash
acquired, for $9.2 million, and (2) additions to
properties, plants, and equipment totaling $4.6
million, including significant additions at the Noche
Buena project of $2.2 million, the Greens Creek mine of
$1.3 million, the industrial minerals segment of $0.8
million, and other additions of $0.3 million. These
uses of cash were partly offset by (1) proceeds from
disposition of properties, plants, and equipment during
the first six months of 1999 totaling approximately
$1.7 million, principally from sale of the corporate
-31-
<PAGE> 32
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
airplane; (2) the release of restricted
investments ($0.4 million); and (3) proceeds from the
sale of investments ($0.3 million).
Due to declines in the prices of metals that
Hecla produces, including gold, silver, lead, and zinc,
Hecla has developed and implemented plans to generate
and preserve cash during the current low metals price
environment. Hecla's plans include marketing for sale
its MWCA subsidiary and certain other assets. Hecla
has also implemented certain cost cutting measures to
reduce operating cash costs. Without improvements in
the prices of metals, Hecla anticipates that its
history of losses applicable to common shareholders
will continue. There can be no assurance that Hecla
will be successful in its efforts to sell the MWCA
subsidiary and other assets, or in its implementation
of additional cost cutting measures.
Hecla estimates that minimum capital
expenditures, including capitalized interest, to be
incurred during the remainder of 1999 will be
approximately $9.4 million. These capital expenditures
consist primarily of:
Property Expenditure
------------------ ------------
La Camorra $6.0 million
Greens Creek (29.7% interest) $2.1 million
Industrial minerals segment $0.9 million
Other $0.4 million
These planned capital expenditures will
depend, in large part, on Hecla's ability to obtain the
required funds from operating activities, amounts
available under its restated bank agreement and the
possible issuance of additional equity. There can be
no assurance that actual capital expenditures will be
as projected based upon the uncertainties associated
with the estimates for capital projects, uncertainties
associated with possible development projects, and
Hecla' ability to generate adequate funding for the
projected capital expenditures.
Hecla's estimate of its capital expenditure
requirements assumes, with respect to the Greens Creek
and Rosebud properties, that the Company's joint
-32-
<PAGE> 33
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
venture partners will not default with respect to
their portion of development costs and capital
expenditures.
During the first six months of 1999, Hecla
continued its feasibility study on the Noche Buena gold
project in Mexico. Hecla completed fill-in drilling to
35-meter centers on the core of the deposit as well as
step out drilling to expand the deposit. Additional
metallurgical testing was also completed during the
first half of 1999. However, at the current gold
price, Hecla has decided to suspend development of this
project. Hecla will reconsider the status of this
project when the gold price returns to a higher level
although there can be no assurance that Hecla will
develop the Noche Buena project.
Pursuant to a Registration Statement filed
with the Securities and Exchange Commission and
declared effective in the third quarter of 1995, Hecla
can, at its option, issue debt securities, common
shares, preferred shares or warrants in an amount not
to exceed $100.0 million in the aggregate. During the
first half of 1999, in two separate issuances, Hecla
sold an aggregate of 4,738,807 shares of common stock
realizing proceeds of approximately $11.9 million, net
of issuance costs. Additionally, 1,603,998 warrants to
purchase Hecla common stock were issued in connection
with one of the issuances. Each warrant entitles the
holder to purchase one share of common stock at an
exercise price equal to the lesser of $3.19 or 102% of
the volume weighted average price on the NYSE for each
trading day during the ten consecutive trading days
immediately preceding the date that notice of exercise
is given to Hecla. The warrants are exercisable until
May 11, 2002. These equity issuances were sold under
the above-described Registration Statement. To date,
Hecla has issued $62.2 million of Hecla's common shares
under the Registration Statement.
At June 30, 1999, there was $25.0 million
outstanding under Hecla's $55.0 million bank agreement
classified as long-term debt. On May 7, 1999, Hecla
amended its bank agreement. Under the revised terms of
the bank agreement, the amount available to borrow will
remain at $55.0 million, subject to certain
limitations. On June 25, 1999, Hecla entered into a
first amendment to the bank agreement which provided
-33-
<PAGE> 34
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
for the waiver of certain restrictive covenants,
allowing Hecla to enter into a project financing
facility to acquire MRIL, as discussed below. Hecla
was in compliance with all restrictive covenants
pursuant to the bank agreement as of June 30, 1999.
Hecla also has outstanding $9.8 million aggregate
principal amount of tax-exempt, solid waste disposal
revenue bonds as of June 30, 1999. The amount
available to borrow under the bank agreement is reduced
by the $9.8 million principal amount of these bonds.
At June 30, 1999, the Company had the ability to borrow
an additional $20.2 million under the bank agreement.
On June 25, 1999, Hecla's newly acquired,
wholly owned subsidiary, MRIL, entered into a credit
agreement to provide project financing of up to $11.0
million nonrecourse to Hecla to finance the acquisition
of MRIL. MRIL granted a security interest over the
stock of its Venezuelan subsidiary, certain Venezuelan
real property assets and all cash proceeds of the newly
acquired La Camorra mine. MRIL must maintain
compliance with certain financial and other restrictive
covenants related to the available ore reserves and
financial performance of the La Camorra mine. MRIL
borrowed $10.5 million pursuant to the terms of the
project financing agreement, which is repayable in nine
semiannual payments beginning June 30, 2000. At
June 30, 1999, MRIL had outstanding pursuant to the
project financing agreement $10.5 million principal
amount. In connection with the project financing
agreement, as of June 25, 1999, Hecla entered into a
subordinated loan agreement which provided a $3.0
million zero coupon loan, subordinate to Hecla's
existing $55.0 million credit agreement, repayable in
three annual payments beginning June 30, 2003. The
entire $3.0 million subordinated loan was outstanding
at June 30, 1999. The terms of the subordinated loan
agreement provide that Hecla must maintain compliance
with the financial covenants of Hecla's $55.0 million
credit agreement. The interest rates in the
subordinated loan agreement and the project financing
agreement are based on the London Interbank Offered
Rates. Additionally, MRIL sold forward 306,045 ounces
of gold on a quarterly basis over the period December
1999 to December 2004, at a flat forward price of
$288.25 per ounce, and as a portion of the sale entered
into an agreement at a quarterly Gold Lease Rate Swap
-34-
<PAGE> 35
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
at a fixed rate of 1.5% on the outstanding volume
of the above forward sales, commencing June 2000.
Exploration expenditures for the remainder of
1999 are estimated to be approximately $2.0 to $2.5
million. Hecla's exploration strategy is to focus
further exploration at, or in the vicinity of, its
currently owned domestic and foreign properties, as
well as grass roots and advanced stage projects.
Accordingly, domestic exploration expenditures will be
incurred principally at Rosebud and Greens Creek.
Foreign exploration efforts in 1999 will center
primarily on targets in Mexico and South America. There
can be no assurances that actual exploration
expenditures will be as projected.
Hecla's planned environmental and reclamation
expenditures for the remainder of 1999 are expected to
be approximately $7.0 to $8.0 million. These
expenditures will occur at the Grouse Creek mine, the
Bunker Hill Superfund site, the Coeur d'Alene River
Basin, the Cactus mine, the American Girl mine, the
Republic mine, the Yellow Pine mine, other idle
properties, and the Durita property. There can be no
assurances that actual environmental and reclamation
expenditures will be as projected.
Reserves for closure costs, reclamation and
environmental matters totaled $27.3 million at June 30,
1999. Hecla anticipates that expenditures relating to
these reserves will be made over the next several
years. Although Hecla believes the allowance is
adequate based on current estimates of aggregate costs,
Hecla plans to reassess its environmental and
reclamation obligations, including obligations under
the Bunker Hill Consent Decree, and at Grouse Creek,
Yellow Pine and other idle properties as new
information develops on these sites during 1999.
Depending on the results of the reassessment, it is
reasonably possible that Hecla's estimate of its
obligations may change in the near term.
In the normal course of its business, Hecla
uses forward sales commitments, commodity swap
contracts, and commodity put and call option contracts
to manage its exposure to fluctuations in the prices of
certain metals which it produces. Contract positions
are
-35-
<PAGE> 36
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
generally designed to ensure that Hecla will
receive a defined minimum price for certain quantities
of its production. Gains and losses, and the related
costs paid or premium received, for contracts which
hedge the sales prices of commodities are deferred and
included in income as part of the hedged transaction.
Revenues from these contracts are recognized at the
time contracts are closed out by delivery of the
underlying commodity, when Hecla matches specific
production to a contract, or upon settlement of the net
position in cash. Hecla is exposed to certain losses,
generally the amount by which the contract price
exceeds the spot price of a commodity, in the event of
nonperformance by the counterparties to these
agreements.
At June 30, 1999, Hecla had forward sales
commitments through December 31, 2004 for 306,045
ounces of gold at an average price of $288 per ounce.
These gold forward sales commitments were entered into
as required under Hecla's $11.0 million project
financing facility for the La Camorra gold mine. The
estimated fair value of these forward sales commitments
was $45,000 as of June 30, 1999. The London Final gold
price at June 30, 1999, was $261. In connection with
the $11.0 million project financing for the La Camorra
gold mine, Hecla entered into a quarterly Gold Lease
Rate Swap at a fixed rate of 1.5% on 257,242 ounces of
the aforementioned gold forward sales, commencing June
2000. The estimated cost to close out the Gold Lease
Rate Swap at June 30, 1999 was $550,000. Additionally,
at June 30, 1999, Hecla had forward sales commitments
through December 31, 2000 for 1,200,000 ounces of
silver at an average price of $5.51. If Hecla's
forward silver sales commitments were closed on
June 30, 1999, the estimated fair value of these
forward sales commitments was approximately $225,000.
The Handy & Harman silver price at June 30, 1999 was
$5.28. At June 30, 1999, Hecla had zinc swap contracts
through July 2000 for 3,000 metric tonnes of zinc at an
average price of $0.495 per pound. The estimated fair
value of these zinc swaps was approximately $112,000 as
of June 30, 1999. The LME cash zinc price at June 30,
1999, was $0.457. Additionally at June 30, 1999, Hecla
had lead swap contracts through July 2000 for 6,000
metric tonnes of lead at an average price of $0.245 per
pound. The estimated fair value of these lead swaps
was approximately $197,000 as of June 30, 1999. The
-36-
<PAGE> 37
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
LME cash lead price at June 30, 1999, was $0.220.
The nature and purpose of the forward sales contracts,
however, do not presently expose Hecla to any
significant net loss. All of these contracts were
designated as hedges as of June 30, 1999.
During the first quarter of 1999, Hecla sold
call options for 1,350,000 ounces of silver through
December 31, 1999, at an average strike price of $5.33.
Hecla received a premium of $460,000 for the sale of
these call options. Through June 30, 1999, Hecla has
recognized revenue of $153,000 from expired call option
contracts and an additional $104,000 of revenue from
these call options based upon a mark to market
adjustment of the call options as of June 30, 1999.
These contracts are not designated as hedges and are
subject to revenue recognition based upon the changes
in the fair market value of the contracts. These
contracts are designed to provide some price
protection, to the extent of the amount of the premium
received, in the event of a decline in the price of
silver. They also limit the maximum price that Hecla
may receive on a portion of Hecla's silver production
to the strike price of the call options plus the
premium received.
Hecla is subject to legal proceedings and
claims which have arisen in the ordinary course of its
business and have not been finally adjudicated (see
Part II. Item 1. Legal Proceedings and Note 7 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 Hecla's management
that the outcome of these matters will not have a
material adverse effect on the financial position of
Hecla and its subsidiaries. However, it is possible
that these matters could have a material effect on
quarterly or annual operating results, when they are
resolved, in the future periods.
Year 2000
---------
Hecla utilizes software and related
technologies throughout its business that will be
affected by the "Year 2000 computer problem," which is
common to many corporations and governmental entities.
This problem
-37-
<PAGE> 38
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
concerns the inability of information systems,
primarily computer software programs and certain
hardware, to properly recognize and process date-
sensitive information as the Year 2000 approaches.
Absent corrective actions, computer programs that have
date-sensitive software may recognize a date using "00"
as the year 1900 rather than 2000. This could result
in system failures or miscalculations causing
disruptions to various activities and operations.
Hecla has established thirteen teams to
identify and correct Year 2000 compliance issues.
Hecla's primary information systems (IS) with non-
compliant code are expected to be modified or replaced
with systems that are Year 2000 compliant. Hecla has
also evaluated its non-IS applications, primarily
systems embedded in processing and other facilities.
Additionally, the teams have evaluated Hecla's critical
suppliers and vendors as to their state of readiness
for the Year 2000.
Hecla's primary IS was originally evaluated
in 1996, and out of 2,300 programs, 850 were identified
that required modification. All of the 850 programs
have been modified, installed and tested by Hecla's
information services department. End user testing is
complete. Hecla's other IS's have been evaluated and
are compliant systems. Remediation and contingency
plans are in progress with completion scheduled on or
before September 30, 1999.
Inventories and assessments of non-IS systems
have been completed by all thirteen teams. Remediation
efforts are currently being implemented, where
necessary. Contingency plans are being developed for
all major components in case of system failures
surrounding the Year 2000.
Hecla is utilizing independent consultants to
oversee the Year 2000 project as well as to perform
certain remediation efforts. In addition, progress on
the Year 2000 project is also monitored by senior
management, and reported to the Board of Directors at
each respective meeting.
Hecla has identified critical suppliers, as
well as other essential service providers, and has
surveyed
-38-
<PAGE> 39
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
their Year 2000 compliancy. Based on expected
compliance dates expressed by some of these critical
suppliers and other service providers, additional
follow-up may be required to fully assess their state
of readiness for the Year 2000. These follow-up
activities will occur throughout 1999. For other
suppliers and service providers, risk assessments and
contingency plans, where necessary, will be finalized
by the end of the third quarter of 1999. Hecla has
taken the above-described steps to address issues
surrounding suppliers and service providers; however,
Hecla has no direct ability to influence other parties'
compliance actions. Hecla believes it has taken the
necessary actions to mitigate the effect of Year 2000
risks, although Hecla is not able to eliminate the
risks or to estimate the ultimate effect Year 2000 will
have on Hecla's operating results and financial
condition.
Contingency plans for Year 2000 related
business interruptions are being developed and will
include, but are not limited to, the development of
emergency backup recovery procedures, replacing
automated processes with manual processes,
identification of alternate suppliers, and increasing
raw material supplies and finished goods inventory
prior to December 31, 1999. Substantially all plans are
expected to be completed by the end of the third
quarter of 1999, but ongoing monitoring will continue
throughout 1999.
Hecla's most likely potential risk is a
temporary inability to process and ship its products,
as well as the inability of some customers to order and
pay on a timely basis.
Incremental costs directly related to Year
2000 issues are estimated to be $175,000 from 1998 to
2000, of which approximately $110,000 has been spent as
of June 30, 1999. Hecla's current estimate of expected
costs is based upon work performed to date, and
depending on the results of future work, the cost
estimate may increase. This estimate assumes that
Hecla will not incur significant Year 2000 costs on
behalf of its suppliers or customers.
Hecla's Year 2000 efforts are ongoing and its
overall plan, as well as the consideration of
-39-
<PAGE> 40
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
contingency plans, will continue to evolve as new
information becomes available. While Hecla is taking
steps it believes to be necessary to prevent any major
interruption to its business activities, that will
depend in part, upon the ability of third parties to be
Year 2000 compliant.
New Accounting Pronouncement
----------------------------
In June 1998, Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued. SFAS
133 establishes accounting and reporting standards for
derivative instruments, including certain derivative
instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging
activities. It requires that an entity recognizes all
derivatives as either assets or liabilities in the
statement of financial position and measures those
instruments at fair value. In June 1999, SFAS No. 137,
"Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB
Statement No. 133" was issued. SFAS 137 defers the
effective date of SFAS 133 to all fiscal quarters of
all fiscal years beginning after June 15, 2000;
however, earlier application is encouraged as of the
beginning of any fiscal quarter. Hecla is presently
evaluating the effect the adoption of this standard
will have on Hecla's financial condition, results of
operations, and cash flows.
Quantitative and Qualitative Disclosure About
---------------------------------------------
Market Risk
-----------
The following discussion about Hecla's risk-
management activities include "forward-looking
statements" that involve risk and uncertainties.
Actual results could differ materially from those
projected in the forward-looking statements.
The following tables summarize the financial
instruments and derivative instruments held by Hecla at
June 30, 1999, which are sensitive to changes in
interest rates and commodity prices. In the normal
course of business, Hecla also faces risks that are
either nonfinancial or nonquantifiable (See "Investment
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<PAGE> 41
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Considerations" of Part I, Item 1 of Hecla's 1998
Annual Report on Form 10-K).
Interest-Rate Risk Management
-----------------------------
At June 30, 1999, Hecla's debt is subject to
changes in market interest rates and is sensitive to
those changes. Hecla currently has no derivative
instruments to offset the risk of interest rate
changes. Hecla may choose to use derivative
instruments, such as interest rate swaps to manage the
risk associated with interest rate changes.
The following table presents principal cash
flows for debt outstanding at June 30, 1999, by
maturity date and the related average interest rate.
The variable rates are estimated based on implied
forward rates in the yield curve at the reporting date.
(in thousands)
<TABLE>
<CAPTION>
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
------ ------ ------ ------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bank credit agreement $ - - $ - - $ - - $12,500 $12,500 $ - - $25,000 $25,000
Average interest rate 7.62% 8.10% 8.52% 8.65% 8.75% - -%
Revenue bonds $ - - $ - - $ - - $ - - $ - - $ 9,800 $ 9,800 $ 9,800
Average interest rate 3.50% 3.66% 4.07% 4.33% 4.48% 4.69%
Project financing debt $ - - $ 500 $3,000 $ 3,000 $ 3,000 $ 1,000 $10,500 $10,500
Average interest rate 8.07% 8.55% 8.97% 9.10% 9.20% 9.34%
Subordinated bank debt $ - - $ - - $ - - $ - - $ 2,000 $ 1,000 $ 3,000 $ 3,000
Average interest rate 9.57% 10.05% 10.47% 10.60% 10.70% 10.84%
</TABLE>
Commodity-Price Risk Management
-------------------------------
Hedging
Hecla uses commodity forward sales
commitments, commodity swap contracts, and commodity
put and call option contracts to manage its exposure to
fluctuation in the prices of certain metals which it
produces. Contract positions are designed to ensure
that Hecla will receive a defined minimum price for
certain quantities of its production. Hecla uses these
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<PAGE> 42
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
instruments to reduce risk by offsetting market
exposures. Hecla is exposed to certain losses,
generally the amount by which the contract price
exceeds the spot price of a commodity, in the event of
nonperformance by the counterparties to these
agreements. The instruments held by Hecla are not
leveraged and are held for purposes other than trading.
All of these contracts are designated as hedges at
June 30, 1999.
The following table provides information
about Hecla's forward sales commitments and commodity
swap contracts at June 30, 1999. The table presents the
notional amount in ounces or tonnes, the average
forward sales price, and the total-dollar contract
amount expected by the maturity dates, which occur
between April 30, 1999, and December 31, 2004.
<TABLE>
<CAPTION>
Expected Expected Expected Expected Expected Expected Estimated
Maturity Maturity Maturity Maturity Maturity Maturity Fair
1999 2000 2001 2002 2003 2004 Value
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Forward contracts:
Gold sales (ounces) 22,681 52,196 62,010 60,428 59,802 48,928
Future price (per ounce) $ 288 $ 288 $ 288 $ 288 $ 288 $ 288
Contract amount (in $000's) $ 6,538 $ 15,045 $ 17,874 $ 17,418 $ 17,238 $ 14,103 $ 45
Silver sales (ounces) - - 1,200,000 - - - - - - - -
Future price (per ounce) $ - - $ 5.51 $ - - $ - - $ - - $ - -
Contract amount (in $000's) $ - - $ 6,606 $ - - $ - - $ - - $ - - $ 223
Swap contracts:
Zinc (tonnes) 1,500 1,500 - - - - - - - -
Future price (per pound) $ 0.495 $ 0.495 $ - - $ - - $ - - $ - -
Contract amount (in $000's) $ 1,637 $ 1,637 $ - - $ - - $ - - $ - - $ 112
Lead (tonnes) 3,000 3,000 - - - - - - - -
Future price (per pound) $ 0.245 $ 0.245 $ - - $ - - $ - - $ - -
Contract amount (in $000's) $ 1,620 $ 1,620 $ - - $ - - $ - - $ - - $ 197
</TABLE>
In addition to the above contracts, Hecla has
a quarterly Gold Lease Rate Swap at a fixed rate of
1.5% on 257,242 ounces of the above gold forward
contracts. The ounces covered under the swap are
adjusted each quarter, commencing June 2000, in
accordance with the expiration of the forward gold
contracts. The estimated cost to close out the Gold
Lease Rate Swap at June 30, 1999 was $550,000.
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<PAGE> 43
Part I - Financial Information (Continued)
Hecla Mining Company and Subsidiaries
Trading
During the first quarter of 1999, Hecla sold
call options for 1,350,000 ounces of silver through
December 31, 1999, at an average strike price of $5.33.
Hecla sold the call options to provide additional cash
flow. The sale of the options are designed to provide
some price protection, to the extent of the amount of
the call premium received, in the event of a decline in
the price of silver. These contracts also limit the
maximum that Hecla may receive on a portion of Hecla's
silver production to the strike price of the options
plus the premium received. Hecla is exposed to price
risk on these call options, and the value of the call
options are marked to market with a gain or loss, if
any, recorded in earnings. Through June 30, 1999,
Hecla has recognized revenue of $153,000 from expired
call option contracts and an additional $104,000 of
revenue from a mark to market adjustment.
The following table provides information
about Hecla's silver call options at June 30, 1999.
The table presents the notional amount in ounces, the
weighted average strike price, and the total-dollar
contract amount expected by the maturity dates, which
occur between July 30, 1999, and December 31, 1999.
Expected Estimated
Maturity Fair
1999 Value
--------- ---------
Sold call options:
Silver calls (ounces) 900,000
Weighted average strike price (per ounce) $ 5.33
Contract amount (in $000's) $ 4,797 $ 104
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<PAGE> 44
Part II - Other Information
Hecla Mining Company and Subsidiaries
Item 1. Legal Proceedings
- ------- -----------------
- Bunker Hill
In 1994, Hecla, as a potentially responsible
party under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA),
entered into a consent decree with the Environmental
Protection Agency and the State of Idaho, concerning
environmental remediation obligations at the Bunker
Hill Superfund site located at Kellogg, Idaho. The
consent decree settled Hecla's response-cost liability
under CERCLA at the Bunker Hill site. As of June 30,
1999, Hecla has estimated and accrued an allowance for
liability for remedial activity costs at the Bunker
Hill site of $4.6 million. These estimated
expenditures are anticipated to be made over the next
three to five years. Although Hecla believes the
allowance is adequate based upon current estimates of
aggregate costs, Hecla plans to reassess its
obligations under the consent decree as new information
is developed during 1999. Depending on the results of
the reassessment, it is reasonably possible that
Hecla's estimate of its obligations may change in the
near term.
Coeur d'Alene River Basin Natural Resource Damage
Claims
- Coeur d'Alene Tribe Claims
In July 1991, the Coeur d'Alene Indian Tribe
brought a lawsuit, under CERCLA, in Idaho Federal
District Court against Hecla and a number of other
mining companies asserting claims for damages to
natural resources downstream from the Bunker Hill site
over which the tribe alleges some ownership or control.
Hecla answered the tribe's complaint denying liability
for natural resource damages (NRD). In October 1996,
following a court imposed four-year suspension of the
proceeding, the tribe's natural resource damage
litigation was consolidated with the United States
Natural Resources Damage litigation described below for
discovery and other limited pretrial purposes.
-44-
<PAGE> 45
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
- U.S. Government Claims
In March 1996, the United States filed a
lawsuit in Idaho Federal District Court against certain
mining companies that conducted historic mining
operations in the Silver Valley of northern Idaho,
including Hecla. The lawsuit asserts claims under
CERCLA and the Clean Water Act and seeks recovery for
alleged damages to or loss of natural resources located
in the Coeur d'Alene River Basin in northern Idaho for
which the United States asserts to be the trustee under
CERCLA. The lawsuit asserts that the defendants'
historic mining activity resulted in releases of
hazardous substances and damaged natural resources
within the Basin. The suit also seeks declaratory
relief that Hecla and other defendants are jointly and
severally liable for response costs under CERCLA for
historic mining impacts in the Basin outside the Bunker
Hill site. Hecla answered the complaint in May 1996,
denying liability to the United States under CERCLA and
the Clean Water Act and asserted a counterclaim against
the United States for the federal government's
involvement in mining activities in the Basin which
contributed to the releases and damages alleged by the
United States. Hecla believes it also has a number of
defenses to the United States' claims.
On September 30, 1998, the Federal District
Court granted Hecla's summary judgment motion with
respect to the applicable statute of limitations and
dismissed the United States' NRD claim due to the
failure of the EPA to comply with federal law and EPA
regulations in expanding the national priority list
site boundaries to include the entire Coeur d'Alene
River/Lake Coeur d'Alene Basin which would have the
effect of extending the statute of limitations. The
United States has appealed the Federal District Court's
decision to the Ninth Circuit Court of Appeals. The
case is proceeding through discovery. On March 31,
1999, the court issued a case management order setting
trial in this case for November 2000. Summary judgment
motions related to 1) the extent of federal trusteeship
over natural resources in the Basin and 2) a
constitutional challenge to the retroactive application
of Superfund liability at the site are currently
pending before the Federal District Court.
-45-
<PAGE> 46
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
In May 1998, the EPA announced that it had
commenced a remedial investigation/feasibility study
under CERCLA for the entire Basin, including Lake Coeur
d'Alene, in support of its response cost claims
asserted in its March 1996 lawsuit.
- State of Idaho Claims
In March 1996, Hecla entered into an
agreement with the State of Idaho pursuant to which
Hecla agreed to continue certain financial
contributions to environmental cleanup work in the
Basin being undertaken by a state trustees group. In
return, the state agreed not to sue Hecla for damage to
natural resources for which the state is a trustee for
a period of five years, to pursue settlement with Hecla
of the state's NRD claims and to grant Hecla credit
against any such state claims for all expenditures made
under the Idaho agreement and certain other Company
contributions and expenditures for environmental
cleanup in the Basin.
At June 30, 1999, Hecla's accrual for
remediation activity in the Basin, not including the
Bunker Hill site, totaled approximately $0.2 million.
These expenditures are anticipated to be expended
during 1999. Depending on the results of the
aforementioned lawsuits, it is reasonably possible that
Hecla's estimate of its obligation may change in the
near or longer term.
Insurance Coverage Litigation
In 1991, Hecla initiated litigation in the
Idaho State District Court in Kootenai County, Idaho,
against a number of insurance companies which provided
comprehensive general liability insurance coverage to
Hecla and its predecessors. Hecla believes that the
insurance companies have a duty to defend and indemnify
Hecla under their policies of insurance for all
liabilities and claims asserted against Hecla by the
EPA and the tribe under CERCLA related to the Bunker
Hill site and the Basin in northern Idaho. In 1992,
the Idaho State District Court ruled that the primary
insurance companies had a duty to defend Hecla in the
Tribe's lawsuit. During 1995 and 1996, Hecla entered
into settlement agreements with a number of the
-46-
<PAGE> 47
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
insurance carriers named in the litigation. Hecla
has received a total of approximately $7.2 million
under the terms of the settlement agreements. Thirty
percent of these settlements were paid to the EPA to
reimburse the U.S. government for past costs under the
Bunker Hill site consent decree. Litigation is still
pending against one insurer with trial suspended until
the underlying environmental claims against Hecla are
resolved or settled. The remaining insurer is
providing Hecla with a partial defense in all Basin
environmental litigation. As of June 30, 1999, Hecla
had not reduced its accrual for reclamation and closure
costs to reflect the receipt of any anticipated
insurance proceeds.
Other Claims
On October 22, 1998, Hecla and certain
affiliates were served with a lawsuit filed in Superior
Court of Kern County, California. The complaint
pertains to the Cactus Gold mine located near Mojave,
California. Seventy-four plaintiffs allege that during
the period from 1960 through the present, the named
defendants' operations and activities caused personal
injury and property damage to the plaintiffs. The
plaintiffs seek monetary damages of $29.6 billion for
general negligence, nuisance, trespass, statutory
violations, ultra-hazardous activities, strict
liability, and other torts. Hecla has provided notice
and demand for defense/indemnity to its insurance
carriers providing liability insurance coverage for the
Cactus Gold mine operation. The primary carrier has
denied coverage. Hecla is currently investigating the
advisability of seeking court enforcement of the
carrier's coverage obligations under the policies.
Hecla has retained outside counsel to defend Hecla.
Based on a prior health risk assessment completed for
the operation as required by the State of California
and a preliminary review with outside legal counsel of
the allegations in the complaint as it relates to the
historical operations of Hecla and its predecessors at
the Cactus Gold mine, Hecla believes the allegations
are without merit.
In 1997, Hecla's subsidiary, Kentucky-
Tennessee Clay, terminated shipments of 1% of annual
ball clay production, sold to animal feed producers,
when the
-47-
<PAGE> 48
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
Food and Drug Administration determined trace
elements of dioxin were present in poultry. Dioxin is
inherently present in ball clays generally. Hecla
believes $11.0 million of insurance coverage is
available for approximately $8.0 million in claims to
date. Although the outcome cannot be assured, Hecla
believes that there will be no material adverse effect
on Hecla's results of operations, financial condition
or cash flows from this matter.
Hecla 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 there can be no assurance as to the ultimate
disposition of these matters and the proceedings
disclosed above, it is the opinion of Hecla's
management that the outcome of these matters will not
have a material adverse effect on the financial
condition of the Company. However, it is possible that
these matters could have a material effect on quarterly
or annual operating results, when they are resolved, in
future periods.
-48-
<PAGE> 49
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
Item 4. Annaul Meeting of Shareholders
- ------- ------------------------------
At the annual meeting of shareholders held on
May 7, 1999 the following matters were voted on by
Hecla's shareholders:
Election of Three Directors:
Votes Votes
For Withheld
----- --------
Leland O. Erdahl 43,841,109 633,472
---------- -------
Thomas J. O'Neil 43,845,187 629,394
---------- -------
Paul A. Redmond 43,834,465 640,116
---------- -------
Approval of selection of
PricewaterhouseCoopers LLP as
Hecla's Auditors for 1999
Votes Votes
For Against Abstentions
----- ------- -----------
43,927,860 323,972 222,749
---------- ---------- -----------
-49-
<PAGE> 50
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
10.1 Purchase Agreement between Monarch
Resources Limited and Hecla Mining Company dated
May 17, 1999 (incorporated by reference as
Exhibit 4.1 in the Form 8-K/A for the event dated
June 25, 1999).
10.2 Restated Credit Agreement between Hecla
Mining Company and NationsBank, N.A. and certain
financial institutions dated May 7, 1999.
10.2(a) First Amendment to Restated Credit Agreement
between Hecla Mining Company and NationsBank,
N.A. dated June 25, 1999.
10.3 Credit Agreement between Monarch
Resources Investments Limited and Standard Bank
London Limited dated as of June 25, 1999.
10.4 Subordinated Loan Agreement between
Hecla Mining Company and Standard Bank London
Limited dated as of June 25, 1999.
10.5 NationsBank Subordination Agreement
between Hecla Mining Company, NationsBank, N.A.
and Standard Bank London Limited dated as of June
25, 1999.
12 Fixed Charge Coverage Ratio Calculation
13 Second Quarter Report to Shareholders
for the quarter ended June 30, 1999, for release
dated August 3, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K
Report on Form 8-K dated May 10, 1999,
related to the Form of Warrant Agreement between
Hecla Mining Company and Warrant Agent and Form of
Agreement to purchase common stock and warrants
between Hecla Mining Company and purchasers.
-50-
<PAGE> 51
Part II - Other Information (Continued)
Hecla Mining Company and Subsidiaries
Report on Form 8-K/A dated May 12, 1999,
related to Amended Form of Warrant Agreement
between Hecla Mining Company and Warrant Agent.
Report on Form 8-K dated May 19, 1999,
related to Hecla Mining Company agreement to
acquire the assets of Monarch Resources Limited.
Report on Form 8-K dated June 25, 1999,
related to news release on purchase of the assets
of Monarch Resources Limited by Hecla Mining
Company.
Report on Form 8-K/A dated June 25, 1999,
related to purchase agreement between Hecla Mining
Company and Monarch Resources Limited dated May
17, 1999.
Items 2, 3, and 5 of Part II are omitted from this report as
inapplicable.
-51-
<PAGE> 52
Hecla Mining Company and 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: August 12, 1999 By /s/ Arthur Brown
---------------------------------
Arthur Brown, Chairman, President
and Chief Executive Officer
Date: August 12, 1999 By /s/ Lewis E. Walde
--------------------------------
Lewis E. Walde,
Assistant Controller
(Chief Accounting Officer)
-52-
<PAGE> 53
EXHIBIT INDEX
Exhibit
No. Description
- -------- ----------------------
10.1 Purchase Agreement between Monarch
Resources Limited and Hecla Mining Company dated
May 17, 1999 (incorporated by reference as
Exhibit 4.1 in the Form 8-K/A for the event dated
June 25, 1999).
10.2 Restated Credit Agreement between Hecla
Mining Company and NationsBank, N.A. and certain
financial institutions dated May 7, 1999.
10.2(a) First Amendment to Restated Credit Agreement
between Hecla Mining Company and NationsBank,
N.A. dated June 25, 1999.
10.3 Credit Agreement between Monarch
Resources Investments Limited and Standard Bank
London Limited dated as of June 25, 1999.
10.4 Subordinated Loan Agreement between
Hecla Mining Company and Standard Bank London
Limited dated as of June 25, 1999.
10.5 NationsBank Subordination Agreement
between Hecla Mining Company, NationsBank, N.A.
and Standard Bank London Limited dated as of June
25, 1999.
12 Fixed Charge Coverage Ratio Calculation
13 Second Quarter Report to Shareholders
for the quarter ended June 30, 1999, for release
dated August 3, 1999
27 Financial Data Schedule
-53-
<PAGE> 1
Exhibit 10.2
EXECUTION
- -----------------------------------------------------------------
RESTATED CREDIT AGREEMENT
-----------------------------------------
HECLA MINING COMPANY
and
NATIONSBANK, N.A.
as Agent
and CERTAIN FINANCIAL INSTITUTIONS
as Lenders
-------------------------------------------------
$ 55,000,000
May 7, 1999
- -----------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE I - Definitions and References
Section 1.1. Defined Terms
Section 1.2. Exhibits and Schedules; Additional Definitions
Section 1.3. Amendment of Defined Instruments
Section 1.4. References and Titles
Section 1.5. Calculations and Determinations
ARTICLE II - The Loans
Section 2.1. Commitments to Lend; Notes
Section 2.2. Requests for New Loans
Section 2.3. Continuations and Conversions of Existing Loans
Section 2.4. Use of Proceeds
Section 2.5. Interest Rates and Fees
Section 2.6. Optional Prepayments
Section 2.7. Mandatory Prepayments
Section 2.9 Initial Borrowing Base
Section 2.10 Subsequent Determinations of Borrowing Base
Section 2.11 Letters of Credit
Section 2.12 Requesting Letters of Credit
Section 2.13 Reimbursement
Section 2.14 Transferees of Letters of Credit
Section 2.15 Extension of Maturity
Section 2.16 Restriction on Liability
Section 2.17 No Duty to Inquire
Section 2.18 Payment of LC Obligations
Section 2.19. Letter of Credit Fees
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures
Section 3.2. Increased Cost and Reduced Return
Section 3.3. Limitation on Types of Loans
Section 3.4. Illegality
Section 3.5. Treatment of Affected Loans
Section 3.6. Compensation
Section 3.7. Change of Applicable Lending Office
Section 3.8. Replacement of Lenders
Section 3.9. Taxes
<PAGE> 3
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Documents to be Delivered
Section 4.2. Additional Conditions Precedent
ARTICLE V - Representations and Warranties
Section 5.1. Borrower's Representations and Warranties
Section 5.2. Representation by Lenders
ARTICLE VI - Affirmative Covenants of Borrower
Section 6.1. Payment and Performance
Section 6.2. Books, Financial Statements and Reports
Section 6.3. Other Information and Inspections
Section 6.4. Notice of Material Events and Changes of Name or Address
Section 6.5. Maintenance of Properties
Section 6.6. Maintenance of Existence and Qualifications
Section 6.7. Payment of Trade Debt, Taxes, etc.
Section 6.8. Insurance
Section 6.9. Payment of Expenses
Section 6.10. Performance on Borrower's Behalf
Section 6.11. Interest
Section 6.12. Compliance with Agreements and Law
Section 6.13. Evidence of Compliance
Section 6.14. Subsidiary Guarantors
Section 6.15. Bank Accounts; Offset
Section 6.16. Agreement to Deliver Security Documents; Sale of MWCA, Inc.
Section 6.17. Perfection and Protection of Security Interests and Liens
ARTICLE VII - Negative Covenants of Borrower
Section 7.1. Limitation on Debt and Liens
Section 7.2. Hedging Contracts
Section 7.3. Limitation on Mergers, Issuances of Securities
Section 7.4. Limitation on Sales of Property
Section 7.5. Limitation on Dividends and Redemptions
Section 7.6. Limitation on Investments and New Businesses
Section 7.7. Limitation on Credit Extensions
Section 7.8. Transactions with Affiliates
Section 7.9. ERISA Plans
Section 7.10. Fiscal Year
Section 7.11. Working Capital and Current Ratio
Section 7.12. Fixed Charge Coverage Ratio
Section 7.13. Tangible Net Worth
<PAGE> 4
ARTICLE VIIA - Guaranty
Section 7A.1. Guaranty
Section 7A.2. Unconditional Guaranty
Section 7A.3. Waiver
Section 7A.4. No Subrogation
Section 7A.5. Subordination
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default
Section 8.2. Remedies
ARTICLE IX - Agent
Section 9.1. Appointment, Powers, and Immunities
Section 9.2. Reliance by Agent
Section 9.3. Defaults
Section 9.4. Rights as Lender
Section 9.5. Indemnification
Section 9.6. Non-Reliance on Agent and Other Lenders
Section 9.7. Sharing of Set-Offs and Other Payments
Section 9.8. Investments
Section 9.9. Benefit of Article IX
Section 9.10. Resignation
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments
Section 10.2. Survival of Agreements; Cumulative Nature
Section 10.3. Notices
Section 10.4. Indemnity
Section 10.5. Joint and Several Liability; Parties in Interest
Section 10.6. Assignments and Participations
Section 10.7. Confidentiality
Section 10.8. Governing Law; Submission to Process
Section 10.9. Limitation on Interest
Section 10.10. Termination; Limited Survival
Section 10.11. Severability
Section 10.12. Counterparts; Fax
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc.
Section 10.14. Amendment and Restatement
Section 10.15. No Novation or Release
Section 10.16. Ratification
<PAGE> 5
Schedules and Exhibits:
Schedule 1 - Disclosure Schedule
Schedule 2 - Security Schedule
Schedule 3 - Borrower's Subsidiaries
Schedule 4 - Approved Foreign Receivables Account Debtors
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Opinion of Counsel for Related Persons
Exhibit F - Assignment and Acceptance Agreement
Exhibit G - Letter of Credit Application and Agreement
Exhibit H - Borrower Security Agreement
Exhibit I - Subsidiary Guarantor Security Agreement
<PAGE> 6
CREDIT AGREEMENT
THIS RESTATED CREDIT AGREEMENT is made as of May 7, 1999, by and among
HECLA MINING COMPANY, a Delaware corporation (herein called "Borrower"), the
Subsidiary Guarantors referred to below, NATIONSBANK, N.A., individually and as
agent (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 to such term in this Section 1.1 or in the
sections and subsections referred to below:
"ADJUSTED BASE RATE" means the Base Rate plus the Base Rate Margin. No
Adjusted Base Rate charged by any Person shall ever exceed the Highest Lawful
Rate.
"ADJUSTED CD RATE" means, for any CD Loan for any CD Interest Period
therefor, the rate per annum equal to the sum of (a) the Fixed Rate Margin plus
(b) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) determined by Agent to be equal to the sum of (i) the CD Rate for such CD
Loan for such CD Interest Period divided by 1 minus the Reserve Requirement for
such CD Loan for such CD Interest Period plus (ii) the Assessment Rate. The
Adjusted CD Rate for any CD Loan shall change whenever the Fixed Rate Margin or
the Reserve Requirement changes. No Adjusted CD Rate charged by any Person
shall ever exceed the Highest Lawful Rate.
"ADJUSTED EURODOLLAR RATE" means, for any Eurodollar Loan for any
Eurodollar Interest Period therefor, the rate per annum equal to the sum of
(a) the Fixed Rate Margin plus (b) the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by Agent to be equal to the
quotient obtained by dividing (i) the Eurodollar Rate for such Eurodollar Loan
for such Eurodollar Interest Period by (ii) 1 minus the Reserve Requirement for
such Eurodollar Loan for such Eurodollar Interest Period. The Adjusted
Eurodollar Rate for any Eurodollar Loan shall change whenever the Fixed Rate
Margin or the Reserve Requirement changes. No Adjusted Eurodollar Rate charged
by any Person shall ever exceed the Highest Lawful Rate.
<PAGE> 7
"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, N.A., as Agent hereunder, and its successors in
such capacity.
"AGREEMENT" means this Restated Credit Agreement.
"APPLICABLE LENDING OFFICE" means, for each Lender and for each Type of
Loan, the "Lending Office" of such Lender (or of an Affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
office of such Lender (or an Affiliate of such Lender) as such Lender may from
time to time specify to Agent and Borrower by written notice in accordance with
the terms hereof as the office by which its Loans of such Type are to be made
and maintained.
"ASSESSMENT RATE" means, for any day, the annual assessment rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) which is payable by Agent (in
its individual capacity) to the Federal Deposit Insurance Corporation (or any
successor) for deposit insurance for United States dollar time deposits with
Agent (in its individual capacity) at its principal office as determined by
Agent. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
"BASE RATE" means, for any day, the rate per annum equal to the higher of
(a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and
(b) the Prime Rate for such day. Any change in the Base Rate due to a change in
the Prime Rate or the Federal Funds Rate shall be effective on the effective
date of such change in the Prime Rate or Federal Funds Rate. As used in this
definition, "Prime Rate" means the per annum rate of interest established from
time to time by the Reference Bank as its prime rate, which rate may not be the
lowest rate of interest charged by Agent to its customers.
"BASE RATE LOAN" means a Loan which does not bear interest at a Fixed Rate.
<PAGE> 8
"BASE RATE MARGIN" means, on each day:
FACILITY USAGE BASE RATE MARGIN
less than or equal to twenty- 15 Basis Points (0.15%)
five percent (25%) of the per annum
Borrowing Base
less than or equal to fifty 35 Basis Points (0.35%)
percent (50%) but greater than per annum
twenty-five percent (25%) of the
Borrowing Base
less than or equal to seventy- 80 Basis Points (0.80%)
five percent (75%) but greater per annum
than fifty percent (50%) of the
Borrowing Base
greater than seventy-five 100 Basis Points (1.0%)
percent of the Borrowing Base per annum
(75%)
PROVIDED THAT on August 31, 1999, the Base Rate Margin for all percentages of
Facility Usage shall be increased by Fifty Basis Points (0.5%) if Borrower shall
not have received the Minimum Net Proceeds on or prior to such date and such
increase shall remain in effect until such time as Borrower shall have received
the Minimum Net Proceeds.
"BASIS POINT" means one one-hundredth of one percent (0.01%).
"BONDS" means the bonds issued under the Indenture.
"BOND LC" means that certain letter of credit issued by LC Issuer, which
provides for payment of the Bonds, and any letter of credit issued by LC Issuer
in substitution therefor in accordance with the terms of this Agreement and the
original Bond LC.
"BOND LC CASH COLLATERAL" has the meaning set forth in Section 2.18(b).
"BOND LC COLLATERAL ACCOUNT" has the meaning given it in Section 2.18(b).
<PAGE> 9
"BOND LC OBLIGATIONS" means all LC Obligations arising with respect to the
Bond LC.
"BORROWER" means Hecla Mining Company, a Delaware corporation.
"BORROWER SECURITY AGREEMENT" shall mean the Security Agreement of Borrower
in favor of Agent substantially in the form of Exhibit H attached hereto.
"BORROWING" means a borrowing of new Loans of a single Type pursuant to
Section 2.2 or a Continuation or Conversion of existing Loans into a single Type
(and, in the case of Fixed Rate Loans, with the same Interest Period) pursuant
to Section 2.3 and a combination of new Loans and a Continuation or Conversion
of existing Loans in a single Type (and, in the case of Fixed Rate Loans, with
the same Interest Period).
"BORROWING BASE" means the sum of (i) the Working Capital Borrowing Base
and (ii) the Cash Earnings Borrowing Base; provided, however, that in no event
shall the Borrowing Base ever exceed the Maximum Credit Amount.
"BORROWING BASE DEFICIENCY" has the meaning given to such term in Section
2.7.
"BORROWING BASE REPORT" means a report in a form reasonably acceptable to
Agent, appropriately completed, together with the following attachments: (a) a
detailed aged schedule of all Eligible Receivables as of the date specified in
such report, listing face amounts and dates of invoices of each such Eligible
Receivable (and, upon request of Agent, a list of all Eligible Receivables,
listing the name and address of each account debtor, copies of invoices, credit
reports, and any other matters and information relating to the Eligible
Receivables), and (b) a schedule of Eligible Inventory, setting forth the
location of all such Eligible Inventory (other than Eligible Inventory in
transit), including Eligible Inventory not in the possession of Borrower and the
name of the Person in possession thereof and whether and how much of such
Eligible Inventory consists of raw material, finished goods or otherwise.
"BORROWING NOTICE" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
<PAGE> 10
"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 Loans (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 Eurodollar Loans (such as
the day on which a Eurodollar 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" means, collectively, the General LC Cash Collateral and
the Bond LC Cash Collateral.
"CASH EARNINGS" means as of the end of any calendar month, Borrower's
Consolidated net income for the twelve (12) consecutive calendar months then
ended PLUS (i) nonrecurring losses for such calendar month, (ii) other non-cash
charges taken into account in determining such net income and (iii) exploration
expenses taken into account in determining such net income, but only to the
extent that exploration expenses exceed $3,000,000, MINUS (iv) nonrecurring
gains taken into account in determining such net income, and (v) any cash
dividends that have been declared, accrued or paid (without duplication) on
common or preferred stock during such twelve-month period.
"CASH EARNINGS BORROWING BASE" means, for any calendar month, two hundred
percent (200%) of Borrower's Cash Earnings calculated as of the end of the
second calendar month preceding such calendar month.
"CD LOANS" means Loans that bear interest at rates based upon the Adjusted
CD Rate.
"CD RATE" means, for any CD Loan for any CD Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by Agent to be the average of the bid rates quoted to the Reference
Bank at approximately 10:00 a.m. New York, New York time (or as soon thereafter
as practicable) on the first day of such CD Interest Period by two (2) or more
certificate of deposit dealers of recognized national standing selected by the
Reference Bank for the purchase at face value of certificates of deposit of such
Reference Bank having a term comparable to such CD Interest Period and in an
amount comparable to the principal amount of the CD Loan to be made by the
Reference Bank for such CD Interest Period.
<PAGE> 11
"CD INTEREST PERIOD" means, with respect to each particular CD Loan in a
Borrowing, a period of 30, 60, 90 or 180 days, as specified in the Borrowing
Notice or Continuation/Conversion Notice applicable thereto, beginning on and
including the date specified in such Borrowing Notice or Continuation/Conversion
Notice (which must be a Business Day), and ending on but not including the day
which is 30, 60 or 90 or 180 days thereafter (e.g., a 30-day period beginning
on April 1 will end on but not include April 30); provided that: (a) any CD
Interest Period which would otherwise end on a day which is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such Interest Period shall end on
the next preceding Business Day; and (b) any CD Interest Period which begins on
the last Business Day in a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day in a calendar month; and (c)
notwithstanding the foregoing, any CD Interest Period which would otherwise end
after the last day of the Commitment Period shall end on the last day of the
Commitment Period (or, if the last day of the Commitment Period is not a
Business Day, on the next preceding Business Day).
"CHANGE OF CONTROL" means the occurrence of either of the following events:
(a) any Person or two or more Persons acting as a group shall acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Act of 1934, as amended, and including holding
proxies to vote for the election of directors other than proxies held by
Borrower's management or their designees to be voted in favor of Persons
nominated by Borrower's Board of Directors) of 25% or more of the outstanding
voting securities of Borrower, measured by voting power (including both common
stock and any preferred stock or other equity securities entitling the holders
thereof to vote with the holders of common stock in elections for directors of
Borrower) or (b) a majority of the directors of Borrower shall consist of
Persons not nominated by Borrower's Board of Directors (not including as Board
nominees any directors which the Board is obligated to nominate pursuant to
shareholders agreements, voting trust arrangements or similar arrangements).
"COLLATERAL" means all property of any kind which is subject to a Lien in
favor of Lenders (or in favor of Agent for the benefit of Lenders) or which,
under the terms of any Security Document, is purported to be subject to such a
Lien.
<PAGE> 12
"COMMITMENT PERIOD" means the period from and including the date hereof
until December 31, 2001 (or, if earlier, the day on which the obligations of
Lenders to make Loans hereunder or the obligations of LC Issuer to issue Letters
of Credit hereunder have been terminated or 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.
"CONTINUATION" shall refer to the continuation pursuant to Section 2.3
hereof of a Fixed Rate Loan of one Type as a Fixed Rate Loan of the same Type
from one Interest Period to the next Interest Period.
"CONTINUATION/CONVERSION NOTICE" means a written or telephonic request, or
a written confirmation, made by Borrower which meets the requirements of Section
2.3.
"CONVERT, CONVERSION AND CONVERTED" shall refer to a conversion pursuant to
Section 2.3 or Article III of one Type of Loan into another Type of Loan.
"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.
"DEFAULT RATE" means, at the time in question (a) with respect to any Base
Rate Loan or any Obligation which is not a Loan, the rate per annum equal to
three percent (3%) above the Adjusted Base Rate then in effect, (b) with
respect to any Eurodollar Loan, the rate per annum equal to three percent (3%)
above the Adjusted Eurodollar Rate then in effect, and (c) with respect to any
CD Rate Loan, the rate per annum equal to three percent (3%) above the Adjusted
CD Rate then in effect. No Default Rate charged by any Person shall ever exceed
the Highest Lawful Rate.
<PAGE> 13
"DETERMINATION DATE" has the meaning given to such term in Section 2.9.
"DISCLOSURE REPORT" means either a notice given by Borrower under Section
6.4 or a certificate given by Borrower's chief financial officer under Section
6.2(b).
"DISCLOSURE SCHEDULE" means Schedule 1 hereto.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" below its name on its
signature page hereto, or such other office as such Lender may from time to time
specify to Borrower and Agent; with respect to LC Issuer, the office, branch, or
agency through which it issues Letters of Credit; and, with respect to Agent,
the office, branch, or agency through which it administers this Agreement.
"EBITDA" means as of the end of any Fiscal Quarter, Borrower's Consolidated
net income for the four consecutive Fiscal Quarters then ended plus exploration
expenses in excess of $3,000,000, interest, taxes, depreciation and
amortization, nonrecurring losses and 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.
"ELIGIBLE INVENTORY" means Eligible Other Inventory and Eligible MWCA
Inventory.
"ELIGIBLE MWCA INVENTORY" means any Product which is owned by MWCA, Inc.
prior to the occurrence of a MWCA Triggering Event and which:
(a) is located at a mine or a processing plant owned by MWCA, Inc. or is
in transit to a mill or processing plant owned by MWCA, Inc.; and
(b) such mine, processing plant, or mill:
(i) IS LOCATED IN THE UNITED STATES in a state in respect of which
Agent has received Security Documents from MWCA, Inc. granting Agent a
security interest in such Product pursuant to Section 6.16(c) or, if in
transit, will be located in such a state immediately upon reaching its
destination, or
<PAGE> 14
(ii) IS NOT LOCATED IN THE UNITED STATES, but the aggregate amount of
all such Eligible Inventory described in this subsection (ii) and in
subsection (b)(ii) of the definition of Eligible Other Inventory and
included in the Borrowing Base does not exceed 20% of all Eligible
Inventory; and
(c) such Product is fully and adequately insured pursuant to Section 6.8
with Agent named as loss payee as its interests may appear; and
(d) such Product is categorized on the Borrower's Consolidated balance
sheet as "Products on hand and in Transit; Concentrates and Metals in transit,
and Industrial mineral product."
"ELIGIBLE OTHER INVENTORY" means any Product which is owned by Borrower or
any Subsidiary Guarantor (excluding MWCA, Inc. until the occurrence of a MWCA
Triggering Event) and which:
(a) is located at a mine or a processing plant owned by Borrower or any
Subsidiary Guarantor (excluding MWCA, Inc. until the occurrence of a MWCA
Triggering Event) or is in transit to a smelter, mill or refinery owned by any
such Persons; and
(b) such mine or processing plant, or such smelter, mill or refinery:
(i) IS LOCATED IN THE UNITED STATES in a state in respect of which
Agent has received an opinion of counsel, in form and substance
satisfactory to Agent, to the effect that the Product located in such state
is subject to an enforceable and duly perfected security interest in favor
of Agent or, if in transit, will be located in such a state immediately
upon reaching its destination, or
(ii) IS NOT LOCATED IN THE UNITED STATES, but the aggregate amount of
all such Eligible Inventory described in this subsection (ii) and in
subsection (b)(ii) of the definition of Eligible MWCA Inventory and
included in the Borrowing Base does not exceed 20% of all Eligible
Inventory; and
(c) if such Product is located in the United States, such Product is
subject to an enforceable security interest in favor of Agent which is duly
perfected and of first priority, or if in transit, will be duly perfected and of
first priority immediately upon reaching its destination; and
<PAGE> 15
(d) such Product is fully and adequately insured pursuant to Section 6.8
with Agent named as loss payee as its interests may appear; and
(e) such Product is categorized on the Borrower's Consolidated balance
sheet as "Products on hand and in Transit; Concentrates and Metals in transit,
and Industrial mineral product".
"ELIGIBLE RECEIVABLES" means at any time an amount equal to the aggregate
net invoice or ledger amount owing on all trade accounts receivable of Borrower,
and any Subsidiary Guarantor:
(a) arising from the sale of Products by Borrower or Subsidiary Guarantor
to account debtors which are not Affiliates of such Person in the ordinary
course of such Person's business;
(b) upon which such Person's right to receive payment is absolute and not
contingent upon the fulfillment of any condition whatsoever and upon which the
account debtor has no defense or counterclaims;
(c) that are payable in the United States in United States dollars;
(d) that are subject to a perfected first priority security interest in
favor of Agent, for the benefit of Lenders, and the terms of which do not
restrict or prohibit the granting of such security interest; and
(e) that are not in default.
An account shall be deemed in default if: (i) it is not paid within the ninety
(90) days after the date of delivery of the related Products to the account
debtor or, if such account arises under an Extended Term Contract (as defined in
this paragraph) within thirty (30) days after the payment date required under
the Extended Term Contract, but in no event to exceed one-hundred eighty (180)
days after the date of delivery of the related Products to the account debtor;
(ii) more than 25% of the aggregate amount of all accounts owed by a single
account debtor (or its Affiliates) are being contested by appropriate
proceedings in good faith by such account debtor or are in default under
subparagraph (i) above; (iii) any account debtor obligated upon such account
suspends business, makes a general assignment for the benefit of creditors; or
fails to pay its debts generally as they come due; or (iv) the account debtor
obligated upon such account is insolvent or otherwise not
<PAGE> 16
satisfactory to Agent; provided, however, that not more than fifty percent (50%)
of the total of Eligible Receivables shall consist of receivables from sales of
Products to purchasers located outside the United States (other than Approved
Foreign Receivables as such term is defined in this paragraph). As used in this
paragraph, the term "Extended Term Contract" means a contract for the sale of
Products under which the account debtor is granted payment terms in excess of
thirty (30) days after the date of delivery thereof to such account debtor, and
the term "Approved Foreign Receivable" means each Eligible Receivable from any
Person described on Schedule 4.
"ELIGIBLE TRANSFEREE" means a Person which either (a) is a Lender or an
Affiliate of a Lender, or (b) is consented to as an Eligible Transferee by Agent
and, so long as no Default or Event of Default is continuing, by Borrower, which
consents in each case will not be unreasonably withheld (provided that no Person
organized outside the United States may be an Eligible Transferee if Borrower
would be required to pay withholding taxes on interest or principal owed to such
Person).
"ENVIRONMENTAL LAWS" means any and all Laws 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.
"ERISA AFFILIATE" means Borrower and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control that, together with Borrower, are treated as a single employer
under Section 414 of the Internal Revenue Code.
"ERISA PLAN" means any employee pension benefit plan subject to Title IV of
ERISA maintained by any ERISA Affiliate with respect to which any Related Person
has a fixed or contingent liability.
<PAGE> 17
"EURODOLLAR INTEREST PERIOD" means, with respect to each particular
Eurodollar Loan in a Borrowing, the period specified in the Borrowing Notice or
Continuation/Conversion Notice applicable thereto, beginning on and including
the date specified in such Borrowing Notice or Continuation/Conversion Notice
(which must be a Business Day), and ending one, two, three, or six months
thereafter, as Borrower may elect in such notice; provided that: (a) any
Eurodollar Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day; and (b) any Eurodollar Interest
Period which begins on the last Business Day in a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day in a calendar
month; and (c) notwithstanding the foregoing, any Eurodollar Interest Period
which would otherwise end after the last day of the Commitment Period shall end
on the last day of the Commitment Period (or, if the last day of the Commitment
Period is not a Business Day, on the next preceding Business Day).
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office
of such Lender specified as its "Eurodollar Lending Office" below its name on
the signature page hereto (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as such Lender may from
time to time specify to Borrower and Agent.
"EURODOLLAR LOAN" means a Loan that bears interest at the Adjusted
Eurodollar Rate.
"EURODOLLAR RATE" means, for any Eurodollar Loan within a Borrowing and
with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Dow
Jones Market Service (formerly Telerate Access Service) Page 3750 (or any
successor page) as the London interbank offered rate for deposits in United
States dollars at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, the term "Eurodollar
Rate" shall mean, for any Eurodollar Loan within a Borrowing and with respect to
the related Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank
<PAGE> 18
offered rate for deposits in Dollars at approximately 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest
1/100 of 1%).
"EVENT OF DEFAULT" has the meaning given to such term in Section 8.1.
"EXISTING CREDIT AGREEMENT" means that certain Credit Agreement dated as of
August 11, 1997 among Borrower, Agent and the Lenders parties thereto, as
supplemented or amended to the date hereof, together with the promissory notes
made by Borrower thereunder.
"FACILITY USAGE" means, at the time in question, the aggregate amount of
outstanding Loans and existing LC Obligations at such time.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of one percent) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of Dallas, on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Agent on such day on such transactions as determined by Agent.
"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-
<PAGE> 19
term debt scheduled to be paid or 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; PROVIDED however, that during
the period through and including December 31, 1999, Fixed Charges shall be
reduced by the net proceeds from sales of real property and the Metalline
Contact Mines, Inc. shares, which are non-recurring gains.
"FIXED RATE" means, with respect to any Fixed Rate Loan, the related
Adjusted Eurodollar Rate or Adjusted CD Rate.
"FIXED RATE LOANS" means any CD Loans or any Eurodollar Loans or both.
"FIXED RATE MARGIN" means, on each day:
FACILITY USAGE FIXED RATE MARGIN
less than or equal to twenty- 140 Basis Points (1.4%)
five percent (25%) of the per annum
Borrowing Base
less than or equal to fifty 160 Basis Points (1.6%)
percent (50%) but greater than per annum
twenty-five percent (25%) of
the Borrowing Base
less than or equal to seventy- 205 Five Basis Points (2.05%)
five percent (75%) but greater per annum
than fifty percent (50%) of the
Borrowing Base
greater than seventy-five 225 Basis Points (2.25%)
percent (75%) of the Borrowing per annum
Base
PROVIDED THAT on August 31, 1999, the Fixed Rate Margin for all percentages of
Facility Usage shall be increased by Fifty Basis Points (0.5%) if Borrower shall
not have received the Minimum Net Proceeds on or prior to such date and such
increase shall remain in effect until such time as Borrower shall have received
the Minimum Net Proceeds.
"FUNDED DEBT"of any Person means Debt in the following categories,
calculated without duplication:
<PAGE> 20
(a) Debt for borrowed money or gold loans (excluding Hedging Obligations);
and
(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 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.
"GENERAL LC CASH COLLATERAL" has the meaning given it in Section 2.18(b).
"GENERAL LC COLLATERAL ACCOUNT" has the meaning given it in Section
2.18(b).
"GENERAL LC OBLIGATIONS" means all LC Obligations other than Bond LC
Obligations.
"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.
"HEDGING CONTRACT" means (a) any agreement providing for options, swaps,
floors, caps, collars, forward sales or forward purchases involving interest
rates, commodities or commodity prices, equities, currencies, bonds, or indexes
based on any of the foregoing, (b) any option, futures or forward contract
traded on an exchange, and (c) any other derivative agreement or other similar
agreement or arrangement.
<PAGE> 21
"HEDGING OBLIGATIONS" means all of the following:
(a) any and all present or future obligations of one or more of the
Related Persons to any one or more Lenders (or any affiliate of any Lender)
according to the terms of any present or future interest or currency rate swap,
rate cap, rate floor, rate collar, exchange transaction, forward rate agreement,
or other exchange or rate protection agreements or any option with respect to
any such transaction now existing or hereafter entered into between any of the
Related Persons and one or more parties constituting any Lender (or any
affiliate of any Lender); and
(b) any and all present or future obligations of one or more Related
Persons to any one or more Lenders (or to any affiliate of any Lender) according
to the terms of any present or future swap agreements, cap, floor, collar,
exchange transaction, forward agreement or other exchange or protection
agreements relating to gold or other minerals, or any option with respect to any
such transaction now existing or hereafter entered into between any of the
Related Persons and one or more parties constituting any Lender (or any
affiliate of any Lender).
"HIGHEST LAWFUL RATE" means, with respect to each Lender Party to whom
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. 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 Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
"INDENTURE" means that certain Indenture of Trust dated as of October 1,
1995 between The Industrial Development Corporation of Custer County, Idaho and
Norwest Bank of Minnesota, National Association, as Trustee, pursuant to which
the solid waste disposal revenue bonds (Hecla Mining Company Project) series
1995 were issued.
"INITIAL FINANCIAL STATEMENTS" means the audited annual Consolidated
financial statements of Borrower dated as of December 31, 1998.
<PAGE> 22
"INTEREST PAYMENT DATE" means (a) with respect to each Base Rate Loan, the
last Business Day of each April, June, September and December, and (b) with
respect to each Fixed Rate Loan, the last day of the Interest Period that is
applicable thereto and, if such Interest Period is more than three months or
ninety (90) days in length, the date specified by Agent which is approximately
three months after such Interest Period begins; provided that the last Business
Day of each calendar month shall also be an Interest Payment Date for each such
Fixed Rate Loan so long as any Event of Default exists under Section 8.1 (a) or
(b).
"INTEREST PERIOD" means with respect to any Fixed Rate Loan, the related CD
Interest Period or Eurodollar Interest Period.
"INTERNAL REVENUE CODE" means the United States Internal Revenue Code of
1986, as amended from time to time and any successor statute or statutes.
"INVESTMENT" means any investment made directly or indirectly, in any
Person, whether by acquisition of shares of capital stock, indebtedness or other
obligations or securities or by loan, advance, capital contribution or otherwise
and whether made in cash, by the transfer of property, or by any other means.
"LAW" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"LC APPLICATION" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC ISSUER" means NationsBank, N.A. in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity. Agent may,
with the consent of Borrower and the Lender in question, appoint any Lender
hereunder as an LC Issuer in place of or in addition to NationsBank, N.A.
"LC OBLIGATIONS" means, at the time in question, the sum of all Matured LC
Obligations plus the maximum amounts which LC Issuer might then or thereafter be
called upon to advance under all Letters of Credit then outstanding.
"LC SUBLIMIT" means the amount of $10,000,000.
<PAGE> 23
"LENDER PARTIES" means Agent, LC Issuer, and all Lenders.
"LENDERS" means each signatory hereto (other than Borrower and any Related
Person that is a party hereto), including NationsBank, N.A. in its capacity as
a Lender hereunder rather than as Agent or LC Issuer, and the successors of each
such party as holder of a Note.
"LETTER OF CREDIT" means any letter of credit issued by LC Issuer hereunder
at the application of Borrower or the Bond LC.
"LIEN" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Debt owed to it or any other arrangement with
such creditor which provides for the payment of such Debt out of such property
or assets or which allows such creditor 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 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 AGREEMENT" means that certain Loan Agreement dated as of October 1,
1995, between Borrower and The Industrial Development Corporation of Custer
County, Idaho.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security Documents,
the Letters of Credit, 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 and commitment
letters).
"LOANS" has the meaning given to such term in Section 2.1.
"MAJORITY LENDERS" means (i) so long as there are two Lenders, Lenders
whose aggregate Percentage Shares equal one hundred percent (100%) and (ii) at
any time there are three or more Lenders and no one Lender has a Percentage
Share equal to or greater than sixty-six and two-thirds percent (66 2/3%),
Lenders whose aggregate Percentage Shares equal or exceed sixty-six and
two-thirds percent (66 2/3%).
<PAGE> 24
"MATERIAL SUBSIDIARY" means each Subsidiary of Borrower that is designated
as a "Material Subsidiary" on Schedule 3 hereto.
"MATURED LC OBLIGATIONS" means all amounts paid by LC Issuer on drafts or
demands for payment drawn or made under or purported to be under any Letter of
Credit and all other amounts due and owing to LC Issuer under any LC Application
for any Letter of Credit, to the extent the same have not been repaid to LC
Issuer (with the proceeds of Loans or otherwise).
"MATURITY DATE" means December 31, 2003.
"MAXIMUM CREDIT AMOUNT" means the amount of $55,000,000.
"MAXIMUM DRAWING AMOUNT" means at the time in question the sum of the
maximum amounts which LC Issuer might then or thereafter be called upon to
advance under all Letters of Credit which are 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 largest amount that would not render such
Subsidiary Guarantor's guarantee of the Obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any applicable state or federal law.
"MINIMUM NET PROCEEDS" means net proceeds from the sale of assets or
capital stock of MWCA, Inc. in an amount equal to or greater than $20,000,000
plus Net Proceeds from New Equity in an amount equal to or greater than
$5,000,000.
"MWCA TRIGGERING EVENT" means the first to occur of any of the following
(a) the failure by Borrower to sell all of the capital stock or all or
substantially all of the assets of MWCA, Inc. by August 31, 1999 or (b) the
occurrence of a Default or Event of Default hereunder.
"NET PROCEEDS FROM NEW EQUITY" means net proceeds received by Borrower from
the issuance of equity securities of the Borrower after January 1, 1999.
"NOTE" has the meaning given to such term in Section 2.1.
<PAGE> 25
"OBLIGATIONS" means all Debt from time to time owing by any Related Person
to any Lender Party under or pursuant to any of the Loan Documents, including
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 2.5, in any Borrowing Notice or when no Loans are outstanding
hereunder, the percentage set forth opposite such Lender's name on its signature
page hereto, and (b) when used otherwise, the percentage obtained by dividing
(i) the sum of the unpaid principal balance of such Lender's Loans at the time
in question plus the Matured LC Obligations which such Lender has funded
pursuant to Section 2.13(c) plus the portion of the Maximum Drawing Amount which
such Lender might be obligated to fund under Section 2.13(c), 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 (i) the Obligations, and (ii) Funded Debt which
matures after the 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 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.
<PAGE> 26
(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, Tribunal, or any
other legally recognizable entity.
"PLEDGE AGREEMENT" means that certain Pledge Agreement dated as of October
1, 1995, between Borrower and Agent covering Bonds purchased with funds drawn
under the Bond LC.
"PRODUCTS" means all severed and extracted ore, minerals, dore,
concentrates, precipitate, scoria, clay, ball clay, kaolin, feldspar, refined
gold, silver, lead, copper, zinc or other metals, inventory and finished
products derived from the foregoing now owned or hereafter acquired by Borrower
or any Subsidiary Guarantor.
"PROHIBITED LIEN" means any Lien not expressly allowed under Section
7.1(b).
"REFERENCE BANK" means NationsBank, N.A.
"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.
"REQUIRED LENDERS" means Lenders whose aggregate Percentage Shares equal
one hundred percent (100%).
<PAGE> 27
"RESERVE REQUIREMENT" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against (a) in the case
of Eurodollar Loans, "Eurocurrency liabilities" (as such term is used in
Regulation D) or (b) in the case of CD Loans, non-personal U.S. Dollar time
deposits in an amount of $100,000 or more. Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other reserves required to
be maintained by such member banks with respect to (i) any category of
liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate or Adjusted CD Rate (as the case may be) is to be determined, or
(ii) any category of extensions of credit or other assets which include
Eurodollar Loans or CD Loans. The Adjusted Eurodollar Rate and the Adjusted CD
Rate shall be adjusted automatically on and as of the effective date of any
change in the Reserve Requirement.
"SECURITY DOCUMENTS" means the instruments listed in the Security Schedule
and all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Related Person to Agent in connection with this Agreement or
any transaction contemplated hereby to secure or guarantee the payment of any
part of the Obligations or the performance of any Related Person's other duties
and obligations under the Loan Documents.
"SECURITY SCHEDULE" means Schedule 2 hereto.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, limited liability company, 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 (50%) or more by such Person.
"SUBSIDIARY GUARANTOR" means each of MWCA, Inc., Kentucky-Tennessee Clay
Company, K-T Feldspar Corporation, and any other Subsidiary who has guaranteed
some or all of the Obligations pursuant to Section 6.14.
<PAGE> 28
"SUBSIDIARY GUARANTOR SECURITY AGREEMENT" shall mean the Security Agreement
of a Subsidiary Guarantor in favor of Agent for the benefit of Lenders
substantially in the form of Exhibit I attached hereto.
"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 ERISA Affiliate 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.
"TOTAL DEBT"means Borrower's Consolidated Debt in the following categories,
calculated without duplication:
(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.
"TRIBUNAL" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency or instrumentality of
the United States of America or any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted or existing.
<PAGE> 29
"TYPE" means, with respect to any Loan, the characterization of such Loan
as either a Base Rate Loan or Fixed Rate Loan.
"WORKING CAPITAL BORROWING BASE" means the amount determined by Agent from
time to time in its reasonable judgment (which judgment shall be exercised in
good faith) equal to the sum of (a) eighty-five percent (85%) of the Eligible
Receivables; and (b) and seventy-five percent (75%) of Eligible Inventory,
valued at the lower of cost or market value.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
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 imply that Lenders have in
advance authorized, or in the future will 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", "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.
<PAGE> 30
Section 1.5. Calculations and Determinations. All calculations of
interest and fees made under the Loan Documents 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 a Lender Party of amounts to be paid under
Article III or any other matters which are to be determined hereunder by a
Lender Party (such as any such as any Adjusted CD Rate, Adjusted Eurodollar
Rate, Assessment Rate, CD Rate, Eurodollar Rate, Business Day, Interest Period,
or Reserve Requirement) 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 any
Lender Party hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP.
ARTICLE II - The Loans and Letters of Credit
Section 2.1. Commitments to Lend; Notes. Subject to the terms and
conditions hereof, each Lender agrees to make loans to Borrower (herein called
such Lender's "Loans") upon Borrower's request from time to time during the
Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all
Lenders are requested to make Loans of the same Type in accordance with their
respective Percentage Shares and as part of the same Borrowing, (b) after giving
effect to such Loans, the Facility Usage does not exceed the Borrowing Base
determined as of the date on which the requested Loans are to be made. The
aggregate amount of all Loans in any Borrowing must be greater than or equal to
$500,000 or must equal the remaining availability under the Borrowing Base.
Borrower may have no more than eight (8) Borrowings of Fixed Rate Loans
outstanding at any time. The obligation of Borrower to repay to each Lender the
aggregate amount of all Loans made by such Lender, together with interest
accruing in connection therewith, shall be evidenced by a single 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 Loans 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. Each
Note shall be due and payable as provided herein and therein, and shall be due
and payable in full on the Maturity Date. Subject to the terms and conditions
hereof, Borrower may borrow, repay, and reborrow hereunder.
<PAGE> 31
Section 2.2. Requests for New Loans. Borrower must give to Agent written
notice (or telephonic notice promptly confirmed in writing) of any requested
Borrowing of new Loans to be advanced by Lenders. Each such notice constitutes
a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of new Base
Rate Loans and the date on which such Base Rate Loans are to be advanced, or
(ii) the aggregate amount of any such Borrowing of new CD Loans, the date on
which such CD Loans are to be advanced (which shall be the first day of the
Interest Period which is to apply thereto), and the length of the applicable
Interest Period, or (iii) the aggregate amount of any such Borrowing of new
Eurodollar Loans, the date on which such Eurodollar Loans are to be advanced
(which shall be the first day of the Interest Period which is to apply thereto),
and the length of the applicable Interest Period, or (iv) if such new CD Loans
or Eurodollar Loans are to be combined with existing Loans in a new Borrowing,
the foregoing information with respect to such combined Borrowing; and
(b) be received by Agent not later than 11:00 a.m., Dallas, Texas time, on
(i) the day on which any such Base Rate Loans are to be made, or (ii) the third
Business Day preceding the day on which any such Fixed Rate Loans are to be
made.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" 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. Upon receipt of any such Borrowing
Notice, Agent shall give each Lender prompt notice of the terms thereof. If all
conditions precedent to such new Loans 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 new Loan in immediately available funds, and upon
receipt of such funds, unless to its actual knowledge any conditions precedent
to such Loans have been neither met nor waived as provided herein, Agent shall
promptly make such Loans available to Borrower. Unless Agent shall have
received prompt notice from a Lender that such Lender will not make available to
Agent such Lender's new Loan, Agent may in its discretion assume that such
Lender has made such Loan available to Agent in accordance with this section and
Agent may if it chooses, in reliance upon such assumption, make such Loan
available to
<PAGE> 32
Borrower. If and to the extent such Lender shall not so make its new Loan
available to Agent, such Lender and Borrower severally agree to pay or repay to
Agent within three (3) days after demand the amount of such Loan together with
interest thereon, for each day from the date such amount was made available to
Borrower until the date such amount is paid or repaid to Agent, with interest at
(i) the Federal Funds Rate, if such Lender is making such payment and (ii) the
interest rate applicable at the time to the other new Loans made on such date,
if Borrower is making such repayment. If neither such Lender nor Borrower pays
or repays to Agent such amount within such three-day period, Agent shall in
addition to such amount be entitled to recover from such Lender and from
Borrower, on demand, interest thereon at the Default Rate applicable to Base
Rate Loans, calculated from the date such amount was made available to Borrower.
The failure of any Lender to make any new Loan to be made by it hereunder shall
not relieve any other Lender of its obligation hereunder, if any, to make its
new Loan, but no Lender shall be responsible for the failure of any other Lender
to make any new Loan to be made by such other Lender.
Section 2.3. Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Loans already outstanding: to
Convert Base Rate Loans to Fixed Rate Loans, to Convert Fixed Rate Loans to Base
Rate Loans on the last day of the Interest Period applicable thereto, to Convert
one Type of Fixed Rate Loan to another Type of Fixed Rate Loan on the last day
of the Interest Period applicable thereto, and to Continue Fixed Rate Loans
beyond the expiration of such Interest Period by designating a new Interest
Period to take effect at the time of such expiration. In making such elections,
Borrower may combine existing Loans made pursuant to separate Borrowings into
one new Borrowing or divide existing Loans made pursuant to one Borrowing into
separate new Borrowings. To make any such election, Borrower must give to Agent
written notice (or telephonic notice promptly confirmed in writing) of any such
Conversion or Continuation of existing Loans, with a separate notice given for
each new Borrowing. Each such notice constitutes a "Continuation/Conversion
Notice" hereunder and must:
(a) specify the existing Loans which are to be Continued or Converted and
if such existing Loans are to be combined with new Loans, specify such Loans;
<PAGE> 33
(b) specify (i) the aggregate amount of any Borrowing of Base Rate Loans
into which such existing Loans are to be Continued or Converted and the date on
which such Continuation or Conversion is to occur, or (ii) the aggregate amount
of any Borrowing of Fixed Rate Loans into which such existing Loans are to be
Continued, Converted, or combined, the date on which such Continuation or
Conversion is to occur (which shall be the first day of the Interest Period
which is to apply to such Fixed Rate Loans), and the length of the applicable
Interest Period; and
(c) be received by Agent not later than 11:00 a.m., Dallas, Texas time, on
(i) the day on which any such Continuation or Conversion to Base Rate Loans is
to occur, or (ii) the third Business Day preceding the day on which any such
Continuation or Conversion to Fixed Rate Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, 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. Upon receipt of any such
Continuation/Conversion Notice, Agent shall give each Lender prompt notice of
the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and
binding on Borrower. During the continuance of any Default, Borrower may not
make any election to Convert existing Loans into Fixed Rate Loans or Continue
existing Loans as Fixed Rate Loans. If (due to the existence of a Default or
for any other reason) Borrower fails to timely and properly give any
Continuation/Conversion Notice with respect to a Borrowing of existing Fixed
Rate Loans at least three (3) days prior to the end of the Interest Period
applicable thereto, such Fixed Rate Loans shall automatically be Converted into
Base Rate Loans at the end of such Interest Period. No new funds shall be
repaid by Borrower or advanced by any Lender in connection with any Continuation
or Conversion of existing Loans pursuant to this section, and no such
Continuation or Conversion shall be deemed to be a new advance of funds for any
purpose; such Continuations and Conversions merely constitute a change in the
interest rate applicable to already outstanding Loans.
<PAGE> 34
Section 2.4. Use of Proceeds. Borrower shall use all Loans to refinance
existing indebtedness, to finance capital expenditures, to refinance Matured LC
Obligations, provide working capital for its operations and for the operations
of the Subsidiary Guarantors and for other general business purposes, including,
but not limited to, extending credit to the Subsidiary Guarantors for such
purposes. Borrower shall use all Letters of Credit for its general corporate
purposes. In no event shall the funds from any Loan or any Letter of Credit be
used directly or indirectly by any Person for personal, family, household or
agricultural purposes or for the purpose, whether immediate, incidental or
ultimate, of purchasing, acquiring or carrying any "margin stock" (as such term
is defined in Regulation U 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. 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.
Section 2.5. Interest Rates and Fees.
(a) Interest Rates. Each Base Rate Loan shall bear interest on each day
outstanding at the Adjusted Base Rate in effect on such day. Each Eurodollar
Loan shall bear interest on each day during the related Interest Period at the
related Adjusted Eurodollar Rate in effect on such day. Each CD Loan shall bear
interest on each day, during the related Interest Period at the related Adjusted
CD Rate in effect on such day. Anything to the contrary herein notwithstanding,
if an Event of Default has occurred and is continuing, all Loans shall bear
interest on each day outstanding at the applicable Default Rate. Past due
payments of principal and interest shall bear interest at the rates and in the
manner set forth in the Notes.
(b) Facility Fees. In consideration of each Lender's commitment to make
Loans, Borrower will pay to Agent for the account of each Lender a nonrefundable
monthly facility fee for each calendar month. The fee for each calendar month
shall be equal to the product of (i) the Applicable Fee Percentage hereinafter
defined (based on the average daily Facility Usage for such calendar month)
multiplied by (ii) the number of days in such calendar month divided by 360
multiplied by (iii) the Borrowing Base for such calendar month. The facility
fee for each calendar month in a Fiscal Quarter shall be due and payable in
arrears forty-five (45) days after the end of such Fiscal Quarter. For each
calendar month, the "Applicable Fee Percentage" shall be determined according to
the following table:
<PAGE> 35
BORROWING BASE BALANCE APPLICABLE FEE PERCENTAGE
less than or equal to twenty- Thirty Five Basis Points
five percent (25%) of the (0.35%) per annum
Borrowing Base
less than or equal to fifty Forty Basis Points (0.40%)
percent (50%) but greater than per annum
twenty-five percent (25%) of
the Borrowing Base
less than or equal to seventy- Forty-Five Basis Points
five percent (75%) but greater (.45%) per annum
than fifty percent (50%) of the
Borrowing Base
greater than seventy-five Fifty Basis Points (.50%)
percent of the Borrowing per annum
Base (75%)
Section 2.6. Optional Prepayments. Borrower may, upon one Business Days'
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, and so long as Borrower pays any costs with respect to the
prepayment of any Fixed Rate Loan due under Section 3.6. 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 2.7. Mandatory Prepayments. If at any time the Facility Usage
exceeds the Maximum Credit Amount (whether due to a reduction in the Maximum
Credit Amount in accordance with this Agreement, or otherwise), Borrower shall
immediately upon demand prepay the principal of the Loans in an amount at least
equal to such excess. If at any time the Facility Usage is less than the
Maximum Credit Amount but in excess of the Borrowing Base (such excess being
herein called a "Borrowing Base Deficiency"), Borrower shall, within thirty (30)
days after Agent gives notice of such fact to Borrower prepay the principal of
the Loans in an aggregate amount at least equal to such Borrowing Base
Deficiency
<PAGE> 36
(or, if the Loans have been paid in full, pay to LC Issuer LC Collateral as
required under Section 2.18(a)). 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. Scheduled Payments of Principal. The aggregate principal
amount of the Loans shall be due and payable in eight (8) quarterly
installments, each of which shall be equal to one-eighth (1/8) of the aggregate
unpaid principal balance of the Loans at the end of the Commitment Period, and
shall be due and payable on each Interest Payment Date for Base Rate Loans,
beginning April 30, 2002 and continuing regularly thereafter until the Maturity
Date, at which time the unpaid principal balance of the Loans and all interest
accrued thereon shall be due and payable in full.
Section 2.9 Initial Borrowing Base. During the period from the date
hereof to the first date on which the Borrowing Base is redetermined, the
Working Capital Borrowing Base shall be $36,589,000, the Cash Earnings Borrowing
Base shall be $31,984,000, and the Borrowing Base shall be $55,000,000.
Section 2.10 Subsequent Determinations of Borrowing Base. Promptly after
receiving each Borrowing Base Report, Agent shall determine the Working Capital
Borrowing Base and the Cash Earnings Borrowing Base, which in the aggregate
comprise the Borrowing Base. Such Borrowing Base shall take effect immediately
on the date notice thereof is sent to Borrower (herein called a "Determination
Date") and remain in effect until the Agent receives the next Borrowing Base
Report and determines the next Borrowing Base. In the event Agent has not
received an appropriately completed Borrowing Base Report (with all attachments)
within the time period specified in Section 6.2(d), an Event of Default shall
have occurred and Agent shall have no obligation to redetermine the Borrowing
Base and Lenders shall have no obligation to make any additional Loans until
such time as Agent shall have received such information.
<PAGE> 37
Section 2.11 Letters of Credit.
(a) Terms Applicable to all Letters of Credit Including Bond LC. Subject
to the terms and conditions hereof, LC Issuer agrees to issue from time to time
during the Commitment Period, in reliance on the agreements of Lenders set forth
in Section 2.13(b), at Borrower's application, such Letters of Credit as
Borrower may from time to time request, so long as:
(i) the sum of (1) the aggregate amount of LC Obligations at such
time, plus (2) the amount of such Letter of Credit, does not exceed the LC
Sublimit;
(ii) the Facility Usage does not exceed the Borrowing Base at such
time;
(iii) the form and terms of such Letter of Credit are satisfactory
to LC Issuer in its sole and absolute discretion; and
(iv) 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.
(b) Terms Applicable to Bond LC. The term of the Bond LC may be extended
at the written request of Borrower (in this subparagraph called "Request for
Extension") for an additional period determined by the LC Issuer if the LC
Issuer shall have given written notice to Borrower of such extension and shall
have delivered to the trustee under the Indenture a notice in the form of Annex
E to the Bond LC (and the Trustee shall have accepted such notice) at least
forty-five (45) days prior to the end of the then effective expiration date of
the Bond LC, subject to the terms and conditions set forth in this Agreement and
the Bond LC, and subject to earlier termination of the Bond LC in accordance
with its terms. If the LC Issuer shall not have received from Borrower a
Request for Extension at least ninety (90) days prior to the then effective
expiration date of the Bond LC, LC Issuer shall have no obligation to consider
extending the term of the Bond LC. LC Issuer shall notify Borrower whether or
not it shall extend the term of the Bond LC within forty-five (45) days after LC
Issuer's receipt of a Request for Extension. Any determination to extend the
term of the Letter of Credit shall be made at LC Issuer 's sole discretion; no
course of dealing or other circumstances shall require the LC Issuer to extend
the Letter of Credit.
<PAGE> 38
Section 2.12 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 LC Issuer 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 G, 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, LC Issuer will, in reliance on the agreements of Lenders
set forth in Section 2.13(b), on the date requested, issue such Letter of Credit
at LC Issuer '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 2.13 Reimbursement.
(a) Reimbursement by Borrower. Each payment of a draft or demand for
payment honored by LC Issuer shall constitute a loan to and obligation of
Borrower. Borrower promises to pay to LC Issuer, or to LC Issuer's order at
such LC Issuer's office in Dallas, Texas on demand, in legal tender of the
United States of America, any and all amounts paid by LC Issuer 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 LC Issuer under such Letter of
Credit until and including the first Business Day following such date of
payment, at the Base Rate and (ii) thereafter, provided that notice is given to
Borrower of such honor by LC Issuer, until the repayment of such amounts to LC
Issuer, at the Default Rate applicable to Base Rate Loans. 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 LC Issuer).
<PAGE> 39
Borrower promises to indemnify LC Issuer against, and to reimburse LC Issuer on
demand for, any of the foregoing taxes, levies, costs or charges paid by LC
Issuer and any loss, liability, claim or expense, including interest, penalties
and legal fees, that LC Issuer 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 Obligations when due.
(b) Participation by Lenders. LC Issuer irrevocably agrees to grant and
hereby grants to each Lender, and, to induce LC Issuer to issue Letters of
Credit hereunder, each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from LC Issuer, 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 LC Issuer's obligations and rights
under each Letter of Credit issued hereunder and the amount of each draft paid
by LC Issuer thereunder. In the event that Borrower should fail to pay LC
Issuer 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, Texas time)
on the Business Day LC Issuer shall have given notice to Lenders of Borrower's
failure to so pay LC Issuer, if such notice is given by 11:00 a.m., Dallas,
Texas time (or on the Business Day immediately succeeding the day such notice is
given after 11:00 a.m. Dallas, Texas time), pay to LC Issuer at LC Issuer'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 LC
Issuer 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 Default Rate
applicable to Base Rate Loans. Each Lender's obligation to reimburse LC Issuer
pursuant to the terms of this Section 2.13(b) is irrevocable and unconditional.
If any such amount required to be paid by any Lender pursuant to this Section
2.13(b) is not in fact made available by such Lender to LC Issuer within three
Business Days after the date such payment is due, LC Issuer 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
<PAGE> 40
owing under this Section 2.13, submitted by LC Issuer to Borrower from time to
time, shall be conclusive, absent manifest error, as to the amounts thereof.
Whenever, at any time after LC Issuer 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 2.13(b), LC Issuer receives any payment related to
such Letter of Credit (whether directly from Borrower or otherwise, including
proceeds of Cash Collateral applied thereto by LC Issuer), or any payment of
interest on account thereof, LC Issuer will distribute to such Lender its
Percentage Share thereof; provided, however, that in the event that any such
payment received by LC Issuer shall be required to be returned by LC Issuer,
such Lender shall return to LC Issuer the portion thereof previously distributed
by LC Issuer to it.
(c) Payment of Reimbursement Obligation with Loans. Each time payment
of a draft or demand for payment under a Letter of Credit is honored by LC
Issuer, Borrower shall be deemed to have made a Borrowing Notice in the amount
of such payment pursuant to Section 2.2. If all conditions precedent to the
making of such Loan have been satisfied and such Loan is made, the proceeds
thereof shall be applied to the payment of Borrower's obligation to reimburse LC
Issuer for such payment.
Section 2.14 Transferees of Letters of Credit. Borrower agrees that if
any Letter of Credit provides that it is transferable, LC Issuer is under no
duty to determine the proper identity of anyone appearing as transferee of such
Letter of Credit, nor shall LC Issuer be charged with responsibility of any
nature or character for the validity or correctness of any transfer or
successive transfers, and payment by LC Issuer to any purported transferee or
transferees as determined by LC Issuer is hereby authorized and approved, and
Borrower further agrees to hold LC Issuer and each Lender harmless and
indemnified against any liability or claim in connection with or arising out of
the foregoing.
Section 2.15 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 2.11(a), this
Agreement shall be binding upon Borrower with respect to such Letter of Credit
as so extended,
<PAGE> 41
increased or otherwise modified, with respect to drafts and property covered
thereby, and with respect to any action taken by LC Issuer or any of LC Issuer's
correspondents in accordance with such extension, increase or other
modification.
Section 2.16 Restriction on Liability. The users of each Letter of
Credit shall be deemed the agents of Borrower and neither LC Issuer, nor its
correspondents shall be responsible for:
(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.
LC Issuer shall not be responsible for any act, error, neglect or default,
omission, insolvency or failure in the business of any of the correspondents of
LC Issuer, for any refusal by LC Issuer 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 LC Issuer. 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 LC Issuer and or Lenders under this Agreement or the
<PAGE> 42
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 LC Issuer 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 LC Issuer 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 2.17 No Duty to Inquire. Borrower agrees that LC Issuer 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 event giving rise to said draft, either at the time of
acceptance of payment or thereafter; provided that LC Issuer 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 LC Issuer 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 LC Issuer, and payment
by LC Issuer 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 LC Issuer 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 2.18 Payment of LC Obligations.
(a) Cash Collateral for LC Obligations.
(i) Acceleration. If the Obligations, or any part thereof, become
immediately due and payable pursuant to Article VIII, 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 LC Issuer an amount equal
to the aggregate LC Obligations then outstanding.
<PAGE> 43
(ii) Long-term Letters of Credit. If in accordance with the terms of
Section 2.11(a) of this Agreement, Majority Lenders have agreed to extend
the expiration date of any Letter of Credit beyond the last Business Day of
the Commitment Period, on such Business Day Borrower will pay to Agent for
the account of the LC Issuer an amount equal to the aggregate
LC Obligations relating to such Letters of Credit, in addition to all other
amounts then due under the Loan Documents.
(iii) Required Prepayment Amount. If at the time Borrower is
required to make a mandatory prepayment pursuant to Section 2.7, the
Obligations which are not LC Obligations (in this Section called the "NON-
LC OBLIGATIONS") then outstanding are less than the Borrowing Base
Deficiency, Borrower shall pay to Agent for the account of LC Issuer the
amount by which (1) the Borrowing Base Deficiency exceeds (2) the Non-LC
Obligations then outstanding, (in each case the "EXCESS AMOUNT") to be held
pursuant to this Section 2.18.
(iv) Refund of Excess Amounts. If at the end of any Fiscal Quarter
during which Agent has held Cash Collateral pursuant to subsection (iii)
above: (1) Borrower has delivered financial statements pursuant to Section
5.1(b) for such Fiscal Quarter; (2) Borrower is not required to make a
mandatory prepayment pursuant to Section 2.7 and (3) no Default or Event of
Default has occurred and is continuing, then upon the written request of
Borrower within ninety (90) days after the end of such Fiscal Quarter,
Agent shall remit to Borrower the amount of Cash Collateral previously
deposited pursuant to subsection (iii) above.
(b) Cash Collateral Accounts.
(i) General LC Collateral Account. All amounts due and payable by
Borrower under this Section 2.18 with respect to all Letters of Credit
(other than the Bond LC) shall be (1) first applied to Borrower's General
LC Obligations that are then due and payable, and (2) second held in an
account established at NationsBank or an Affiliate thereof designated the
Hecla Mining Company General LC Collateral Account (the "GENERAL LC
COLLATERAL ACCOUNT"), as security for the remaining Obligations other than
Bond LC Obligations (in this Section 2.18 all such amounts held in the
General LC Collateral Account and all investments made with funds in
<PAGE> 44
the General LC Collateral Account are collectively called the "GENERAL LC
CASH COLLATERAL"). The General LC Cash Collateral shall be applied to
General LC Obligations as they become due and payable and when no General
LC Obligations remain outstanding, the General LC Cash Collateral shall be
applied to all other Obligations (excluding Bond LC Obligations) as they
become due and payable. 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
General LC Collateral Account in Permitted Investments at such prices as
are set forth in such request, subject to the Lien in favor of Agent. Upon
the occurrence and during the continuance of an Event of Default, Agent
shall invest and reinvest funds held in the General LC Collateral Account
in Permitted Investments, at such prices as it in its sole discretion
determines, subject to the Lien in favor of Agent. Agent shall have no
liability for losses on any such Permitted Investments. Any proceeds and
interest or other earnings shall be retained in the General LC Collateral
Account and invested in the same manner as other funds therein or applied
to Obligations then due and owing.
(ii) Bond LC Collateral Account. All amounts due and payable by
Borrower under this Section 2.18 with respect to the Bond LC shall be (1)
first applied to Borrower's Bond LC Obligations that are then due and
payable, and (2) second held in an account established at NationsBank or an
Affiliate thereof designated the Hecla Mining Company Bond LC Collateral
Account (the "BOND LC COLLATERAL ACCOUNT"), as security for the remaining
Obligations (in this Section 2.18 all such amounts held in the Bond LC
Collateral Account and all investments made with funds in the Bond LC
Collateral Account are collectively called the "BOND LC CASH COLLATERAL").
The Bond LC Cash Collateral shall be applied to Bond LC Obligations as they
become due and payable and when no Bond LC Obligations remain outstanding,
the Bond LC Cash Collateral shall be applied to all other Obligations as
they become due and payable. 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 Bond LC Collateral Account in Permitted Investments at such prices as
are set forth in such request, subject to the Lien in favor of Agent. Upon
the occurrence and during the
<PAGE> 45
continuance of an Event of Default, Agent shall invest and reinvest
funds held in the Bond LC Collateral Account in Permitted Investments at
such prices as it in its sole discretion determines, subject to the Lien in
favor of Agent. Agent shall have no liability for losses on any such
Permitted Investments. Any proceeds and interest or other earnings shall
be retained in the Bond LC Collateral Account and invested in the same
manner as other funds therein or applied to Obligations then due and owing.
Notwithstanding the foregoing provision of this Section 2.18, in no event
shall Agent invest or fail to invest any funds on deposit in the Bond LC
Collateral Account, or fail to pay any requested rebate to the United
States of America, if such investment or failure to invest or such failure
to pay any required rebate, would cause the Bonds to be or become
"ARBITRAGE BONDS" within the meaning of Section 148 of the Internal Revenue
Code; Agent shall only invest funds on deposit in the Bond LC Collateral
Account at a yield not in excess of the yield on the Bonds. The term
"YIELD" means with respect to the issue of which the Bonds are a part, the
discount rate that, when used in computing the present value of the issue
date of all unconditionally payable payments of principal, interest and
fees for qualified guarantees on the issue, produces an amount equal to the
present value using the same discount rate of the aggregate issue price of
the issue as of the issue date. Agent may conclusively rely on an opinion
of its legal counsel (including in-house counsel) in determining whether it
has complied with the obligations of this subsection and Agent shall not be
liable for any failure to comply with such obligations if Agent shall have
relied on any such opinion. Such proceeds, interest or income which are
not so invested or reinvested in Permitted Investments due to the
restriction described above shall be deposited and held by the Agent in the
Bond LC Cash Collateral Account.
(iii) Neither Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds held in
the General LC Collateral Account or the Bond LC Collateral Account, except
as otherwise provided in subsection 2.18(a)(iii) above or until this
Agreement has been terminated pursuant to Section 10.10.
<PAGE> 46
(iv) Borrower agrees that it will not sell or otherwise dispose of any
interest in the General LC Cash Collateral Account, the Bond LC Collateral
Account or the Cash Collateral, or create or permit to exist any Lien upon
or with respect to any of the foregoing except in favor of Agent.
(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. Borrower agrees
that, to the extent notice of sale of any Permitted Investments shall be
required by law, at least five Business Days' notice to Borrower of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it will be so adjourned.
(d) Account Transfers. When Borrower is required to make payments under
this Section 2.18 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 NationsBank 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 2.18 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.
<PAGE> 47
(e) Perfection and Protection of Security Interests and Liens. Borrower
will from time to time deliver to Agent any financing statements, continuation
statements and other documents, properly completed and executed (and
acknowledged when required) by the Related Persons in form and substance
satisfactory to Agent, which Agent requests for the purpose of perfecting,
confirming, or protecting any Liens or other rights in the Cash Collateral.
(f) Custody of Cash Collateral. The Agent shall exercise reasonable care
in the custody and preservation of the Cash Collateral and shall be deemed to
have exercised such care if the Cash Collateral is accorded treatment
substantially equivalent to that which the Agent accords its own property, it
being understood that the Agent shall not have any responsibility for taking any
necessary steps to preserve rights against any parties with respect to the Cash
Collateral.
Section 2.19. Letter of Credit Fees. In consideration of the issuance of
each Letter of Credit by LC Issuer, Borrower agrees to pay:
(a) an issuance fee for each Letter of Credit in the amount calculated by
applying one-eighth of one percent (0.125%) per annum of the face amount of such
Letter of Credit for the term thereof, payable to LC Issuer for its own account
at the time of issuance of such Letter of Credit.
(b) for the Bond LC, a letter of credit fee accruing on and after the
date hereof equal to the amount calculated by applying one and thirty-seven and
one-half one-hundredths of one percent (1.375%) per annum to the face amount of
the Bond LC for the term thereof, payable to LC Issuer.
(c) for all Letters of Credit except the Bond LC, a letter of credit fee
equal to the greater of (A) the amount calculated by applying the Fixed Rate
Margin to the face amount of such Letter of Credit for the term thereof or (B)
$500, in each case payable to LC Issuer at the time of issuance of such Letter
of Credit for the account of Lenders in accordance with their Percentage Shares.
<PAGE> 48
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Agent for the account of the Lender Party to
whom such payment is owed, in lawful money of the United States of America,
without set-off, deduction or counterclaim, and in immediately available funds.
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. 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 each Lender Party shall apply all such money so
distributed, 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 6.9 or 10.4 and then to the partial
payment of all other Obligations then due in proportion to the amounts thereof,
or as Lender Parties 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;
(d) then for the payment or prepayment of any other Obligations; and
<PAGE> 49
(e) last and only from proceeds of Collateral, for the payment or
prepayment of any other indebtedness or obligations secured by such Collateral,
pro rata to each Lender in accordance with the amount of such indebtedness or
obligations owing to such Lender.
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 Sections
2.6 and 2.7. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Agent pro rata to each Lender Party then owed
Obligations described in such subsection in proportion to all amounts owed to
all Lender Parties which are described in such subsection; provided that if any
Lender then owes payments to LC Issuer for the purchase of a participation under
Section 2.13(c) or to Agent under Section 9.5, any amounts otherwise
distributable under this section to such Lender shall be deemed to belong to LC
Issuer, or Agent, respectively, to the extent of such unpaid payments, and Agent
shall apply such amounts to make such unpaid payments rather than distribute
such amounts to such Lender.
Section 3.2. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable Law, rule,
or regulation, or any change in any applicable Law, rule, or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender Party (or its Applicable
Lending Office) with any request or directive (whether or not having the force
of Law) of any such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender Party (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any Fixed Rate
Loans, its Note, or its obligation to make Fixed Rate Loans, or change the
basis of taxation of any amounts payable to such Lender Party (or its
Applicable Lending Office) under this Agreement or its Note in respect of
any Fixed Rate Loans (other than taxes imposed on the overall net income of
such Lender Party by the jurisdiction in which such Lender Party has its
principal office or such Applicable Lending Office);
<PAGE> 50
(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the Reserve
Requirement utilized in the determination of the Fixed Rate) relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities or commitments of, such Lender Party (or its Applicable Lending
Office), including the commitment of such Lender Party hereunder; or
(iii) shall impose on such Lender Party (or its Applicable Lending
Office) or the London interbank market any other condition affecting this
Agreement or its Notes or any of such extensions of credit or liabilities
or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
Party (or its Applicable Lending Office) of making, Converting into, Continuing,
or maintaining any Fixed Rate Loans or to reduce any sum received or receivable
by such Lender Party (or its Applicable Lending Office) under this Agreement or
its Notes with respect to any Fixed Rate Loans, then Borrower shall pay to such
Lender Party on demand such amount or amounts as will compensate such Lender
Party for such increased cost or reduction. If any Lender Party requests
compensation by Borrower under this section, Borrower may, by notice to such
Lender Party (with a copy to Agent), suspend the obligation of such Lender Party
to make or Continue Loans of the Type with respect to which such compensation is
requested, or to Convert Loans of any other Type into Loans of such Type, until
the event or condition giving rise to such request ceases to be in effect (in
which case the provisions of Section 3.5 shall be applicable); provided that
such suspension shall not affect the right of such Lender Party to receive the
compensation so requested.
(b) If, after the date hereof, LC Issuer or any Lender Party shall have
determined that the adoption of any applicable Law, rule, or regulation
regarding capital adequacy or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether or not having the
force of Law) of any such governmental authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on the
capital of such Lender Party or any corporation controlling such Lender Party as
a consequence the obligations of LC Issuer or such Lender Party
<PAGE> 51
hereunder to a level below that which such Lender Party or such corporation
could have achieved but for such adoption, change, request, or directive (taking
into consideration its policies with respect to capital adequacy), then from
time to time upon demand Borrower shall pay to LC Issuer or such Lender Party
such additional amount or amounts as will compensate LC Issuer or such Lender
Party for such reduction, but only to the extent that such Lender Party has not
been compensated therefor by any increase in the Adjusted Eurodollar Rate.
(c) LC Issuer and each Lender Party shall promptly notify Borrower and
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle LC Issuer or such Lender Party to compensation pursuant to
this section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender Party, be otherwise disadvantageous
to it. LC Issuer or any Lender Party claiming compensation under this section
shall furnish to Borrower and Agent a statement setting forth the additional
amount or amounts to be paid to it hereunder which shall be conclusive in the
absence of manifest error. In determining such amount, LC Issuer or such Lender
Party shall act in good faith and may use any reasonable averaging and
attribution methods.
Section 3.3. Limitation on Types of Loans. If on or prior to the first
day of any Interest Period for any Fixed Rate Loan:
(a) Agent determines (which determination shall be conclusive) that by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Fixed Rate for such Interest Period; or
(b) Majority Lenders determine (which determination shall be conclusive)
and notify Agent that the Fixed Rate will not adequately and fairly reflect the
cost to the Lenders of funding Eurodollar Loans or for such Interest Period;
then Agent shall give Borrower prompt notice thereof specifying the relevant
Type of Loans and the relevant amounts or periods, and so long as such condition
remains in effect, the Lender Parties shall be under no obligation to make
additional Loans of such Type, or to Convert Loans of any other type into such
Type, and Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Loans of the affected type, either prepay such
Loans or Convert such Loans into another Type of Loan in accordance with the
terms of this Agreement.
<PAGE> 52
Section 3.4. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender Party or its
Applicable Lending Office to make, maintain, or fund Fixed Rate Loans hereunder,
then such Lender Party shall promptly notify Borrower thereof and such Lender
Party's obligation to make or Continue Fixed Rate Loans and to Convert other
Types of Loans into Fixed Rate Loans shall be suspended until such time as such
Lender Party may again make, maintain, and fund Fixed Rate Loans (in which case
the provisions of Section 1.5 shall be applicable).
Section 3.5. Treatment of Affected Loans. If the obligation of any
Lender Party to make a particular Type of Fixed Rate Loan or to Continue, or to
Convert Loans of any other Type into, Loans of a particular Type shall be
suspended pursuant to Sections 3.2 or 3.4 hereof (Loans of such Type being
herein called "Affected Loans" and such Type being herein called the "Affected
Type"), such Lender Party's Affected Loans shall be automatically Converted into
Base Rate Loans on the last day(s) of the then current Interest Period(s) for
Affected Loans (or, in the case of a Conversion required by Section 3.4 hereof,
on such earlier date as such Lender Party may specify to Borrower with a copy to
Agent) and, unless and until such Lender Party gives notice as provided below
that the circumstances specified in Sections 3.2 or 3.4 hereof that gave rise to
such Conversion no longer exist:
(a) to the extent that such Lender Party's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Lender Party's Affected Loans shall be applied instead to its
Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such Lender
Party as Loans of the Affected Type shall be made or Continued instead as Base
Rate Loans, and all Loans of such Lender Party that would otherwise be Converted
into Loans of the Affected Type shall be Converted instead into (or shall remain
as) Base Rate Loans.
If such Lender Party gives notice to Borrower (with a copy to Agent) that the
circumstances specified in Section 3.2 or 3.4 hereof that gave rise to the
Conversion of such Lender Party's Affected Loans pursuant to this section no
longer exist (which such Lender Party agrees to do promptly upon such
circumstances ceasing to exist) at a time when Loans of the Affected Type made
by other Lender Parties are outstanding, such Lender Party's Base
<PAGE> 53
Rate Loans shall be automatically Converted, on the first day(s) of the next
succeeding Interest Period(s) for such outstanding Loans of the Affected Type,
to the extent necessary so that, after giving effect thereto, all Loans held by
the Lender Parties holding Loans of the Affected Type and by such Lender Party
are held pro rata (as to principal amounts, Types, and Interest Periods) in
accordance with their Percentage Shares of the Maximum Credit Amount.
Section 3.6. Compensation. Upon the request of any Lender Party,
Borrower shall pay to such Lender Party such amount or amounts as shall be
sufficient (in the reasonable opinion of such Lender Party) to compensate it for
any loss, cost, or expense (including loss of anticipated profits) incurred by
it as a result of:
(a) any payment, prepayment, or Conversion of a Fixed Rate Loan for any
reason (including, without limitation, the acceleration of the Loans pursuant to
Section 8.2) on a date other than the last day of the Interest Period for such
Loan; or
(b) any failure by Borrower for any reason (including, without limitation,
the failure of any condition precedent specified in Article IV to be satisfied)
to borrow, Convert, Continue, or prepay a Fixed Rate Loan on the date for such
borrowing, Conversion, Continuation, or prepayment specified in the relevant
notice of borrowing, prepayment, Continuation, or Conversion under this
Agreement.
Section 3.7. Change of Applicable Lending Office. Each Lender Party
agrees that, upon the occurrence of any event giving rise to the operation of
Sections 3.2 through 3.6 with respect to such Lender Party, it will, if
requested by Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender Party) to designate another Applicable Lending
Office, provided that such designation is made on such terms that such Lender
Party and its Applicable Lending Office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such section. Nothing in this section shall affect
or postpone any of the obligations of Borrower or the rights of any Lender Party
provided in Sections 3.2 through 3.6.
<PAGE> 54
Section 3.8. Replacement of Lenders. If any Lender Party seeks
reimbursement for increased costs under Sections 3.2 through 3.6, then within
ninety (90) days thereafter -- provided no Event of Default then exists --
Borrower shall have the right (unless such Lender Party withdraws its request
for additional compensation) to replace such Lender Party by requiring such
Lender Party to assign its Loans and Notes and its commitments hereunder to an
Eligible Transferee reasonably acceptable to Agent and to Borrower, provided
that: (a) all Obligations of Borrower owing to such Lender Party being replaced
(including such increased costs, but excluding principal and accrued interest on
the Notes being assigned) shall be paid in full to such Lender Party
concurrently with such assignment, and (b) the replacement Eligible Transferee
shall purchase the Note being assigned by paying to such Lender Party a price
equal to the principal amount thereof plus accrued and unpaid interest thereon.
In connection with any such assignment Borrower, Agent, such Lender Party and
the replacement Eligible Transferee shall otherwise comply with Section 10.6.
Notwithstanding the foregoing rights of Borrower under this section, however,
Borrower may not replace any Lender Party which seeks reimbursement for
increased costs under Section 3.2 through 3.6 unless Borrower is at the same
time replacing all Lender Parties which are then seeking such compensation.
Section 3.9. Taxes.
(a) Any and all payments by Borrower to or for the account of any Lender
Party, Agent or LC Issuer hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any and all present or future
taxes, duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender Party,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the Laws of which such Lender Party (or its Applicable
Lending Office) is organized or any political subdivision thereof (all such non-
excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and
liabilities being hereinafter referred to as "Taxes"). If Borrower shall be
required by Law to deduct any Taxes from or in respect of any sum payable under
this Agreement or any other Loan Document to any Lender Party, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this section) such Lender Party receives an amount equal to the sum it would
have received had no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
Law.
<PAGE> 55
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").
(c) Borrower agrees to indemnify each Lender Party, Agent and LC Issuer
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this section) paid by such Lender Party or Agent (as the case may be) and
any liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.
(d) Each Lender Party organized under the Laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender Party listed on the signature pages hereof
and on or prior to the date on which it becomes a Lender Party in the case of
each other Lender Party, and from time to time thereafter if requested in
writing by Borrower or Agent (but only so long as such Lender Party remains
lawfully able to do so), shall provide Borrower and Agent with a properly
executed (iv) Internal Revenue Service Form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Lender Party is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business in the United
States, (v) Internal Revenue Service Form W-8 or W-9, as appropriate, or any
successor form prescribed by the Internal Revenue Service, and (vi) any other
form or certificate required by any taxing authority (including any certificate
required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying
that such Lender Party is entitled to an exemption from or a reduced rate of tax
on payments pursuant to this Agreement or any of the other Loan Documents.
<PAGE> 56
(e) For any period with respect to which a Lender Party has failed to
provide Borrower and Agent with the appropriate form pursuant to the immediately
preceding subsection (unless such failure is due to a change in treaty, Law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender Party shall not be entitled to
indemnification under subsection (a) or (b) of this section with respect to
Taxes imposed by the United States; provided, however, that should a Lender
Party, which is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Taxes because of its failure to deliver a
form required hereunder, Borrower shall take such steps as such Lender Party
shall reasonably request to assist such Lender Party to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or for the
account of any Lender Party pursuant to this section, then such Lender Party
will agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender Party, is not otherwise disadvantageous to such Lender Party and in the
event Lender Party is reimbursed for an amount paid by Borrower pursuant to this
section, it shall promptly return such amount to Borrower.
(g) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Agent the original or a certified copy of a receipt
evidencing such payment.
(h) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this section
shall survive the termination of the Commitment Period and the payment in full
of the Notes.
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Documents to be Delivered. No Lender has any obligation to
make its first Loan, and LC Issuer has no obligation to issue the first Letter
of Credit, 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:
<PAGE> 57
(a) This Agreement and any other documents that Lenders are to execute in
connection herewith;
(b) Each Note;
(c) Each Security Document listed in the Security Schedule;
(d) 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 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 the 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 Loan or such Letter of Credit, in which such officers
certify to the satisfaction of the conditions set out in subsections (a),
(b), (c) and (d) of Section 4.2.
(e) 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, and certificates of Borrower's
good standing and due qualification to do business, issued by appropriate
officials in any states in which Borrower owns property subject to Security
Documents;
(f) Documents similar to those specified in subsections (d)(i) and (e) of
this section with respect to each Subsidiary Guarantor and the execution by it
of its guaranty of Borrower's Obligations;
<PAGE> 58
(g) A favorable opinion of internal counsel for Related Persons,
substantially in the form set forth in Exhibit E;
(h) The Initial Financial Statements;
(i) Certificates or binders evidencing Related Persons' insurance in
effect on the date hereof;
(j) Opinions of special counsel to Agent in states where inventory of the
Related Persons is located addressing the perfection of Liens in such inventory;
and
(k) Payment of all commitment, facility, agency, attorney and other fees
required to be paid to any Lender pursuant to any Loan Documents or any
commitment agreement heretofore entered into.
Section 4.2. Additional Conditions Precedent. No Lender has any
obligation to make any Loan (including its first), and LC Issuer has no
obligation to issue any Letter of Credit (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 Loan or the date of
issuance of such Letter of Credit (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 Loan or the date of issuance of such Letter of Credit.
(b) No Default shall exist at the date of such Loan or the date of
issuance of such Letter of Credit.
(c) No material adverse change shall have occurred in Borrower's
Consolidated financial condition or results of operations.
(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 Loan or the date of issuance
of such Letter of Credit.
<PAGE> 59
(e) The making of such Loan or the issuance of such Letter of Credit shall
not be prohibited by any Law and shall not subject any Lender or any LC Issuer
to any penalty or other onerous condition under or pursuant to any such Law.
(f) Agent shall have received all documents and instruments which Agent
has then requested, in addition to those described in Section 4.1 (including
opinions of legal counsel for 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 Related Person 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.
ARTICLE V - Representations and Warranties
Section 5.1. Borrower's Representations and Warranties. To confirm each
Lender's understanding concerning Related Persons and Related Persons'
businesses, properties and obligations and to induce each Lender to enter into
this Agreement and to extend credit hereunder, Borrower represents and warrants
to 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.
(b) Organization and Good Standing. Each Related Person which is a
corporation, limited liability company 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
<PAGE> 60
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, limited
liability company 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, membership agreement or partnership agreement or certificate of any
Related Person, (3) any agreement, judgment, license, order or permit applicable
to or binding upon any Related Person, (4) result in the acceleration of any
Debt owed by any Related Person, or (5) 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.
<PAGE> 61
(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
<PAGE> 62
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 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) 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.
<PAGE> 63
(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 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 on
the signature pages hereto 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 3.
<PAGE> 64
(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, 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. 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. 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 Debt, 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
VIIA and the incurrence of such Debt and obligations in return for such
consideration may reasonably be expected to benefit each Subsidiary Guarantor,
directly or indirectly.
<PAGE> 65
(s) Coal Mines.
Neither Borrower nor any Subsidiary Guarantor is engaged in extracting
commercial quantities of coal from properties owned or leased by any such
Person.
Section 5.2. 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.
ARTICLE VI - Affirmative Covenants of Borrower
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce each Lender to enter into
this Agreement and extend credit hereunder, Borrower warrants, covenants and
agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders have previously agreed
otherwise:
Section 6.1. 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.
Section 6.2. 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:
<PAGE> 66
(a) As soon as available, and in any event within ninety (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 PricewaterhouseCoopers LLP 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 one hundred (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.
(b) As soon as available, and in any event within forty-five (45) days
after the end of each of the first three 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 7.12 through 7.14
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.
<PAGE> 67
(c) Within forty-five (45) days after the end of each Fiscal Quarter, cash
flow projections based on a rolling four quarter basis, and by April 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.
(d) As soon as available, and in any event within thirty (30) days as of
the end of the prior calendar month, a Borrowing Base Report of Borrower duly
completed by an authorized officer of Borrower which shall contain the
calculation of the Working Capital Borrowing Base and the Cash Earnings
Borrowing Base.
(e) 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.
(f) A quarterly variance report explaining material variances between
actual versus budgeted amounts for all material business units of Borrower,
including information such as unit price and cost data, capital expenditures,
revenues, and operating costs.
Section 6.3. 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, 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.
<PAGE> 68
Section 6.4. Notice of Material Events and Changes of Name or Address.
Borrower will promptly notify Agent:
(a) of any material adverse change in Borrower's financial condition or
Borrower's Consolidated financial condition,
(b) of the occurrence of any Default,
(c) 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,
(d) of the occurrence of any Termination Event,
(e) of any suit, action or proceeding reasonably anticipated to result in
a claim in excess of $1,000,000, any notice of potential Debt under any
Environmental Laws which might exceed such amount, or any other material adverse
claim asserted against any Related Person or with respect to any Related
Person's properties,
(f) of any labor controversy resulting in or threatening to result in a
strike against any Related Person,
(g) 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, and
(h) 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.
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.
Section 6.5. 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.
<PAGE> 69
Section 6.6. Maintenance of Existence and Qualifications. Each Related
Person will maintain and preserve its existence and its rights and franchises in
full force and effect and will qualify to do business 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.
Section 6.7. Payment of Trade Debt, Taxes, etc Each Related Person will
(a) timely file all required tax returns; (b) timely pay all taxes, assessments,
and other governmental charges or levies imposed upon it or upon its income,
profits or property; (c) within ninety (90) 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; (d) pay and discharge when due all other Debt now or hereafter owed by
it; and (e) 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 appropriate proceedings and has set aside on its books
adequate reserves therefor in accordance with GAAP.
Section 6.8. 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 (a) to provide that such policies may not be canceled, reduced or
affected in any manner for any reason without fifteen (15) days prior notice to
Agent, and (b) 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 Debt 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.
<PAGE> 70
Section 6.9. Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, Borrower will promptly (and in
any event, within thirty (30) days after any invoice or other statement or
notice) pay all reasonable costs and expenses incurred by or on behalf of (a)
Agent (including attorneys' fees) in connection with (i) the negotiation,
preparation, execution and delivery of the Loan Documents, and any and all
consents, waivers or other documents or instruments relating thereto, (ii) 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 (iii) the
borrowings hereunder and other action reasonably required in the course of
administration hereof, and (b) 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).
Section 6.10. 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 hereunder which is due and
payable on the date such amount is paid by Agent.
Section 6.11. Interest. Borrower hereby promises to Agent and Lenders to
pay interest at the Default 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.
Section 6.12. 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.
<PAGE> 71
Section 6.13. 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.
Section 6.14. 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 cash earnings constituting more than ten
percent (10%) of Cash Earnings as of the end of any Fiscal Quarter (calculated
on a rolling twelve-month basis as set forth in the definition of Cash Earnings
in Section 1.1 and then divided by four), to become a Subsidiary Guarantor and a
party hereto at such time and to execute and deliver to Agent a Subsidiary
Guarantor Security Agreement, 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 6.15. 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 (i) 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, (ii) any and all deposits
<PAGE> 72
(general or special, time or demand, provisional or final) of Borrower or
such Subsidiary Guarantor with Agent or any Lender or Participant, and (iii) 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.
Section 6.16. Agreement to Deliver Security Documents; Sale of MWCA, Inc.
(a) Borrower agrees to deliver and to cause each other Related Person to
deliver, to further secure the Obligations whenever requested by Agent in its
sole and absolute discretion, security agreements, financing statements and
other Security Documents in form and substance satisfactory to Agent for the
purpose of granting, confirming, and perfecting first and prior liens or
security interests in any real or personal property which is at such time
Collateral or which was intended to be Collateral pursuant to any Security
Document previously executed and not then released by Agent.
(b) Upon the sale of all of the capital stock of MWCA, Inc. or upon the
sale of all or substantially all or any part of the assets of MWCA, Inc., Agent
will release its security interest in such assets or stock and shall release
MWCA, Inc. from its guarantee hereunder, provided that (i) Agent shall, upon any
such sale, redetermine the Borrowing Base to reflect the sale of MWCA, Inc. or
its assets and (ii) Borrower shall immediately pay to Agent from the proceeds of
any such sale the amount of the Borrowing Base Deficiency, if any, created as a
result of such Borrowing Base redetermination in accordance with the provisions
of Section 2.7.
(c) On the date hereof, MWCA, Inc. is delivering to Agent Security
Documents pursuant to Section 6.16(a) above. Agent has agreed to hold such
Security Documents in anticipation of the sale described in Section 6.16(b) to
record the related financing statements only if Borrower fails to sell all of
the capital stock or all or substantially all of the assets of MWCA, Inc. by
August 31, 1999 or (ii) if earlier, after the occurrence of a Default hereunder.
<PAGE> 73
Section 6.17. Perfection and Protection of Security Interests and Liens.
Borrower will from time to time deliver, and will cause each other Related
Person from time to time to deliver, to Agent any financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by Related Persons in
form and substance satisfactory to Agent, which Agent requests for the purpose
of perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
ARTICLE VII - Negative Covenants of Borrower
To conform with the terms and conditions under which each Lender is willing
to have credit outstanding to Borrower, and to induce 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 have previously agreed otherwise:
Section 7.1. Limitation on Debt and Liens.
(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) the Obligations.
(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 Funded Debt and secure only Debt which is not
delinquent or which is being contested as provided in Section 6.7.
<PAGE> 74
(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.
Section 7.2. Hedging Contracts. No Related Person will be a party to or
in any manner be liable on any Hedging Contract except:
(a) contracts entered into with the purpose and effect of fixing prices on
Products expected to be produced by Related Persons, provided that at all times:
(i) each such contract shall comply with Borrower's hedging policy as approved
by the Board of Directors of Borrower, a copy of which has been provided to
Agent and each Lender, and (ii) no such contract shall be made for speculative
purposes; and
(b) contracts entered into by a Related Person with the purpose and effect
of fixing interest rates on a principal amount of indebtedness of such Related
Person that is accruing interest at a variable rate, provided that (i) the
aggregate notional amount of such contracts never exceeds seventy-five percent
(75%) of the anticipated outstanding principal balance of the indebtedness to be
hedged by such contracts or an average of such principal balances calculated
using a generally accepted method of matching interest swap contracts to
declining principal balances, (ii) the floating rate index of each such contract
generally matches the index used to determine the floating rates of interest on
the corresponding indebtedness to be hedged by such contract, (iii) no such
contract shall be made for speculative purposes, and (iv) each such contract is
with a counterparty or has a guarantor of the obligation of the counterparty who
(unless such counterparty is a Lender or one of its Affiliates) at the time the
contract is made has long-term obligations rated AA or Aa2 or better,
respectively, by either Rating Agency or is an investment grade-rated industry
participant.
<PAGE> 75
Section 7.3. 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 be merged into or
consolidated with (a) another Subsidiary of Borrower, so long as a Subsidiary
Guarantor is the surviving business entity, or (b) 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.
Section 7.4. 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:
(a) 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.
(b) Inventory which is sold in the ordinary course of business on ordinary
trade terms.
(c) properties or assets, or interests therein, the value of which does
not exceed in the aggregate ten million dollars ($10,000,000) during any Fiscal
Year provided that immediately upon any such sale the Cash Earnings Borrowing
Base 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).
<PAGE> 76
(d) Borrower may sell all of the capital stock of MWCA, Inc. and/or MWCA,
Inc. may sell all or substantially all or any part of its assets, provided
(i) simultaneously with any such sale, of the net proceeds thereof shall be
applied as a prepayment on the Obligations to the extent required by
Section 6.16, (ii) following any such sale, the Borrowing Base, as adjusted to
take such a sale into account, shall be in excess of the Obligations, and
(iii) both immediately prior to, and immediately following, the consummation of
any such sale, no Default or Event of Default shall have occurred or be
continuing.
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.
Section 7.5. 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 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 without limitation, to Borrower; and to Subsidiary
Guarantors. In addition to the foregoing each Related Person may declare and
pay to any Persons with respect to common or preferred stock (a) cash dividends
so long as no Default or Event of Default has occurred and is continuing, and
(b) 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.
Section 7.6. Limitation on Investments and New Businesses. No Related
Person will
<PAGE> 77
(a) make any expenditure or commitment or incur any obligation or enter
into or engage in any transaction except in the ordinary course of business,
(b) engage directly or indirectly in any business or conduct any
operations except in connection with or incidental to its present businesses and
operations, or
(c) make any acquisitions of or capital contributions to or other
investments in any Person, other than Permitted Investments.
Section 7.7. Limitation on Credit Extensions. Except for Permitted
Investments, no Related Person will extend credit, make advances or make loans
other than
(a) 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,
(b) loans to Borrower or to any Subsidiary Guarantor,
(c) loans in an aggregate outstanding principal amount not to exceed
$1,000,000 to third parties.
Section 7.8. 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.
Section 7.9. ERISA Plans. No Related Person will incur any obligation to
contribute to any "multiemployer plan" as defined in Section 4001 of ERISA.
Section 7.10. Fiscal Year. Neither Borrower nor any Subsidiary Guarantor
will change its fiscal year.
<PAGE> 78
Section 7.11. 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 Notes which are required to be repaid within one
year from the time of calculation.
Section 7.12. Fixed Charge Coverage Ratio. The ratio of (a) EBITDA as of
the end of each Fiscal Quarter to (b) Fixed Charges as of the end of such Fiscal
Quarter will never be less than (i) .75 to 1.0 from the date hereof until
December 31, 1999 (ii) 1.25 to 1.0 from January 1, 2000 until December 31, 2000,
and (iii) 1.5 to 1.0 at any time after December 31, 2000.
Section 7.13. Tangible Net Worth. Borrower's Consolidated Tangible Net
Worth as of the end of any Fiscal Quarter ending after December 31, 1998 will
not be less than the sum of (a) $137,000,000, plus (b) 50% of Borrower's
Consolidated net income earned during the period from January 1, 1999 to the end
of such Fiscal Quarter, if positive, or zero, if negative, plus (c) 75% of the
net proceeds from the issuance of equity securities of Borrower after December
31, 1999, to the end of such Fiscal Quarter.
As used in this subsection, the following terms shall have the meanings set
forth below:
(A) "Borrower's Consolidated Debt" means all Consolidated liabilities
and similar balance sheet items of Borrower, together with all Funded Debt
of any Related Person.
(B) "Borrower's Consolidated Tangible Net Worth" means the remainder
of (x) all Consolidated assets of Borrower, other than intangible assets
(including without limitation as intangible assets such assets as patents,
copyrights, licenses, franchises, goodwill, trade names, trade secrets and
leases other than oil, gas or mineral leases or leases required to be
capitalized under GAAP), minus (y) Borrower's Consolidated liabilities.
<PAGE> 79
ARTICLE VIIA - Guaranty
Section 7A.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 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, or below in the following subsection, 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.
<PAGE> 80
(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.
Section 7A.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 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 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 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.
<PAGE> 81
(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 Collateral for any or all of the Obligations, accept
additional or substituted Collateral therefor, and perfect or fail to
perfect Lenders' rights in any or all Collateral.
(vi) Discharge, release, substitute or add obligors.
(vii) Apply all monies received from obligors or others, or from
any Collateral for any of the Obligations, as Agent or Lenders may
determine to be in its best interest, without in any way being required to
marshal 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 Article VIIA 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, marshaling 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
Subsidiary Guarantor in the course of or resulting from any such
proceedings.
<PAGE> 82
(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.
(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 VIIA 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.
<PAGE> 83
(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 Subsidiary Guarantor from any liability hereunder,
and each Subsidiary 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 7A.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 7A.3. Waiver. Each Subsidiary Guarantor hereby waives, with
respect to the Obligations, this guaranty, and the other Loan Documents:
(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 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.
<PAGE> 84
Section 7A.4. No Subrogation. No Subsidiary Guarantor shall have any
right of subrogation with respect hereto (including any right of subrogation
under 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 VIIA 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 7A.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 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 VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events constitutes
an Event of Default under this Agreement:
<PAGE> 85
(a) Any Related Person fails to pay any principal component of any
Obligation when due and payable, 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 Related Person fails to pay any Obligation (other than the
Obligations in subsection (a) above) when due and payable, 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, within five (5)
Business Days after the same becomes due;
(c) 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;
(d) Any Related Person fails to duly observe, perform or comply with any
covenant, agreement or provision of Section 6.2(d), 6.4, 6.16(b), 6.16(c),
Article VII, or Section 7A.1;
(e) Any Related Person fails (other than as referred to in subsections
(a), (b), (c) or (d) 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;
(f) 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 5.1 for any reason other
than its release or subordination by Agent;
(g) 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 to Borrower and
its Subsidiaries on a Consolidated basis 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;
<PAGE> 86
(h) Any Related Person (i) fails to pay any portion, when such portion is
due, of any of its Debt in excess of $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, and any such failure, breach or default
continues beyond any applicable period of grace provided therefor;
(i) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code) 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 Debt exceeds the then
current value of such ERISA Plan's assets available for the payment of such
benefit Debt 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);
(j) Any Related Person:
(i) suffers the entry against it of a judgment, decree or order for
relief by a Tribunal 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 (30)
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
<PAGE> 87
(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 or of any part of the
Collateral in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor discharged
within thirty (30) 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 (30)
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 Tribunal against all or any substantial part of its assets
or any part of the Collateral, and such writ or warrant of attachment or
any similar process is not stayed or released within thirty (30) days after
the entry or levy thereof or after any stay is vacated or set aside;
(k) Any Change of Control occurs;
(l) any party to the Indenture fails to observe or perform any of the
covenants, conditions, or agreements of the Indenture or the Bonds in any
material respect, or any party to the Loan Agreement fails to observe or perform
any of the covenants, conditions, or agreements of the Loan Agreement in any
material respect, and such failure has not been waived or not cured within any
applicable grace period; and
(n) A Lien is placed upon any property of any Related Person other than a
Lien described in Section 7.1(b).
<PAGE> 88
Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(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. Upon any such acceleration, any obligation
of any Lender and any obligation of LC Issuer to issue Letters of Credit
hereunder to make any further Loans shall be permanently terminated. 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, do either or both of the
following: (1) terminate any obligation of Lenders to make Loans hereunder, and
any obligation of LC Issuer to issue Letters of Credit hereunder, and
(2) 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.
Section 8.2. Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce 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 each Lender Party
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 Lender Parties 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.
<PAGE> 89
ARTICLE IX - Agent
Section 9.1. Appointment, Powers, and Immunities. Each Lender hereby
irrevocably appoints and authorizes Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Agent (which term as used in this sentence and in Section 9.5 and the
first sentence of Section 9.6 hereof shall include its Affiliates and its own
and its Affiliates' officers, directors, employees, and agents): (a) shall not
have any duties or responsibilities except those expressly set forth in this
Agreement or in any other Loan Document and shall not be a trustee or fiduciary
for any Lender; (b) shall not be responsible to the Lenders for any recital,
statement, representation, or warranty (whether written or oral) made in or in
connection with any Loan Document or any certificate or other document referred
to or provided for in, or received by any of them under, any Loan Document, or
for the value, validity, effectiveness, genuineness, enforceability, or
sufficiency of any Loan Document, or any other document referred to or provided
for therein or for any failure by any Related Person or any other Person to
perform any of its obligations thereunder; (c) shall not be responsible for or
have any duty to ascertain, inquire into, or verify the performance or
observance of any covenants or agreements by any Related Person or the
satisfaction of any condition or to inspect the property (including the books
and records) of any Related Person or any of its Subsidiaries or Affiliates;
(d) shall not be required to initiate or conduct any litigation or collection
proceedings under any Loan Document; and (e) shall not be responsible for any
action taken or omitted to be taken by it under or in connection with any Loan
Document, except for its own gross negligence or willful misconduct. Agent may
employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care.
Section 9.2. Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telecopy) believed by it to be
genuine and correct and to have been signed, sent or made by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Related Person), independent accountants, and other
experts selected by Agent with
<PAGE> 90
reasonable care. Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until Agent receives and accepts an
Assignment and Acceptance executed in accordance with Section 10.6 hereof. As
to any matters not expressly provided for by this Agreement, Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding on all of the Lenders; provided, however, that
Agent shall not be required to take any action that exposes Agent to personal
liability or that is contrary to any Loan Document or applicable Law or unless
it shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking any
such action.
Section 9.3. Defaults. Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless Agent has
received written notice from a Lender or Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default". In the
event that Agent receives such a notice of the occurrence of a Default or Event
of Default, Agent shall give prompt notice thereof to the Lenders. Agent shall
(subject to Section 9.1 hereof) take such action with respect to such Default or
Event of Default as shall reasonably be directed by the Required Lenders,
provided that, unless and until Agent shall have received such directions, Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interest of the Lenders.
Section 9.4. Rights as Lender. With respect to its Percentage Share of
the Maximum Credit Amount and the Loans made by it, Agent (and any successor
acting as Agent) in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include Agent in its individual
capacity. Agent (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Lender) accept deposits from, lend
money to, make Investments in, provide services to, and generally engage in any
kind of lending, trust, or other business with any Related Person or any of its
Subsidiaries or Affiliates as if it were not acting
<PAGE> 91
as Agent, and Agent (and any successor acting as Agent) and its Affiliates
may accept fees and other consideration from any Related Person or any of its
Subsidiaries or Affiliates for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.
SECTION 9.5. INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY AGENT (TO
THE EXTENT NOT REIMBURSED UNDER SECTION 10.4 HEREOF, BUT WITHOUT LIMITING THE
OBLIGATIONS OF BORROWER UNDER SUCH SECTION) RATABLY IN ACCORDANCE WITH THEIR
RESPECTIVE PERCENTAGE SHARES, FOR ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES), OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT MAY BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST AGENT (INCLUDING BY ANY LENDER) IN
ANY WAY RELATING TO OR ARISING OUT OF ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY OR ANY ACTION TAKEN OR OMITTED BY AGENT UNDER ANY LOAN
DOCUMENT (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF AGENT);
provided that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any costs or
expenses payable by Borrower under Section 10.4, to the extent that Agent is not
promptly reimbursed for such costs and expenses by Borrower. The agreements
contained in this section shall survive payment in full of the Loans and all
other amounts payable under this Agreement.
Section 9.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees
that it has, independently and without reliance on Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Borrower and its Subsidiaries and decision to
enter into this Agreement and 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 analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by Agent hereunder, Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition, or business of any Related Person
or any of its Subsidiaries or Affiliates that may come into the possession of
Agent or any of its Affiliates.
<PAGE> 92
Section 9.7. Sharing of Set-Offs and Other Payments. Each Lender Party
agrees that if it shall, whether through the exercise of rights under Security
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 3.1,
causes such Lender Party to have received more than it would have received had
such payment been received by Agent and distributed pursuant to Section 3.1,
then (a) it shall be deemed to have simultaneously purchased and shall be
obligated to purchase interests in the Obligations as necessary to cause all
Lender Parties to share all payments as provided for in Section 3.1, and
(b) such other adjustments shall be made from time to time as shall be equitable
to ensure that Agent and all Lender Parties share all payments of Obligations as
provided in Section 3.1; provided, however, that nothing herein contained shall
in any way affect the right of any Lender Party to obtain payment (whether by
exercise of rights of banker's lien, set-off or counterclaim or otherwise) of
Debt 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 the order of a Tribunal order to be
paid on account of the possession of such funds prior to such recovery.
Section 9.8. Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lender Parties any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lender Parties 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 Lender Parties, Agent shall invest such
funds pending distribution; all interest on any such Investment shall
<PAGE> 93
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 Lender Parties (other than to the Person who is Agent
in its separate capacity as a Lender Party) shall be held by Agent pending such
distribution solely as Agent for such Lender Parties, and Agent shall have no
equitable title to any portion thereof.
Section 9.9. Benefit of Article IX. The provisions of this Article
(other than the following section) are intended solely for the benefit of Lender
Parties, and no Related Person shall be entitled to rely on any such provision
or assert any such provision in a claim or defense against any Lender. Lender
Parties may waive or amend such provisions as they desire without any notice to
or consent of Borrower or any Related Person.
Section 9.10. 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 Borrower may, with the
written concurrence of Majority Lenders, designate a successor Agent. If within
fifteen (15) days after the date of such resignation Borrower makes no such
designation or such written concurrence is not given, 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 (30) 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 IX 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.
<PAGE> 94
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender Party 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 any Lender Party 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,
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 or LC Issuer, by such party, 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 has already been given as to the termination
of the Loan Documents as provided in Section 10.10). 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 IV (provided that Agent may in its discretion withdraw any request it
has made under Section 4.2), (2) increase the maximum amount which such Lender
is committed hereunder to lend, (3) reduce any fees payable to such Lender
hereunder, or the principal of, or interest on, such Lender's Note, (4) postpone
any date fixed for any payment of any such fees, principal or interest,
(5) amend the definitions herein of "Majority Lenders" or "Required Lenders" or
otherwise change the aggregate amount of Percentage Shares which is
<PAGE> 95
required for Agent, Lenders or any of them to take any particular action under
the Loan Documents, (6) release Borrower from its obligation to pay such
Lender's Note or any Subsidiary Guarantor from its guaranty of such payment,
(7) amend Sections 7.11, 7.12, or 7.13, or (8) amend this Section 10.1(a) or
release any Collateral. Notwithstanding the foregoing, simultaneously with any
sale of the stock and/or assets of MWCA, Inc. permitted by Section 7.4(d), each
Lender agrees that Agent may release the security interest in such stock and/or
assets of MWCA, Inc. Upon the sale of all of such stock or assets, Agent shall
release MWCA, Inc. from its guaranty hereunder and its other agreements set
forth herein, in each case without any further consent or approval from any
Lender.
(b) Acknowledgments 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 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) no 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 and the other
Related Persons, on one hand, 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 Related
Person and any Lender, (vii) Agent is not Borrower's Agent, but Agent for
Lenders, (viii) should an Event of Default or Default occur or exist, each
Lender will determine in its sole discretion and for its own reasons 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 any Lender, or any representative thereof, and no
such representation or covenant has been made, that 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
<PAGE> 96
to any such Event of Default or Default or any other provision of the Loan
Documents, and (x) all Lender Parties have relied upon the truthfulness of the
acknowledgments in this section in deciding to execute and deliver this
Agreement and to become obligated hereunder.
(c) Joint Acknowledgment. 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 10.2. Survival of Agreements; Cumulative Nature. All of 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 each Lender Party and all of Lender Parties' obligations to Borrower
are terminated. All statements and agreements contained in any certificate or
other instrument delivered by any Related Person to any Lender Party 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 Related Persons in the Loan
Documents, and the rights, powers, and privileges granted to Lender Parties 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 any Lender Party 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.
<PAGE> 97
Section 10.3. Notices. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Lender Parties), and shall
be deemed sufficiently given or furnished if delivered by personal delivery, by
facsimile or other electronic transmission, by delivery service with proof of
delivery, or by registered or certified United States mail, postage prepaid, to
Borrower and Related Persons at the address of Borrower specified on the
signature pages hereto and to each Lender Party at its address 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 during
normal business hours at the address provided herein, (b) in the case of
facsimile or other electronic transmission, upon receipt, or (c) in the case of
registered or certified United States mail, three (3) days after deposit in the
mail; provided, however, that no Borrowing Notice shall become effective until
actually received by Agent.
Section 10.4. Indemnity. BORROWER AGREES TO INDEMNIFY EACH LENDER PARTY,
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 SUCH
LENDER PARTY GROWING OUT OF, RESULTING FROM OR IN ANY OTHER WAY ASSOCIATED WITH
ANY OF THE COLLATERAL, THE LOAN DOCUMENTS AND THE TRANSACTIONS AND EVENTS
(INCLUDING THE ENFORCEMENT OR DEFENSE THEREOF) AT ANY TIME ASSOCIATED THEREWITH
OR CONTEMPLATED THEREIN (WHETHER ARISING IN CONTRACT OR IN TORT OR OTHERWISE AND
INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH ANY ENVIRONMENTAL LAWS BY ANY
LENDER PARTY OR ANY OTHER PERSON OR ANY LIABILITIES OR DUTIES OF ANY LENDER
PARTY OR ANY OTHER 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 OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY,
<PAGE> 98
provided only that no Lender Party 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 any Lender Party, 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 term "Lender Party" shall refer
not only to each Person designated as such in Section 1.1 but also to each
director, officer, agent, attorney, employee, representative and Affiliate of
such Person.
Section 10.5. Joint and Several Liability; Parties in Interest.
(a) All Obligations which are incurred by two or more Related Persons
shall be their joint and several obligations and Debt. 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 the 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 all Lender Parties, such purchaser shall not be entitled to
any rights of any Lender under the Loan Documents unless and until Borrower or
its Affiliates have purchased all of the Obligations.
Section 10.6. Assignments and Participations.
(a) Each Lender may assign to one or more Eligible Transferees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Loans, its Note, and its Percentage Share of
the Maximum Credit Amount); provided, however, that
<PAGE> 99
(i) each such assignment shall be to an Eligible Transferee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, any such partial assignment shall be in an amount at least equal
to $5,000,000 or an integral multiple of $5,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant, and
not varying, percentage of all of its rights and obligations under the Loan
Documents; and
(iv) the parties to such assignment shall execute and deliver to Agent
for its acceptance an Assignment and Acceptance in the form of Exhibit F
hereto, together with any Note subject to such assignment and a processing
fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this section, the assignor, Agent and
Borrower shall make appropriate arrangements so that, if required, new Notes are
issued to the assignor and the assignee. If the assignee is not incorporated
under the Laws of the United States of America or a state thereof, it shall
deliver to Borrower and Agent certification as to exemption from deduction or
withholding of Taxes in accordance with Section 3.9.
(b) Agent shall maintain at its address referred to in Section 10.3 a copy
of each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders and their
Percentage Share of the Maximum Credit Amount of, and principal amount of the
Loans owing to, each Lender from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and Borrower, Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
<PAGE> 100
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit F hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Maximum Credit Amount and its Loans); provided, however, that
(i) such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) the participant shall be entitled to
the benefit of the yield protection provisions contained in Article III and the
right of offset contained in Section 6.15, and (iv) Borrower shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right to enforce the obligations of Borrower relating to its Loans and its
Note and to approve any amendment, modification, or waiver of any provision of
this Agreement (other than amendments, modifications, or waivers decreasing the
amount of principal of or the rate at which interest is payable on such Loans or
Note, extending any scheduled principal payment date or date fixed for the
payment of interest on such Loans or Note, or extending its Maximum Credit
Amount).
(e) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time assign and pledge all or any portion of its Loans and its
Note to any Federal Reserve Bank as collateral security pursuant to Regulation A
and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning Borrower or any of
its Subsidiaries in the possession of such Lender from time to time to assignees
and participants (including prospective assignees and participants), subject,
however, to the provisions of Section 10.7 hereof.
<PAGE> 101
Section 10.7. Confidentiality. Agent and each Lender (each, a "Lending
Party") agrees to keep confidential any information furnished or made available
to it by Borrower pursuant to this Agreement that is marked confidential;
provided that nothing herein shall prevent any Lending Party from disclosing
such information (a) to any other Lending Party or any Affiliate of any Lending
Party, or any officer, director, employee, agent, or advisor of any Lending
Party or Affiliate of any Lending Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any Law, rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any regulatory agency
or authority, (f) that is or becomes available to the public or that is or
becomes available to any Lending Party other than as a result of a disclosure by
any Lending Party prohibited by this Agreement, (g) in connection with any
litigation to which such Lending Party or any of its Affiliates may be a party,
(h) to the extent necessary in connection with the exercise of any remedy under
this Agreement or any other Loan Document, and (i) subject to provisions
substantially similar to those contained in this section, to any actual or
proposed participant or assignee.
Section 10.8. 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 346 OF THE
TEXAS FINANCE CODE (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 SERVICE OF PROCESS MAY BE MADE UPON
IT OR ANY RELATED PERSON IN ANY LEGAL PROCEEDING RELATING TO THE LOAN DOCUMENTS
OR THE OBLIGATIONS BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW.
<PAGE> 102
Section 10.9. Limitation on Interest. Lender Parties, 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. Lender
Parties 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) 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 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, Lender
Parties and 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
<PAGE> 103
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 Chapter 303 of the Texas Finance Code (the "Texas Finance
Code") as amended, for that day, the ceiling shall be the "weekly ceiling" as
defined in the Texas Finance Code, provided that if any applicable Law permits
greater interest, the law permitting the greatest interest shall apply. 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 10.10. 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 3.2
through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender Party 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 10.11. 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 10.12. Counterparts; Fax. 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. This Agreement and the Loan Documents
may be validly executed and delivered by facsimile or other electronic
transmission.
<PAGE> 104
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc Borrower and
each Lender Party hereby knowingly, voluntarily, intentionally, and irrevocably
(a) 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) waives, to the maximum extent not prohibited by
Law, any right it may have to claim or recover in any such litigation any
"Special Damages", as defined below, (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 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. As used in this section,
"Special Damages" includes all special, consequential, exemplary, or punitive
damages (regardless of how named), but does not include any payments or funds
which any party hereto has expressly promised to pay or deliver to any other
party hereto.
Section 10.14. Amendment and Restatement. This Agreement amends and
restates in its entirety the Existing Credit Agreement. Borrower hereby agrees
that (i) the Debt outstanding under the Existing Credit Agreement and all
accrued and unpaid interest thereon and (ii) all accrued and unpaid fees under
the Existing Credit Agreement shall be deemed to be outstanding under and
governed by this Agreement.
Section 10.15. No Novation or Release. Borrower hereby acknowledges,
warrants, represents and agrees that this Agreement is not intended to be, and
shall not be deemed or construed to be, a novation or release of the Existing
Credit Agreement.
Section 10.16. Ratification. Each of Borrower and Subsidiary Guarantors
hereby (a) ratifies and confirms each of the Security Documents listed on the
Security Schedule (the "Designated Security Documents") to which it is a party;
(b) agrees that, as used in each of the Designated Security Documents, each
reference to: (i) the "Credit Agreement," shall henceforth be deemed to be a
reference to this Agreement and (ii) the "Notes" shall henceforth be deemed to
be a reference to the "Note" as used in this Agreement; (c) agrees that the
<PAGE> 105
"Obligations" as defined in this Agreement are part of the Secured Obligations
(as defined in each of the Designated Security Documents); and (d) agrees that
each of its obligations and covenants with respect to such Designated Security
Documents to which it is a party shall remain in full force and effect after the
execution of this Agreement. The execution, delivery and effectiveness of this
Agreement and the Notes shall not, except as expressly provided herein or
therein, operate as a waiver of any right, power or remedy of Agent or any
Lender under any Loan Document nor constitute a waiver of any provision of any
Loan Document.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
<PAGE> 106
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
BORROWER: HECLA MINING COMPANY
By: /s/ John P. Stilwell
--------------------------
John P. Stilwell
Vice President and Chief Financial Officer
Address (for Borrower and Subsidiary
Guarantors):
6500 Mineral Drive
Coeur d'Alene, Idaho 83815-8788
Attention: John P. Stilwell
Telephone: (208) 769-4100
Telecopy: (208) 769-7612
SUBSIDIARY GUARANTORS: MWCA, INC.
By: /s/ J. Gary Childress
----------------------------
J. Gary Childress
Vice President
KENTUCKY-TENNESSEE CLAY COMPANY
By: /s/ J. Gary Childress
----------------------------
J. Gary Childress
Vice President
K-T FELDSPAR CORPORATION
By: /s/ J. Gary Childress
---------------------------
J. Gary Childress
Vice President
<PAGE> 107
AGENT AND LENDER: NATIONSBANK, N.A.
By: /s/ David Rubenking
---------------------------
David Rubenking,
Senior Vice President
Address:
NationsBank Plaza
901 Main Street, 49th FL (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, N.A.
Denver Energy Group
370 Seventeenth, Suite 3250
Denver, Colorado 80202-5632
Attention: David Rubenking
Telephone: (303) 629-6969
Telecopy: (303) 629-6303
<PAGE> 108
LENDERS: FIRST SECURITY BANK, N.A., Lender
By: /s/ Vicki Riga
------------------------------
Vicki Riga
Vice President
Corporate Banking Division
119 North 9th Street
Boise Idaho 83702
Attention: Vicki Riga, Vice
President
Telephone: (208)393-2163
Telecopy: (208)393-2472
<PAGE> 1
Exhibit 10.2(a)
FIRST AMENDMENT TO RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO RESTATED CREDIT AGREEMENT (herein
called the "Amendment") made as of June 25, 1999 by and among
Hecla Mining Company, a Delaware corporation ("Borrower"), the
undersigned subsidiary guarantors ("Subsidiary Guarantors"),
NationsBank, N.A., individually and as agent ("Agent"), and the
Lenders, including Agent, party to the Original Agreement
("Lenders"), defined below.
W I T N E S S E T H:
WHEREAS, Borrower, Subsidiary Guarantors, Agent and Lenders
entered into that certain Restated Credit Agreement dated as of
May 7, 1999 (as amended, supplemented, or restated, the "Original
Agreement") for the purpose and consideration therein expressed,
whereby Lenders became obligated to make loans to Borrower as
therein provided; and
WHEREAS, Borrower, Subsidiary Guarantors, Agent and Lenders
desire to amend the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the
Original Agreement, in consideration of the loans which may
hereafter be made by Lenders to Borrower, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree as
follows:
ARTICLE I.
DEFINITIONS AND REFERENCES
Section 1.1. TERMS DEFINED IN THE ORIGINAL AGREEMENT.
Unless the context otherwise requires or unless otherwise
expressly defined herein, the terms defined in the Original
Agreement shall have the same meanings whenever used in this
Amendment.
Section 1.2. OTHER DEFINED TERMS. Unless the context
otherwise requires, the following terms when used in this
Amendment shall have the meanings assigned to them in this
Section 1.2.
"AMENDMENT" means this First Amendment to Restated
Credit Agreement.
"CREDIT AGREEMENT" means the Original Agreement as
amended hereby.
<PAGE> 2
ARTICLE II.
AMENDMENTS TO ORIGINAL AGREEMENT
Section 2.1. DEFINED TERMS. (a) The definition of "Cash
Earnings" in Section 1.1 of the Original Agreement is hereby
amended in its entirety to read as follows:
"'CASH EARNINGS' means as of the end of any calendar
month, Borrower's Consolidated net income for the twelve
(12) consecutive calendar months then ended plus
(i) nonrecurring losses for such calendar month, (ii) other
non-cash charges taken into account in determining such net
income and (iii) exploration expenses taken into account in
determining such net income, but only to the extent that
exploration expenses exceed $3,000,000, minus
(iv) nonrecurring gains taken into account in determining
such net income, and (v) any cash dividends that have been
declared, accrued or paid (without duplication) on common or
preferred stock during such twelve-month period; provided
that the net income of the Project Subsidiaries shall be
excluded from the calculation of 'Cash Earnings'."
(b) The definition of "Permitted Investments" in Section
1.1 of the Original Agreement is hereby amended by adding thereto
the following clauses (g) and (h) immediately after clause (f)
thereof to read as follows:
"(g) consisting of the purchase of the capital stock
of the Project Subsidiaries.
"(h) consisting of capital contributions, loans or
other advances of funds to the Project Subsidiaries which do
not exceed $2,000,000 in the aggregate."
(c) The following definition of "Project Subsidiaries" is
hereby added to Section 1.1 of the Original Agreement immediately
following the definition of "Prohibited Lien":
"'PROJECT SUBSIDIARIES' means Monarch Resources
Investments Limited, a company organized under the laws of
Bermuda, and Monarch Minera Suramerica, C.A., a company
organized under the laws of Venezuela."
(d) The following definition of "Subordinated Credit
Agreement" is hereby added to Section 1.1 of the Original
Agreement immediately following the definition of Subsidiary
Guarantor Security Agreement":
"'SUBORDINATED CREDIT AGREEMENT' means the credit
agreement dated June 25, 1999 among Borrower, Standard Bank
London Limited, as administrative agent and collateral
agent, and certain banks and financial institutions."
<PAGE> 3
Section 2.2. SUBSIDIARY GUARANTORS. The first sentence of
Section 6.14 of the Original Agreement is hereby amended in its
entirety to read as follows:
"Borrower shall cause each of its Subsidiaries (other
than the Project 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 cash earnings constituting
more than ten percent (10%) of Cash Earnings as of the end
of any Fiscal Quarter (calculated on a rolling twelve-month
basis as set forth in the definition of Cash Earnings in
Section 1.1 and then divided by four), to become a
Subsidiary Guarantor and a party hereto at such time and to
execute and deliver to Agent a Subsidiary Guarantor Security
Agreement, 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."
Section 2.3. LIMITATION ON LIENS. Section 7.1(b) of the
Original Agreement is hereby amended by adding new subsections
(vii) and (viii) immediately after subsection (vi) thereof to
read as follows:
"(vii) Liens in the stock and assets of the
Project Subsidiaries and in the agreement for the
purchase thereof.
"(viii) rights of the banks and financial
institutions that are parties to the Subordinated
Credit Agreement to setoff against the obligations
owing under the Subordinated Credit Agreement any
balances, credit, deposits accounts or moneys of
Borrower at such banks and financial institutions."
Section 2.4. LIMITATION ON CREDIT EXTENSIONS. Section 7.7
of the Original Agreement is hereby amended by adding thereto the
following subsection (d) immediately after subsection (c) to read
as follows:
"(d) loans that are part of the Permitted Investments."
ARTICLE III.
CONDITIONS OF EFFECTIVENESS
Section 3.1. EFFECTIVE DATE. This Amendment shall become
effective as of the date first above written when and only when:
(a) Agent shall have received all of the following, at
Agent's office, duly executed and delivered and in form and
substance satisfactory to Agent, all of the following:
<PAGE> 4
(i) the Amendment;
(ii) a Subordination Agreement by and between Agent and
Standard Bank London Limited, as Agent under the
Subordinated Credit Agreement;
(iii) a certificate of the Secretary of Borrower
dated the date of this Amendment certifying: (i) that
resolutions adopted by the Board of Directors of the
Borrower authorize the execution, delivery and performance
of this Amendment by Borrower; (ii) the names and true
signatures of the officers of the Borrower authorized to
sign this Amendment; and (iii) that all of the
representations and warranties set forth in Article IV
hereof are true and correct at and as of the time of such
effectiveness; and
(iv) such other supporting documents as Agent may
reasonably request;
(b) Borrower shall have paid, in connection with such Loan
Documents, all recording, handling, amendment and other fees
required to be paid to Agent pursuant to any Loan Documents; and
(c) Borrower shall have paid, in connection with such Loan
Documents, all other fees and reimbursements to be paid to Agent
pursuant to any Loan Documents, or otherwise due Agent and
including fees and disbursements of Agent's attorneys.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1. REPRESENTATIONS AND WARRANTIES OF BORROWER.
In order to induce each Lender to enter into this Amendment,
Borrower represents and warrants to each Lender that:
(a) The representations and warranties contained in
subsections of Section 5.1 of the Original Agreement are true and
correct at and as of the time of the effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver this
Amendment and is and will continue to be duly authorized to
borrow monies and to perform its obligations under the Credit
Agreement. Borrower has duly taken all corporate action necessary
to authorize the execution and delivery of this Amendment and to
authorize the performance of the obligations of Borrower
hereunder.
(c) The execution and delivery by Borrower of this
Amendment, the performance by Borrower of its obligations
hereunder and the consummation of the transactions contemplated
hereby do not and will not conflict with any provision of law,
<PAGE> 5
statute, rule or regulation or of the certificate of
incorporation and bylaws of Borrower, or of any material
agreement, judgment, license, order or permit applicable to or
binding upon Borrower, or result in the creation of any lien,
charge or encumbrance upon any assets or properties of Borrower.
Except for those which have been obtained, no consent, approval,
authorization or order of any court or governmental authority or
third party is required in connection with the execution and
delivery by Borrower of this Amendment or to consummate the
transactions contemplated hereby.
(d) When duly executed and delivered, each of this
Amendment and the Credit Agreement will be a legal and binding
obligation of Borrower, enforceable in accordance with its terms,
except as limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors'
rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of
Borrower dated as of December 31, 1998 and the unaudited
quarterly Consolidated financial statements of Borrower dated as
of March 31, 1999 fairly present the Consolidated financial
position at such dates and the Consolidated statement of
operations and the changes in Consolidated financial position for
the periods ending on such dates for Borrower. Copies of such
financial statements have heretofore been delivered to each
Lender. Since such dates no material adverse change has occurred
in the financial condition or businesses or in the Consolidated
financial condition or businesses of Borrower.
ARTICLE V.
MISCELLANEOUS
Section 5.1. RATIFICATION OF AGREEMENTS. The Original
Agreement as hereby amended is hereby ratified and confirmed in
all respects. Any reference to the Credit Agreement in any Loan
Document shall be deemed to be a reference to the Original
Agreement as hereby amended. The execution, delivery and
effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or
remedy of Lenders under the Credit Agreement, the Notes, or any
other Loan Document nor constitute a waiver of any provision of
the Credit Agreement, the Notes or any other Loan Document.
Section 5.2. SURVIVAL OF AGREEMENTS. All representations,
warranties, covenants and agreements of Borrower herein shall
survive the execution and delivery of this Amendment and the
performance hereof, including without limitation the making or
granting of the Loans, and shall further survive until all of the
Obligations are paid in full. All statements and agreements
contained in any certificate or instrument delivered by any
<PAGE> 6
Related Person hereunder or under the Credit Agreement to any
Lender shall be deemed to constitute representations and
warranties by, and/or agreements and covenants of, Borrower under
this Amendment and under the Credit Agreement.
Section 5.3. LOAN DOCUMENTS. This Amendment is a Loan
Document, and all provisions in the Credit Agreement pertaining
to Loan Documents apply hereto.
Section 5.4. GOVERNING LAW. This Amendment shall be
governed by and construed in accordance the laws of the State of
Texas and any applicable laws of the United States of America in
all respects, including construction, validity and performance.
Section 5.5. COUNTERPARTS; FAX. This Amendment may be
separately executed in counterparts and by the different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to constitute one and the same Amendment. This
Amendment may be validly executed and delivered by facsimile or
other electronic transmission.
THIS AMENDMENT 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 OF THE PARTIES.
[The remainder of this page has been intentionally left blank.]
<PAGE> 7
IN WITNESS WHEREOF, this Amendment is executed as of the
date first above written.
BORROWER: HECLA MINING COMPANY
By: /s/ John P. Stilwell
---------------------------
John P. Stilwell
Vice President and Chief
Financial Officer
SUBSIDIARY GUARANTORS: MWCA, INC.
By: /s/ J. Gary Childress
---------------------------
J. Gary Childress
Vice President
KENTUCKY-TENNESSEE CLAY COMPANY
By: /s/ J. Gary Childress
---------------------------
J. Gary Childress
Vice President
K-T FELDSPAR CORPORATION
By: /s/ J. Gary Childress
---------------------------
J. Gary Childress
Vice President
<PAGE> 8
AGENT AND LENDER: NATIONSBANK, N.A.
By: /s/ David Rubenking
---------------------------
David Rubenking,
Senior Vice President
LENDERS: FIRST SECURITY BANK, N.A.
By: /s/
---------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.3
CONFORMED COPY
DATED AS OF JUNE 25, 1999
-------------------------
MONARCH RESOURCES INVESTMENTS LIMITED
as Borrower
MONARCH MINERA SURAMERICANA, C.A.
as an additional Obligor
THE VARIOUS BANKS AND FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HERETO
as Initial Lenders
STANDARD BANK LONDON LIMITED
as Collateral Agent
and
STANDARD BANK LONDON LIMITED
as Administrative Agent
----------------------------
CREDIT AGREEMENT
----------------------------
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171 638 1111
Fax: 0171 972 7990
TCW/627S00004/1178124
<PAGE> 2
INDEX
1. DEFINITIONS; INTERPRETATION
1.1 Defined Terms
1.2 Use of Defined Terms
1.3 Accounting and Financial Determinations
1.4 Change in Accounting Principles
1.5 Project Determinations, etc
1.6 General Provisions as to Certificates and Opinions, etc.
1.7 Interpretation
2. COMMITMENTS AND PROCEDURES FOR MAKING LOANS; CONTINUATION
PROCEDURES
2.1 Commitments; Making Loans
2.2 Continuation and Conversion Elections
2.3 Records
2.4 Funding
2.5 Obligations Several
3. PRINCIPAL PAYMENTS; INTEREST; COMMISSIONS
3.1 Principal Payments
3.1.1Scheduled Repayments
3.1.2Prepayments - Voluntary and Mandatory
3.1.3Principal Payments Generally
3.2 Interest Payments
3.2.1Rate
3.2.2Post-Maturity Rate
3.2.3Payment Dates; Calculation of Interest
3.2.4Rate Determinations
3.3 Fees
3.3.1Agents' Fees
4. PROJECT ACCOUNTS
4.1 The Account Bank; the Proceeds Account
4.2 Proceeds Account
4.3 Treatment of Proceeds of Project Insurance and Compensation
4.4 General Provisions Relating to the Proceeds Account and the
Local Accounts
5. INCREASED COSTS; TAXES; MARKET DISRUPTIONS; GENERAL PAYMENT
PROVISIONS
5.1 Gold or Dollars Unavailable
5.2 Increased Costs, etc.
5.3 Funding Losses
5.4 Increased Capital Costs
5.5 Illegality
5.6 Taxes
<PAGE> 3
5.7 Mitigation
5.8 Payments, Computations, etc.
5.9 Proration of Payments
5.10 Setoff
5.11 Conversion upon Acceleration, Judgment Currency, etc.
5.12 Application of Proceeds
6. CONDITIONS PRECEDENT TO MAKING LOANS
6.1 Initial Loans
6.1.1Resolutions, etc.
6.1.2Acquisition Transaction, etc.
6.1.3Subordinated Loan Agreement, etc.
6.1.4Borrower Share Charge
6.1.5MMS Pledge Agreement
6.1.6Security Agreement (U.S. Assets)
6.1.7Canadian Security Agreement
6.1.8MMS Guaranty
6.1.9Venezuelan Security Documents
6.1.10 Account Agreement
6.1.11 Intercompany Subordination Agreement
6.1.12 Miscellaneous Documents and Conditions
6.1.13 Opinions
6.1.14 Approvals, Project Documents
6.1.15 Borrowing Notice
6.1.16 Closing Fees, Expenses, etc.
6.1.17 Compliance with Warranties, No Defaults, etc.
7. REPRESENTATIONS AND WARRANTIES
7.1 Organization, Power, Authority, etc.
7.2 Due Authorization; Non-Contravention
7.3 Validity, etc.
7.4 Legal Status
7.5 Financial Statements
7.6 Absence of Default
7.7 Acquisition Agreement
7.8 Litigation, etc.
7.9 Materially Adverse Effect
7.10 Taxes and Other Payments
7.11 Mining Rights
7.12 Ownership and Use of Properties; Liens
7.13 Subsidiaries
7.14 Intellectual Property
7.15 Technology
7.16 Approvals; Project Documents
7.17 Environmental Warranties
7.18 Pari Passu
<PAGE> 4
8. COVENANTS
8.1 Informational and Financial Covenants
8.1.1Financial Information, etc.
8.1.2Defaults
8.1.3Miscellaneous Information Concerning the Project
8.1.4Books and Records; Access
8.1.5Financial Covenants of the Borrower
8.1.6Recalculation of Base Case
8.1.7Accuracy of Information
8.2 Affirmative Covenants
8.2.1Compliance with Laws, etc.
8.2.2Approvals; Operative Documents
8.2.3Maintenance of Corporate Existence
8.2.4Payment of Taxes, etc.
8.2.5Insurance
8.2.6Management and Operation
8.2.7Hedging - Metal Price
8.2.8Environmental Covenant
8.2.9Maintenance of Project Assets
8.2.10 Pari Passu
8.2.11 Collateral Agreements; After-Acquired Collateral
8.3 Negative Covenants
8.3.1Business Activities; Place of Business; Organic Documents;
Fiscal Year
8.3.2Indebtedness
8.3.3Liens
8.3.4Capital Expenditures
8.3.5Investments
8.3.6Restricted Payments, etc.
8.3.7Take or Pay Contracts
8.3.8Consolidation, Merger, etc.
8.3.9Asset Dispositions, etc.
8.3.10 Transactions with Affiliates
8.3.11 Restrictive Agreements, etc.
8.3.12 Project Documents
8.3.13 Royalty Agreements
9. EVENTS OF DEFAULT
9.1 Events of Default
9.1.1Non-Payment of Obligations
9.1.2Non-Performance of Certain Covenants
9.1.3Non-Performance of Other Obligations
9.1.4Breach of Representation or Warranty
9.1.5Default on other Indebtedness
9.1.6Bankruptcy, Insolvency, etc.
9.1.7Metal Trading Agreements
9.1.8Project Documents, etc.
<PAGE> 5
9.1.9Impairment of Loan Documents
9.1.10 Abandonment, Mining Rights
9.1.11 Judgments
9.1.12 Change in Control
9.1.13 Materially Adverse Effect
9.1.14 Cease to Carry on Business
9.1.15 Political Risk Events
9.2 Action if Bankruptcy
9.3 Action if Other Event of Default
10. THE AGENTS
10.1 Actions
10.2 Funding Reliance, etc.
10.3 Exculpation
10.4 Successors
10.5 Loans by Standard Bank
10.6 Standard Bank as Administrative Agent
10.7 Credit Decisions
10.8 Copies, etc
11. MISCELLANEOUS
11.1 Waivers, Amendments, etc
11.2 Notices
11.3 Costs and Expenses
11.4 Indemnification
11.5 Survival
11.6 Severability
11.7 Headings
11.8 Counterparts; Effectiveness
11.9 Governing Law; Entire Agreement
11.10Successors and Assigns
11.11Sale and Transfer of Loans; Participations in Loans
11.11.1 Assignments
11.11.2 Participations
11.12Other Transactions
11.13Forum Selection and Consent to Jurisdiction; Waiver of
Immunity
11.14Waiver of Jury Trial
11.15English Language
<PAGE> 6
SCHEDULES AND EXHIBITS
SCHEDULE I Disclosure Schedule
SCHEDULE II Base Case
SCHEDULE III Additional Costs Rate
EXHIBIT A Borrowing Notice
EXHIBIT B Continuation Notice
EXHIBIT C Conversion Notice
EXHIBIT D Lender Assignment Agreement
EXHIBIT E Compliance Certificate
EXHIBIT F- 1 Process Agent Acceptance
EXHIBIT F-2 Independent Consultant's Certificate
EXHIBIT G Subordinated Loan Agreement
EXHIBIT H Account Agreement
EXHIBIT I MMS Guaranty
EXHIBIT J-1 Canadian Security Agreement
EXHIBIT J-2 Security Agreement (U.S. Assets)
EXHIBIT K-1 Borrower Share Charge
EXHIBIT K-2 MMS Pledge Agreement
EXHIBIT L-1 Assignment of Contract Rights
EXHIBIT L-2 Chattel Mortgage
EXHIBIT L-3 Pledge Without Conveyance
EXHIBIT L-4 Real Property Mortgage
EXHIBIT M-1 Intercompany Subordination Agreement
EXHIBIT M-2 Nationsbank Subordination Agreement
EXHIBIT N-1 Opinion of Debevoise & Plimpton, New York
counsel to the Finance Parties
EXHIBIT N-2 Opinion of Torres, Plaz & Araujo, Venezuelan
counsel to the Finance Parties
EXHIBIT N-3 Opinion of Neher Von Siegmund Rengifo Diquez,
Venezuelan counsel to the Obligors
EXHIBIT N-4 Opinion of Conyers Dill & Pearman, Bermudan
counsel
EXHIBIT N-5 Opinion of Nathaniel K. Adams, corporate
counsel to Hecla Mining
EXHIBIT N-6 Opinion of Fasken Martineau, Canadian counsel
to the Finance Parties
<PAGE> 7
THIS CREDIT AGREEMENT is dated as of June 25, 1999 (this
"AGREEMENT") AMONG:-
(1) MONARCH RESOURCES INVESTMENTS LIMITED, a company organized
and existing under the laws of Bermuda ("MRIL" or the
"BORROWER");
(2) MONARCH MINERA SURAMERICANA, C.A., a company organized under
the laws of Venezuela ("MMS"), as an additional Obligor;
(3) THE PARTIES LISTED ON THE SIGNATURE PAGES HERETO, as the
initial lenders (collectively, the "INITIAL LENDERS");
(4) STANDARD BANK LONDON LIMITED, a bank organized under the
laws of England ("STANDARD BANK"), in its capacity as the
collateral agent (in such capacity, the "COLLATERAL AGENT");
and
(5) STANDARD BANK LONDON LIMITED, in its capacity as the
administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT").
WITNESSETH:
WHEREAS, Hecla Mining Company, a Delaware corporation ("HECLA
MINING") is active in exploration and development of precious
metals and has entered into the Purchase Agreement, dated of May
17, 1999 (the "ACQUISITION AGREEMENT"), pursuant to which Hecla
Mining intends to purchase from Monarch Resources Limited, a
corporation organized under the laws of Bermuda ("MRL" or the
"VENDOR"), all of the issued and outstanding share capital of the
Borrower;
WHEREAS, MRIL owns all of the issued and outstanding share
capital of MMS and also of Monarch Resources de Mexico, S.A. de
C.V., a company organized under the laws of Mexico ("MONARCH
MEXICO");
WHEREAS, MMS owns the La Camorra underground gold mine in
Venezuela (the "PROJECT") and the Project is already engaging in
the commercial production and sale of Gold;
<PAGE> 8
WHEREAS, immediately following completion of the Acquisition
Transaction, MMS intends to initiate certain capital improvements
and installations and to fund certain working capital
requirements at the Project;
WHEREAS, the Borrower has requested that the Lenders make loans
available to the Borrower for the purposes of reimbursing moneys
spent by Hecla Mining in the Acquisition Transaction and also for
remitting funds to MMS to fund the improvements and working
capital requirements at the Project described in the previous
recital and the Lenders are willing to make such loans available
to the Borrower, on the terms and subject to the conditions of
this Agreement and the other Loan Documents;
WHEREAS, in order to finance its obligations under the
Acquisition Agreement, Hecla Mining has requested that Standard
Bank make additional funds available to it and Standard Bank is
willing to make such loans available to Hecla Mining on the terms
and subject to the conditions of the Subordinated Loan Agreement
and the other Loan Documents;
WHEREAS, as security for the Borrower's obligations under this
Agreement and for Hecla Mining's obligations under the
Subordinated Loan Agreement: (a) Hecla Mining is willing to grant
a security interest over the MRIL Shares and (b) the Borrower is
willing to grant a security interest over the MMS Shares;
WHEREAS, as security for the Borrower's obligations under this
Agreement and for Hecla Mining's obligations under the
Subordinated Loan Agreement, MMS is willing: (a) to guarantee
such obligations in favor of the Lenders and (b) grant security
interests over those of its assets constituting the Project as
more particularly set forth in the Loan Agreements to which it is
a party.
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy whereof is hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:
1. DEFINITIONS; INTERPRETATION
1.1 DEFINED TERMS
The following terms, when used in this Agreement, including
its preamble and recitals, shall have the following
meanings:
<PAGE> 9
"ACCOUNT AGREEMENT" means that certain Account Agreement,
executed or to be executed by the Collateral Agent, the
Account Bank and the Borrower substantially in the form of
EXHIBIT H attached hereto.
"ACCOUNT BANK" means The Chase Manhattan Bank or, subject
to this Agreement and the Account Agreement, such other
bank located in New York with which the Proceeds Account
shall be maintained.
"ACQUISITION AGREEMENT" is defined in the FIRST RECITAL.
"ACQUISITION EFFECTIVE DATE" means such date as of which
the Acquisition Transaction shall have been completed in
accordance with its terms.
"ACQUISITION TRANSACTION" means the purchase by Hecla
Mining of the share capital of MRIL, MMS and Monarch
Mexico, as contemplated by the Acquisition Agreement.
"ADDITIONAL COSTS RATE" means for any Interest Period, the
applicable rate determined by Administrative Agent and the
relevant Lenders in accordance with SCHEDULE III.
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE.
"AFFILIATE" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or
under common control with such Person (excluding any
trustee under, or any committee with responsibility for
administering, any compensation, welfare or similar plan).
A Person shall be deemed to be "controlled by" any other
Person if such other Person possesses, directly or
indirectly, power:
(a) to vote twenty percent (20%) or more of the securities
(on a fully diluted basis) having ordinary voting power
for the election of directors or managing general
partners of such Person; or
(b) to direct or cause the direction of the management and
policies of such Person, whether by contract or
otherwise.
"AGENTS" means, collectively, the Administrative Agent and
the Collateral Agent.
<PAGE> 10
"AGGREGATE COMMITMENT AMOUNT" means U.S.$11,000,000, as may
be reduced pursuant to SECTION 2.1(d).
"AGGREGATE DISCOUNTED PROJECTED CASHFLOW" means for any
Forecast Period, the aggregate of Projected Available
Cashflow for each Measurement Period comprising such
Forecast Period, discounted back to the relevant
Calculation Date at the Discount Rate.
"AGREEMENT" is defined in the PREAMBLE.
"APPLICABLE LAW" means, with respect to any Person or
matter, any supranational, national, provincial, federal,
state, regional or local statute, law, rule, treaty,
convention, regulation, order, decree or other requirement
relating to such Person or matter and, where applicable,
any interpretation thereof by any Governmental Agency
having jurisdiction with respect thereto or charged with
the administration or interpretation thereof (in each case,
whether or not having the force of law, but if not having
the force of law, such statute, law, etc. being of the type
with which such Person would comply in the ordinary course
of business).
"APPLICABLE MARGIN" means two and one-half percent. (2.50%)
PER ANNUM.
"APPROVAL" means each and every approval, authorization,
license, permit, consent, filing and registration by or
with any Governmental Agency or other Person necessary for
the execution, delivery or performance of this Agreement or
any other Operative Document (including any such approval
relating to, or necessary for, the production and export of
Project Output and the consent of any lessor or owner of
any property or assets forming part of the Project) or for
the validity or enforceability hereof or thereof, whether
or not referred to in ITEM 1 ("APPROVALS") of the
Disclosure Schedule.
"APPROVED CREDIT QUALITY" means at least A-1 (or any
successor rating) by Standard & Poor's Rating Group, a
division of McGraw Hill, Inc. and/or P-1 (or any successor
rating) by Moody's Investors Services, Inc.
<PAGE> 11
"APPROVED SUBORDINATED INDEBTEDNESS" means any intercompany
Indebtedness advanced by (a) any Subordinated Creditor for
the benefit of the Borrower or MMS and subject to the terms
and conditions of the Intercompany Subordination Agreement
or (b) any other Affiliate of Hecla Mining for the benefit
of the Borrower or MMS and subject to subordination and
other terms and conditions the same in all material
respects as those contained in the Intercompany
Subordination Agreement.
"ASSIGNEE LENDER" is defined in SECTION 11.11.1.
"ASSIGNMENT OF CONTRACT RIGHTS" means any Assignment
executed in Spanish between MMS, the Initial Lenders and
the Collateral Agent relating to MMS' rights under any
designated Project Document, the English translation of
which shall be substantially in the form of EXHIBIT L-1
hereto.
"ASSIGNOR LENDER" is defined in SECTION 11.11.1.
"AUTHORIZED REPRESENTATIVE" means, relative to any Obligor
or Subordinated Creditor, those of its officers whose
signatures and incumbency shall have been certified
pursuant to SECTION 6.1.1.
"AVAILABLE COMMITMENT AMOUNT" means, at any time prior to
the Commitment Termination Date, the excess of the
Commitment Amount (for all Lenders) at such time minus the
Principal Amount of the Loans outstanding at such time.
"AVAILABLE FREE CASHFLOW" means, for any relevant period,
the amount equal to the following:
(a) the actual revenues (expressed in Dollars) realized by
MMS in respect of the Project during such period,
MINUS;
(b) all Operating Expenditures paid by MMS in respect of
the Project during such period, MINUS;
(c) all Taxes paid by MMS in respect of the Project during
such period, MINUS;
(d) all royalty and similar fees paid by MMS in respect of
the Project during such period, MINUS;
<PAGE> 12
(e) all direct corporate costs as identified in the Base
Case, MINUS;
(f) all Capital Expenditures paid by MMS in respect of the
Project during such period, PLUS;
(g) working capital recovery as identified in the Base
Case, MINUS;
(h) amounts paid by the Borrower in respect of principal,
interest or otherwise in respect of the Obligations
during such period.
For the purposes of the foregoing:
(i) ITEM (a) shall be adjusted for any hedging profits or
losses on settlement of each Metal Trading Agreement
then in effect during such period;
(ii) any Obligations paid in Gold shall be valued at the
Current Dollar Equivalent at the time of payment; and
(iii) in computing any portion of a relevant period
where there are insufficiently accurate data to measure
any amounts actually paid by the Borrower and/or MMS,
any means of extrapolation and/or estimation reasonably
acceptable to the Administrative Agent may be used.
"BASE CASE" means the financial model prepared by the
Borrower (approved in writing by the Administrative Agent),
containing INTER ALIA operational, economic, technical and
risk management data concerning the Project and relating to
the Facility together with calculations of: (a) the Loan
Life Cover Ratio, the Project Life Cover Ratio, the Debt
Service Cover Flow Ratio, the Reserve Debt Cover Ratio and
the Reserve Tail Cover Ratio as subject to agreed standard
assumptions and sensitivity analyses, (b) Aggregate
Discounted Projected Cashflow and Projected Available
Cashflow until the Maturity Date or, as the case may be,
the Project End Date and (c) the scheduled payment
obligations with respect to the Facility, as such model is
modified and updated pursuant to SECTION 8.1.6. A print-
out of the initial Base Case is attached as SCHEDULE II.
"BOLIVAR" means lawful money of Venezuela.
"BORROWER" is defined in the PREAMBLE.
<PAGE> 13
"BORROWER SHARE CHARGE" means the Agreement executed by
Hecla Mining and the Collateral Agent, substantially in the
form of EXHIBIT K-1 hereto.
"BORROWING DATE" means either Business Day on which Loans
are made pursuant to SECTION 2.1.
"BORROWING NOTICE" means a loan request and certificate
duly executed by an Authorized Representative of the
Borrower, substantially in the form of EXHIBIT A hereto.
"BUSINESS DAY" means:
(a) any day which is not Saturday, Sunday, a legal holiday
or any other day on which banks are closed in London,
England, Hamilton, Bermuda, or New York, New York or,
to the extent involving MMS (but not any provision
relating to the payment or making of the Loans)
Caracas, Venezuela;
(b) relative to the making, continuing converting or the
calculation of the LIBO Rate, any day on which dealings
in Dollars are carried on in the London interbank
market; and/or
(c) relative to the making, continuing, conversion or
repaying of any Gold Loans, or any related
determination, any day on which dealings in Gold are
carried on between members of the LBMA in London.
"CALCULATION DATE" means each June 30 and December 31, and,
without duplication, the initial Borrowing Date.
"CANADIAN SECURITY AGREEMENT" means that certain Security
Agreement executed by Hecla Mining and the Collateral
Agent, substantially in the form of EXHIBIT J-1 hereto.
"CAPITAL CONTRIBUTION" means a cash contribution made
(directly or indirectly) by one Person to the ordinary
share capital or equity of another Person.
"CAPITAL EXPENDITURES" means, for any period and with
respect to any Person, the sum of:
(a) the aggregate amount of all expenditures of such Person
for fixed or capital assets (including expenditure
incurred in connection with deferred development costs)
made during such period which, in accordance with GAAP,
would be classified as capital expenditures; and
<PAGE> 14
(b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period.
"CAPITALIZED LEASE LIABILITIES" means all monetary
obligations of any Person under any leasing or similar
arrangement which, in accordance with GAAP, would be
classified as capitalized leases, and, for the purposes of
this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with
GAAP, and the stated maturity thereof shall be the date of
the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any security, maturing not more than one year after the
purchase thereof, issued by the United States Treasury
that is maintained in book-entry form on the records of
a Federal Reserve Bank in the United States;
(b) commercial paper, maturing not more than nine months
from the date of issue, which (i) has a rating of at
least Approved Credit Quality and (ii) is issued or
guaranteed by a company (other than any Obligor or
Affiliate thereof) or a bank or commercial financial
institution; or
(c) any negotiable certificate of deposit or banker's
acceptance denominated in Dollars, maturing not more
than one year after the purchase thereof, or any money
market funds in any case issued (or, in the case of a
banker's acceptance, accepted) by a commercial banking
institution organized under the laws of an OECD member
country that has a combined capital and surplus and
undivided profits of not less than U.S.$1,000,000,000
(or the equivalent thereof in any other currency).
"CHANGE IN CONTROL" means:
(a) the failure of Hecla Mining to own (and to have sole power
to vote and dispose of), directly or indirectly and free and
clear of all Liens (other than any Lien pursuant to any
Collateral Agreement), 100% of the issued and outstanding share
capital (however designated) of the Borrower;
<PAGE> 15
(b) the failure of the Borrower to own (and to have sole power
to vote and dispose of), directly or indirectly and free and
clear of all Liens (other than the Liens pursuant to any relevant
Collateral Agreement), 100% of the issued and outstanding share
capital (however designated) of MMS.
Notwithstanding the foregoing, no Change in Control shall
occur under this Agreement, if Hecla Mining wishes to
reorganize its ownership interest in the Borrower and/or
MMS as long as the Administrative Agreement shall have
granted its consent to or such reorganization and the
structure of and the benefits conferred by the Liens
pursuant to the Collateral Agreement in effect before such
reorganization shall be maintained.
"CHATTEL MORTGAGE" means the Chattel Mortgage executed in
Spanish between MMS, the Initial Lenders and the Collateral
Agent, the English translation of which shall be
substantially in the form of EXHIBIT L-2 hereto.
"COLLATERAL AGENT" is defined in the PREAMBLE.
"COLLATERAL AGREEMENTS" means, collectively, the Pledge
Agreements and the Security Agreements.
"COLLECTED LENDERS" means, collectively, the Lenders and
the Subordinated Lenders.
"COMMITMENT" means each Lender's obligation to make,
maintain, continue and convert its Loans in an amount equal
to its Commitment Amount in each case pursuant to the terms
and subject to the conditions of this Agreement.
"COMMITMENT AMOUNT" means (a) relative to any Initial
Lender, the amount set forth opposite its name on the
signature pages hereto under the heading "COMMITMENT
AMOUNT" and (b) relative to any Assignee Lender, the amount
under the heading "COMMITMENT AMOUNT" assumed from the
Assignor Lender pursuant to the Lender Assignment Agreement
by which such Assignee Lender became a party to this
Agreement, in each case as such amount may be adjusted
pursuant to any Lender Assignment Agreement pursuant to
which such Assignor Lender or Assignee Lender, as the case
may be, is a party.
<PAGE> 16
"COMMITMENT TERMINATION DATE" means the earliest to occur
of the following:
(a) December 31, 1999;
(b) the occurrence of any Enforcement Event;
(c) the Borrowing Date on which the second (and final)
Loans shall have been made pursuant to SECTION 2.1; and
(d) the termination of the Commitments pursuant to SECTION
2.1(d).
"COMMITTED HEDGING AGREEMENTS" means all (a) Gold Loans and
(b) net forward sale, put/call options, spot deferred sale
or other similar arrangements providing for a binding
commitment to sell or deliver Gold entered into by the
Borrower pursuant to SECTION 8.2.7.
"COMPENSATION" means:
(a) all cash or other consideration received by MMS (net of
all reasonable out-of-pocket costs paid by MMS to
Persons not affiliated with any Obligor in obtaining
such cash or other consideration) in respect of the
partial or total nationalization, expropriation,
compulsory purchase, requisition or other taking
(whether for title or otherwise) of the Project or the
Project Assets, or any interest therein,
(b) any sum received by MMS in respect of the release,
inhibition, modification, suspension or extinguishment
of any rights, easements or covenants enjoyed by or
benefiting the Project or the Project Assets, or the
imposition of any restriction affecting the Project or
the Project Assets, or the grant of any easement or
rights over or affecting the Project or the Project
Assets or any part thereof, and
(c) any cash or other payment received by MMS in respect of
the refusal, revocation, suspension or modification of
any Approval required for the construction or operation
of the Project or the Project Assets,
other than any proceeds received in respect of any Project
Insurance.
<PAGE> 17
"COMPLIANCE CERTIFICATE" means a certificate (or such other
form as may be reasonably acceptable to the Administrative
Agreement) duly executed by an Authorized Representative of
the Borrower, substantially in the form of EXHIBIT E
hereto.
"COMPLIANCE DATE" means each June 30 and December 31 of
each calendar year.
"CONTINGENT LIABILITY" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct
or indirect agreement, contingent or otherwise, to provide
funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness, obligation or any other
liability of any other Person (other than by endorsements
of instruments in the course of collection), or guarantees
the payment of dividends or other distributions upon the
shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to
any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount,
if larger) of the debt, obligation or other liability
guaranteed thereby.
"CONTINUATION NOTICE" means a notice of continuation and
certificate duly executed by an Authorized Representative
of the Borrower, substantially in the form of EXHIBIT B
hereto.
"CONTRACTUAL OBLIGATION" means, relative to any Person, any
provision of any security issued by such Person or of any
Instrument or undertaking to which such Person is a party
or by which it or any of its property is bound.
"CONVERSION AMOUNT" means the Dollars subject of a Dollar
Loan or the Ounces subject of a Gold Loan to be converted
pursuant to the relevant Conversion Notice.
"CONVERSION DATE" means, in relation to any Loan, the date
for converting such Loan as specified by the Borrower in the
relevant Conversion Notice.
"CONVERSION NOTICE" means a notice of conversion and
certificate duly executed by an Authorized Representative of
the Borrower, substantially in the form of EXHIBIT C hereto.
<PAGE> 18
"CURRENT DOLLAR EQUIVALENT" means, at any date with respect
to any Gold Loan, the amount obtained by multiplying the
then Spot Gold Price by the number of Ounces subject of such
Gold Loan.
"CURRENT GOLD EQUIVALENT" means, at any date with respect
to any Dollar Loan, the amount obtained by dividing the
Principal Amount of such Dollar Loan by the then Spot Gold
Price.
"DEBT SERVICE COVER RATIO" means, at any Compliance Date,
the ratio of:
(a) Projected Available Cashflow for the Measurement Period
following such Compliance Date and for each subsequent
Measurement Period prior to (and including) the
Maturity Date, to
(b) Principal Amounts required to be paid with respect to
the Loans (together with principal amounts in a maximum
amount of U.S.$3,000,000 required to be paid with
respect to the Subordinated Loans) for each such
Measurement Period, together with all interest
projected to be paid with respect to the Loans (and
interest projected to be paid with respect to the
Subordinated Loans, on the Maturity Date under the
Subordinated Loan Agreement).
For the purposes of CLAUSE (b), Principal Amounts for Gold
Loans shall be valued using the relevant Original Dollar
Equivalent.
"DEFAULT" means any Event of Default or any condition or
event which, after notice, lapse of time, the making of any
required determination or any combination of the foregoing,
would constitute an Event of Default.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule
attached hereto as SCHEDULE I.
"DISCOUNT RATE" means, with respect to any Calculation Date,
the weighted average (by Principal Amount outstanding, with
all Gold Loans calculated at their Original Dollar
Equivalent) of:
(a) the sum (in respect of any Dollar Loan) of (i) the LIBO
Rate PLUS (ii) the Applicable Margin, and
<PAGE> 19
(b) the sum (in respect of any Gold Loan) of (i) the Gold
Rate PLUS (ii) the Applicable Margin,
in each case for an actual Interest Period of six months
commencing on such Calculation Date.
"DOLLAR" and the sign "U.S.$" mean lawful money of the
United States.
"DOLLAR LENDING OFFICE" means (a) with respect to each
Initial Lender, the office of such Initial Lender
designated as such below its signature hereto or such other
office of such Initial Lender as may be designated from
time to time by notice from such Initial Lender to the
Administrative Agent and the Borrower, (b) with respect to
each Assignee Lender, the office of such Assignee Lender
designated as such in the Lender Assignment Agreement
pursuant to which it became a Lender or as may be
designated from time to time by notice from such Assignee
Lender to the Administrative Agent and the Borrower and (c)
with respect to the Administrative Agent, the office of the
Administrative Agent designated as such from time to time
by notice to the Borrower and each Lender.
"DOLLAR LOAN" means, relative to each Lender, those of such
Lender's Loans which are from time to time denominated in
Dollars.
"EFFECTIVE DATE" is defined in SECTION 11.8.
"ENFORCEMENT EVENT" means either:
(a) an Insolvency Event; or
(b) the occurrence of any other Event of Default and the
acceleration of the Obligations pursuant to SECTION
9.3.
"ENVIRONMENTAL LAW" means, with respect to any Person, any
Applicable Law relating to or imposing liability or
standards of conduct concerning public health and safety
and the protection of the environment that is applicable to
such Person.
"EVENT OF DEFAULT" is defined in SECTION 9.1.
<PAGE> 20
"FACILITY" means the Loans and the financial accommodations
made to the Borrower in connection therewith.
"FINANCE PARTIES" means, collectively, the Lenders and the
Agents.
"FISCAL QUARTER" means any quarter of a Fiscal Year.
"FISCAL YEAR" means any period of twelve consecutive
calendar months ending on December 31.
"FORECAST PERIOD" means, with respect to any Calculation
Date, the period consisting of all Measurement Periods
following such Calculation Date to (and including) the
Maturity Date or, as the case may be, the Project End Date.
"FORWARD GOLD RATE" means, for any relevant period, the rate
PER ANNUM quoted in the London Interbank Forward Bullion
Market two Business Days prior to the commencement of such
period on the Reuters Screen GOFO Page.
"F.R.S. BOARD" means the Board of Governors of the Federal
Reserve System.
"GAAP" means, as the context may require, Canadian GAAP,
U.S. GAAP or Venezuelan GAAP.
"GOLD" means gold bullion measured in fine ounces troy
weight.
"GOLD LENDING OFFICE" means (a) with respect to each Initial
Lender, the office of such Initial Lender designated as such
below its signature hereto or such other office maintained
by or on behalf of such Initial Lender as may be designated
from time to time by notice from such Initial Lender to the
Administrative Agent and the Borrower, (b) with respect to
each Assignee Lender, the office of such Assignee Lender
designated as such, the lender Assignment Agreement pursuant
to which it became a lender or as may be designated from
time to time by notice from such Assignee Lender to the
Administrative Agent and the Borrower and (c) with respect
to the Administrative Agent, the office of the
Administrative Agent designated as such from time to time by
notice to the Borrower and each Lender.
<PAGE> 21
"GOLD LOAN" means, relative to each Lender, those of such
Lender's Loans which are from time to time denominated in
Gold.
"GOLD OBLIGATION" is defined in SECTION 5.11(a).
"GOLD RATE" means for any Interest Period in relation to a
Gold Loan, the rate of interest PER ANNUM equal to (i) the
LIBO Rate for such Interest Period MINUS (ii) the Forward
Gold Rate for such Interest Period.
"GOVERNMENTAL AGENCY" means any supranational, national,
federal, state, regional or local government or
governmental department or other entity charged with the
administration, interpretation or enforcement of any
Applicable Law.
"HAZARDOUS MATERIAL" means:
(a) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material, substance or waste within the
meaning of any Environmental Law; or
(b) any petroleum product.
"HECLA MINING" is defined in the FIRST RECITAL.
"HEDGING OBLIGATIONS" means, with respect to any Person,
all liabilities of such Person under commodity swap
agreements, interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all
other agreements, options or arrangements designed to
protect such Person against fluctuations in interest rates,
currency exchange rates or precious metals prices
(including any Metal Trading Agreements).
"IMPERMISSIBLE QUALIFICATION" means, relative to the
opinion or report of any independent certified public
accountant or any independent chartered accountant as to
any financial statement of any Obligor, any qualification
or exception to such opinion or report:
(a)which is of a "going concern" or similar nature;
<PAGE> 22
(b) which relates to any limited scope of examination of
matters relevant to such financial statement which has
resulted from any action of such Obligor the result of
which is, directly or indirectly, to prevent such
accountant from making such examination as such
accountant deems appropriate; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a
condition to its removal, would require an adjustment
to such item the effect of which would be to cause a
default of any of the obligations under SECTION 8.1.5.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or
metals (including Gold) and all obligations evidenced
by bonds, debentures, notes, or other similar
Instruments on which interest charges are customarily
paid;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or
not drawn, and banker's acceptances and similar
instruments, in each such case issued for the account
of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP,
recorded as Capitalized Lease Liabilities;
(d) net payment liabilities of such Person under all Hedging
Obligations;
(e) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the
deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased
by such Person (including indebtedness arising under
conditional sales or other title retention agreements),
whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
(f) all Contingent Liabilities of such Person in respect of
any of the foregoing items which are the obligations of
any other Person.
<PAGE> 23
"INDEMNIFIED LIABILITIES" is defined in SECTION 11.4.
"INDEMNIFIED PARTIES" is defined in SECTION 11.4.
"INDEPENDENT CONSULTANT" means Steffen, Roberston &
Kirsten, or such other independent mining consultant as is
retained for the purposes of the Facility by the
Administrative Agent. The Independent Consultant's duties
include assistance in the review of the Base Case and also
the preparation and delivery of operating technical and
production reports concerning the Project for each six
month period during the life of the Facility based on
reports delivered to the Administrative Agent pursuant to
SECTION 8.1.3 and, where relevant its on-site inspections
of the Project.
"INDEPENDENT CONSULTANT'S CERTIFICATE" means a certificate
duly executed by the Independent Consultant, substantially
in the form of EXHIBIT F-2 hereto.
"INITIAL LENDERS" is defined in the PREAMBLE.
"INSOLVENCY EVENT" means, with respect to any Obligor, the
occurrence of any Default described in SECTION 9.1.6.
"INSTRUMENT" means any contract, agreement, indenture,
mortgage, document or writing (whether by formal agreement,
letter or otherwise) under which any obligation is
evidenced, assumed, or undertaken, or any Lien (or right or
interest therein) is granted or perfected or purported to
be granted or perfected.
"INSURANCE CONSULTANT" is defined in SECTION 8.1.4.
"INSURANCE SUMMARY" is defined in SECTION 6.1.12(c).
"INTERCOMPANY SUBORDINATION AGREEMENT" means that certain
Intercompany Subordination Agreement, executed by the
Borrower, MMS, the Subordinated Creditors and the
Collateral Agent, substantially in the form of EXHIBIT M-1
hereto.
<PAGE> 24
"INTEREST PERIOD" means, relative to any Loan:
(a) initially, the period from the date such Loan was made
on the Borrowing Date to the day which numerically
corresponds to such date one, three or six months
thereafter (or such other date as agreed between all
the Lenders and the Borrower but, subject at all times
to the provisions of SECTION 5.1);
(b) thereafter, each period from the last day of the
immediately preceding Interest Period applicable to
such Loan to the day which numerically corresponds to
such date one, three or six months thereafter (or such
other date as agreed between all the Lenders and the
Borrower and, subject as provided in CLAUSE (a)) as the
Borrower may irrevocably select in the relevant
Continuation Notice or Conversion Notice delivered
pursuant to SECTION 2.2;
PROVIDED, HOWEVER, that:
(c) absent the timely selection of an Interest Period for a
then outstanding Loan, the Borrower shall be deemed to
have selected an Interest Period identical to that then
in effect with respect to such Loan;
(d) if such Interest Period for any Loan would otherwise
end on a day which is not a Business Day, such Interest
Period shall end on the next following Business Day,
unless, in the case of any Dollar Loans, such Business
Day occurs in the next following calendar month, in
which case such Interest Period shall end on the
immediately preceding Business Day;
(e) the Borrower shall not be permitted to select, and
there shall not be applicable, any Interest Period for
any Loan that would end later than the Maturity Date;
(f) at any one time, there shall only be permitted to be in
effect a maximum of eight Interest Periods with respect
to the Loans; and
(g) the Administrative Agent shall be able to select
Interest Periods satisfactory to it pursuant to the
terms and conditions of SECTION 3.2.2 or after any
Enforcement Event.
<PAGE> 25
"INVESTMENT" means, relative to any Person and without
duplication:
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary
course of business);
(b) any Contingent Liability entered into by such Person;
and
(c) any ownership or similar interest held by such Person in
any other Person.
The amount of any Investment shall be the original
principal or capital amount thereof less all returns of
principal or equity thereon (and without adjustment by
reason of the financial condition of such other Person) and
shall, if made by the transfer or exchange of property
other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value
of such property.
"LBMA" means The London Bullion Market Association.
"LENDER ASSIGNMENT AGREEMENT" means an Assignment
Agreement, duly executed by an Assignor Lender and an
Assignee Lender, substantially in the form of EXHIBIT D
hereto.
"LENDERS" means, collectively, the Initial Lenders and the
Assignee Lenders.
"LIBO RATE" means:-
(a) the rate (rounded upwards, if necessary, to the nearest
four decimal places) which is the offered rate at or
about 11.00 a.m. two Business Days prior to the
relevant Interest Period for Dollar deposits for a
period equal to the relevant Interest Period which
appears on the display designated as the British
Bankers' Association Interest Settlement Rate as quoted
on the Reuters' Screen page no. LIBOR = (or such other
page or service as may replace page no. LIBOR = of such
service (as the case may be) for the purpose of so
displaying the British Bankers' Association Interest
<PAGE> 26
Settlement Rate for London interbank offered rates and,
in the absence of any such replacement page or service,
such other page of such other service as the
Administrative Agent, the relevant Lenders and the
Borrower may agree), or
(b) if no relevant rate appears on Reuters' Screen page no.
LIBOR = or if such Reuters' Screen page is unavailable
at the relevant time the arithmetic mean (rounded
upwards, if necessary, to the nearest four decimal
places) of the respective rates, as supplied to the
Administrative Agent at its request, quoted by the
Reference Banks to prime banks in the London Interbank
Market at or about 11.00 a.m. two Business Days prior
to the relevant Interest Period in an amount comparable
to the amount of the relevant Loans and for a period
equal to the Interest Period for delivery on the first
day of that Interest Period.
"LIEN" means any security interest, mortgage, pledge,
hypothecation, assignment, encumbrance, lien (statutory or
otherwise), charge against or interest in property to
secure payment of a debt or performance of an obligation or
other priority or preferential arrangement of any kind or
nature whatsoever.
"LOAN" means any Lender's loans under this Agreement,
whether outstanding or to be made, and whether Dollar Loans
or Gold Loans.
"LOAN DOCUMENTS" means, collectively, this Agreement, the
Collateral Agreements, the Subordinated Loan Agreement, the
Account Agreement, the MMS Guaranty, the Intercompany
Subordination Agreement, each Metal Trading Agreement to
which any Lender is a party, and each other Instrument
executed by any Obligor or any Affiliate of any thereof
evidencing any obligation (monetary or otherwise) in
connection with and pursuant to this Agreement and the
transactions contemplated hereby and representing
obligations incurred to any of the Finance Parties.
"LOAN LIFE COVER RATIO" means, at any Calculation Date, the
ratio of:
(a) Aggregate Discounted Projected Cashflow for the
Forecast Period following such Calculation Date to (and
including) the Maturity Date, to
<PAGE> 27
(b) the Principal Outstandings (together with the
outstanding principal amount of the Subordinated Loans)
as at such Calculation Date.
For the purposes of CLAUSE (b), Principal Outstandings with
respect to Gold Loans shall be valued using their Original
Dollar Equivalent.
"LOCAL ACCOUNTS" is defined in SECTION 4.1(b).
"LONDON GOLD PRICE" means on any day the price per Ounce of
Gold as fixed by members of the LBMA during the afternoon
of such day (including an amount, if any, equal to the
premium and any other additional amounts that would be
payable in the London bullion market in connection with a
purchase of Gold). If the London Gold Price is not
available by reference to the price fixed as aforesaid,
then the London Gold Price shall be any of the following
alternatives, with each later mentioned alternative to be
used if the previous alternative is not available:
(a) if such day is a Business Day (as described in CLAUSE
(c) of the definition of such term), the price per
Ounce of Gold as fixed by members of the LBMA during
the morning of such day (including the premium and
additional amounts described above),
(b) if such day is a Business Day as aforesaid, the
publicly quoted price in Dollars per Ounce of Gold on
such other accessible international bullion market as
may be agreed between the Administrative Agent and the
Borrower, or
(c) if such day is not a Business Day as aforesaid, the
price per Ounce of Gold as fixed by members of the LBMA
during the afternoon of the previous Business Day.
"MATERIAL PROJECT DOCUMENTS" means the Union Contract, any
contract or agreement relating to the operation or
maintenance of the Project of the nature that a Materially
Adverse Effect would result if such contract or agreement
were not in effect or were terminated and not replaced
within a period of 30 days and includes those Instruments
designated as "MATERIAL PROJECT DOCUMENTS" from time to
time pursuant to SECTION 8.3.12(b).
<PAGE> 28
"MATERIALLY ADVERSE EFFECT" means an effect, resulting from
any occurrence of whatever nature (including any adverse
determination in any labor controversy, litigation,
arbitration or governmental investigation or proceeding),
which is materially adverse to:
(a) the ability of any Obligor to make any payment or
perform any other material obligation required under
any Operative Document to which it is a party; or
(b) the ability of MMS to operate and maintain the Project
substantially in accordance with this Agreement.
"MATURITY" means, relative to the Loans, any date on which
the Loans are stated to be due and payable, in whole or in
part, whether by required repayment, prepayment,
declaration or otherwise.
"MATURITY DATE" means June 30, 2004.
"MAXIMUM DOLLAR EQUIVALENT" means, with respect to any Gold
Loan, the amount in Dollars obtained by multiplying the
Original Dollar Equivalent of such Gold Loan (as originally
made or converted) by 1.5.
"MEASUREMENT PERIOD" means the period of six calendar
months commencing on each January 1 and July 1 of each
calendar year; PROVIDED, HOWEVER, for the computation of a
financial ratio where a Measurement Period (i) commences on
the initial Borrowing Date, "MEASUREMENT PERIOD" means the
period commencing on the occurrence (or scheduled
occurrence) of the initial Borrowing Date and ending on the
June 30 or December 31 next following or (ii) ends on the
Maturity Date or the Project End Date, "MEASUREMENT PERIOD"
means the period commencing on the relevant January 1 or
July 1 and ending on the scheduled occurrence of either the
Maturity Date or the Project End Date, as the case may be.
"METAL TRADING AGREEMENTS" means, collectively, (i) the
Committed Hedging Agreements and (ii) any other agreements
entered into by the Borrower relating to the sale or
purchase of Gold.
"MINING RIGHTS" means all interests in the surface of the
lands, the minerals in (or that may be extracted from) the
<PAGE> 29
lands, the royalty agreements, water rights, mining
concessions, fee interests, mineral leases, mining
licenses, profits-a-prendre, joint ventures and other
leases, rights-of-way, enurements, licenses and other
rights and interests in real property used by or necessary
to MMS to operate and maintain the Project.
"MMS" is defined in the PREAMBLE.
"MMS GUARANTY" means the Guaranty Agreement executed by MMS
and the Collateral Agent, substantially in the form of
EXHIBIT I hereto.
"MMS PLEDGE AGREEMENT" means the Pledge Agreement executed
by the Borrower, the Initial Lenders and the Collateral
Agent, substantially in the form of EXHIBIT K-2 hereto.
"MMS SHARES" means the 24,500 Class A Shares and the 25,500
Class B Shares, each in capital stock of MMS.
"MONARCH MEXICO" is defined in the SECOND RECITAL and
includes any successor by name change.
"MONARCH MEXICO SHARES" means the 8,464,676 shares of
capital stock of Monarch Mexico.
"MRIL " is defined in the PREAMBLE.
"MRIL SHARES" means the 7,500,000 shares of capital stock
of MRIL.
"MRL" is defined in the FIRST RECITAL.
"NATIONSBANK SUBORDINATION AGREEMENT" means that certain
Subordination Agreement, executed by Nationsbank, N.A., as
senior creditor, Standard Bank, as subordinated creditor
and Hecla Mining, substantially in the form of EXHIBIT M-2
hereto.
"NON-MATERIAL APPROVALS" is defined in SECTION 7.16(a)(ii).
"OBLIGATIONS" means all obligations of any relevant Obligor
with respect to the repayment or performance of all
obligations (monetary or otherwise) arising under or in
connection with the Facility.
<PAGE> 30
"OBLIGORS" means, collectively, the Borrower, MMS and Hecla
Mining.
"OECD" means the Organization for Economic Cooperation and
Development.
"OPERATING EXPENDITURES" means, for any applicable period,
all production, mining, crushing, leaching, metallurgical
processing, laboratory, utility, milling, power, transport,
refining and similar operating and administrative costs
during such period.
"OPERATIVE DOCUMENTS" means, collectively, the Loan
Documents and the Project Documents.
"ORGANIC DOCUMENT" means with respect to (a) the Borrower,
its memorandum of association and its by-laws, (b) MMS, its
by-laws (ESTATUTOS) and (c) any of the foregoing, all
shareholder agreements, voting trusts and similar
arrangements applicable to any of its authorized shares of
capital stock or other equity interests.
"ORIGINAL DOLLAR EQUIVALENT" means, with respect to any Gold
Loan, the amount obtained by multiplying the Original Gold
Price applicable to such Gold Loan by the number of Ounces
subject of such Gold Loan.
"ORIGINAL GOLD PRICE" means, with respect to any Gold
subject of a Gold Loan, the London Gold Price two Business
Days prior to the date such Gold Loan was made or converted
from a Dollar Loan into a Gold Loan.
"OUNCE" means a fine ounce troy weight of Gold in a form
readily tradeable with members of the LBMA from time to
time.
"PARTICIPANT" is defined in SECTION 11.11.2.
"PAYMENT DATE" means each June 30 and December 31,
commencing with June 30, 2000.
"PERCENTAGE" means, relative to any Lender and at any time,
the ratio (expressed as a percentage) of (i) the Principal
Amount of such Lender's Loans at such time to (ii) the
Principal Amount of all the Lenders' Loans at such time.
For the purposes of the foregoing sentence, all Gold Loans
shall be calculated at their Original Dollar Equivalent.
<PAGE> 31
"PERMITTED LIENS" means the Liens permitted pursuant to
SECTION 8.3.3.
"PERSON" means any natural person, corporation,
partnership, firm, association, trust, government,
governmental agency or any other entity, whether acting in
an individual, fiduciary or other capacity.
"PLEDGE AGREEMENTS" means, collectively, the Borrower Share
Charge and the MMS Pledge Agreement.
"PLEDGE WITHOUT CONVEYANCE" means the Pledge executed in
Spanish between MMS, the Initial Lenders and the Collateral
Agent over Project Output (including that being processed
by the Project), the English translation of which shall be
substantially in the form of EXHIBIT L-3 hereto.
"POLITICAL RISK INSURANCE" is defined in SECTION 6.1.12(f).
"PRINCIPAL AMOUNT" means:-
(a) with respect to any Gold Loan, the Current Dollar
Equivalent (or as the context may require Original
Dollar Equivalent) of such Gold Loan; and
(b) with respect to any Dollar Loan, the principal amount
thereof.
"PRINCIPAL OUTSTANDINGS" means at any time the Principal
Amount of all outstanding Loans at such time.
"PROCEEDS ACCOUNT" means the account maintained by the
Borrower with the Account Bank pursuant to SECTION 4.1(a).
"PROCESS AGENT" is defined in SECTION 11.13.
"PROJECT" is defined in the THIRD RECITAL.
"PROJECT ASSETS" means all properties, assets or other
rights, whether real or personal, tangible or intangible,
now owned or hereafter acquired by or for the benefit of
MMS, which are used or intended for use in or forming part
of the Project.
<PAGE> 32
"PROJECT DOCUMENTS" means, collectively and without
duplication (a) the Material Project Documents, (b) all
other Instruments referred to in ITEM 2 ("CURRENT/PENDING
PROJECT DOCUMENTS") of the Disclosure Schedule and (c) all
other Instruments designated as "PROJECT DOCUMENTS" from
time to time pursuant to SECTION 8.3.12.
"PROJECT END DATE" means December 31, 2006.
"PROJECT INSURANCE" means any policy of insurance held in
connection with the Project pursuant to SECTION 8.2.5.
"PROJECT LIFE COVER RATIO" means, at any Calculation Date,
the ratio of:
(a) Aggregate Discounted Projected Cashflow for the
Forecast Period following such Calculation Date to (and
including) the Project End Date, to
(b) the Principal Outstandings (together with the
outstanding principal amount of the Subordinated Loans)
as at such Calculation Date.
For the purposes of CLAUSE (b), Principal Outstandings with
respect to Gold Loans shall be valued using their Original
Dollar Equivalent.
"PROJECT OUTPUT" means all products from the Project
including ore, dore and Gold.
"PROJECT PARTY" means (i) any Obligor and (ii) any
contractor, operator or processor involved in the
technical, physical and operational aspects of the
operation and maintenance of the Project.
"PROJECTED AVAILABLE CASHFLOW" means, for any Measurement
Period, the amount reached by computing:
(a) the actual revenues (expressed in Dollars and
calculated by reference to Ounces of Gold) projected to
be realized by MMS in respect of the Project during
such period, MINUS;
(b) all Operating Expenditures projected to be paid by MMS
in respect of the Project during such period, MINUS;
<PAGE> 33
(c) all Taxes projected to be paid by MMS in respect of the
Project during such period, MINUS;
(d) all royalty and similar fees projected to be paid by
MMS in respect of the Project during such period,
MINUS;
(e) all direct corporate costs as identified in the Base
Case, MINUS;
(f) all Capital Expenditures projected to be paid by MMS in
respect of the Project during such period, PLUS;
(g) working capital recovery as identified in the Base
Case.
For the purposes of ITEM (a) above, as at any relevant
Compliance Date:
(i) any Ounces subject of Committed Hedging Agreements
(other than Gold Loans) then in effect shall be valued
using the actual delivery price specified in such
Committed Hedging Agreements;
(ii)any Ounces subject of Gold Loans due to be repaid
within the relevant Measurement Period shall be valued
at their Original Dollar Equivalent; and
(iii) any other Ounces then projected to be produced
shall be valued using the lower of (i) the average Spot
Gold Price (for a period of three months) ending on
(and including) the relevant Compliance Date and
(ii) the Spot Gold Price as at the relevant Compliance
Date.
"PURCHASE PRICE" is defined in the Acquisition Agreement.
"REAL PROPERTY MORTGAGE" means the Mortgage executed in
Spanish between MMS, the Initial Lenders and the Collateral
Agent over certain real property assets and interests in
and relating to the Project (including certain real
property assets and interests owned or to be acquired by
MMS), the English translations of which shall be
substantially in the form of EXHIBIT L-4 hereto.
"REFERENCE BANKS" means Citibank N.A., The Chase Manhattan
Bank and Deutsche Bank AG acting through their principal
offices in London, or such other banks and financial
institutions which the Borrower and the Administrative
Agent may agree.
<PAGE> 34
"REFINING/TRANSPORTATION AGREEMENT" means the contract
providing for the refining of Project Output and its
shipment (as permitted by Applicable Law) to refiners
outside of Venezuela to be on terms and conditions, and to
be in effect with a counterparty, reasonably satisfactory
to the Administrative Agent.
"REGULATORY CHANGE" means the occurrence after the
Effective Date of any change in or
abrogation of, or introduction, adoption, effectiveness,
interpretation, reinterpretation or phase-in of any:
(a) statute, law, rule, or regulation applicable to any
Finance Party, or
(b) guideline, interpretation, directive, consent decree,
administrative order, request or determination (whether
or not having the force of law but, if not having the
force of law, such guideline, etc. being of the type
with which such Finance Party would comply in the
ordinary course of business) applicable to such Finance
Party of any court, central bank or governmental or
regulatory authority charged with the interpretation or
administration of any statute, law, rule or regulation
referred to in CLAUSE (a) or of any fiscal, monetary,
or other authority having jurisdiction over such
Finance Party.
"REQUIRED COLLECTED LENDERS" means, at any time, Collected
Lenders having, in the aggregate, a percentage of more than
sixty-six and two thirds (662/3%), computed by reference to
the ratio of: (a) the sum of (i) the Principal Amount of
such Collected Lenders' Loans at such time PLUS (ii) the
principal amount of such Collected Lenders' Subordinated
Loans at such time to (b) the sum of (i) the Principal
Amount of all the Collected Lenders' Loans at such time
PLUS (ii) the principal amount of all the Collected
Lenders' Subordinated Loans at such time. For the purposes
of this definition, all Gold Loans shall be calculated at
their Original Dollar Equivalent.
"REQUIRED LENDERS" means, at any time, Lenders having, in
the aggregate, a Percentage of more than sixty-six and two-
thirds (662/3%).
"REQUIREMENT OF LAW" means, as to any Person, its Organic
Documents and any Applicable Law or Contractual Obligation
binding on or applying to such Person.
<PAGE> 35
"RESERVE DEBT COVER RATIO" means, at any date, the ratio
of:
(a) Reserves as at such date, to
(b) the Principal Outstandings together with the
outstanding principal amount of the Subordinated Loans,
as at such date.
For the purposes of items (a) and (b) above,
(i) any Ounces the subject of Committed Hedging
Agreements (other than Gold Loans) in effect at any
relevant time of measurement shall be valued using the
actual delivery price specified in such Committed Hedging
Agreement;
(ii) any Ounces the subject of Gold Loans due to be repaid
at any relevant time of measurement shall be valued at
their Original Dollar Equivalent; and
(iii)any other Ounces projected to be produced at any
relevant time of measurement shall be valued using the
lower of (i) the average Spot Gold Price (for a period of
three months) ending on such date and (ii) the Spot Gold
Price as at such date.
"RESERVE TAIL COVER RATIO" means, at any date, the ratio
of:-
(a) Reserves as at such date, to
(b) Reserves as at the Effective Date.
"RESERVES" means those ounces of gold underlying the
Project which, in accordance with guidelines promulgated by
the U.S. Securities and Exchange Commission, could be
economically and legally extracted or produced at any
relevant time of determination, or, without duplication,
which are presented in the Base Case as mineable gold ore.
"RESTATED CREDIT AGREEMENT" means the Restated Credit
Agreement, dated May 7, 1999, between Hecla Mining,
Nationsbank, N.A. as Agent and the lenders party thereto.
<PAGE> 36
"SECURITY AGREEMENT (U.S. ASSETS)" means that certain
Security Agreement executed by the Borrower and the
Collateral Agent, substantially in the form of EXHIBIT J-2
attached hereto.
"SECURITY AGREEMENTS" means, collectively, the Venezuelan
Security Documents, the Canadian Security Agreement, and
the Security Agreement (U.S. Assets).
"SPOT GOLD PRICE" means, at any date, the London Gold Price
in effect two Business Days prior to such date.
"STANDARD BANK" is defined in the PREAMBLE.
"SUBORDINATED CREDITORS" means, collectively, in their
capacities as lenders under any Instrument evidencing
Approved Subordinated Indebtedness, Hecla Mining and its
Affiliates.
"SUBORDINATED LENDERS" means Standard Bank and the other
banks from time to time party to the Subordinated Loan
Agreement.
"SUBORDINATED LOAN AGREEMENT" means that certain Loan
Agreement executed or to be executed by Hecla Mining, as
borrower, the Subordinated Lenders, Standard Bank as
Administrative Agent and Standard Bank as Collateral Agent,
substantially in the form of EXHIBIT G hereto.
"SUBORDINATED LOANS" means the loans outstanding under the
Subordinated Loan Agreement.
"TAX CREDIT" is defined in SECTION 5.7(b).
"TAX PAYMENT" is defined in SECTION 5.7(b).
"TAXES" means any present or future income, franchise,
excise, stamp or other taxes, fees, duties, withholdings or
other charges of any nature imposed by any taxing authority
of any jurisdiction.
"TYPE" means, as the context may require, Gold Loans or
Dollar Loans.
"UNION CONTRACT" means the contract between MMS and the
Union of Workers from the Gold, Diamonds, Bauxite,
Dolomite, Kaolin, etc. mines of Bolivar State, dated
November 5, 1998.
<PAGE> 37
"U.S. GAAP" is defined in SECTION 1.3.
"VENDOR" is defined in the FIRST RECITAL.
"VENEZUELAN GAAP" is defined in SECTION 1.3.
"VENEZUELAN SECURITY DOCUMENTS" means the Real Property
Mortgage, the Chattel Mortgage, the Pledge Without
Conveyance, any Assignment of Contract Rights and all other
documents expressed to be governed by the laws of Venezuela
creating, evidencing or granting or the subject of security
for the obligations of any Obligor under the Loan
Documents.
1.2 USE OF DEFINED TERMS
Unless otherwise defined or the context otherwise requires,
terms for which meanings are provided in this Agreement
shall have such meanings when used in this Agreement and
each other Loan Document and each notice and other
communication delivered from time to time in connection
therewith.
1.3 ACCOUNTING AND FINANCIAL DETERMINATIONS
Unless otherwise specified, all accounting terms used
herein or in any other Loan Document shall be interpreted,
all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements
required to be delivered hereunder or thereunder shall be
prepared in accordance with, generally accepted accounting
principles in the U.S. ("U.S. GAAP"). Notwithstanding the
foregoing, the parties hereto recognize that the financial
statements of MMS referred to in SECTION 7.5 were prepared
in accordance with generally accepted accounting principles
in Venezuela ("VENEZUELAN GAAP"), and all accounting terms,
determinations and computations relating to MMS at any time
prior to the Effective Date shall be interpreted in
accordance therewith.
1.4 CHANGE IN ACCOUNTING PRINCIPLES
If, after the Effective Date, there shall (without
prejudice to SECTION 8.3.1) be any change to either the
Borrower's or MMS' Fiscal Year, or in the application of
the accounting principles used in the preparation of the
<PAGE> 38
financial statements of Hecla Mining for the Fiscal Year
ending December 31, 1998 (as delivered pursuant to the
Subordinated Loan Agreement) as a result of the
promulgation of rules, regulations, pronouncements or
opinions by agencies having jurisdiction over financial
reporting and accounting standards which changes result in
a change in the method of calculation of, or have an
adverse impact on, financial covenants, standards, or terms
applicable to either the Borrower or MMS found in this
Agreement or any other Loan Document, such Obligor and the
Administrative Agent agree promptly to enter into
negotiations in order to amend such financial covenants,
standards or terms so as to reflect equitably such changes
with the desired result that the evaluations of such
Obligor's financial condition shall be the same after such
changes as if such changes had not been made; PROVIDED,
HOWEVER, that until the Required Lenders have given their
consent (such consent not to be unreasonably withheld,
conditioned or delayed) to the Administrative Agent to such
amendments, each such Obligor's financial condition shall
continue to be evaluated on the same principles as those
used in the preparation of Hecla Mining's financial
statements for the Fiscal Year ending December 31, 1998 as
described above.
1.5 PROJECT DETERMINATIONS, ETC
Subject to SECTION 8.1.7, all determinations and
calculations relating to the Project (including, to the
extent involving projections, the determination or
calculation, as the case may be, of Aggregate Discounted
Projected Cashflow, Debt Service Cover Ratio, Loan Life
Cover Ratio, Project Life Cover Ratio, Projected Available
Cashflow, Reserve Debt Cover Ratio and/or Reserve Tail
Cover Ratio) shall be made in accordance with the Base
Case.
1.6 GENERAL PROVISIONS AS TO CERTIFICATES AND OPINIONS, ETC.
Whenever the delivery of a certificate is a condition
precedent to the taking of any action by either Agent or
any Lender hereunder, the truth and accuracy of the facts
and the diligent and good faith determination of the
opinions stated in such certificate shall in each case be
conditions precedent to the right of any Obligor to have
such action taken, and any certificate executed by such
Obligor shall be deemed to represent and warrant that the
facts stated in such certificate are true and accurate as
of the date stated.
<PAGE> 39
1.7 INTERPRETATION
Unless a clear contrary intention appears, this Agreement
and each other Loan Document shall be construed and
interpreted in accordance with the provisions set forth
below:
(a) the singular number includes the plural number and vice
versa;
(b) reference to any Person includes such Person's successors,
executors, administrators, substitutes and assigns but, if
applicable, only if such successors, executors, administrators,
substitutes and assigns are permitted by this Agreement or such
other Loan Document, and reference to a Person in a particular
capacity excludes such Person in any other capacity or
individually;
(c) reference to any gender includes any other gender;
(d) reference to any agreement, document or Instrument means
such agreement, document or Instrument as amended, supplemented,
novated, refinanced, replaced, waived, restated or modified, and
in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof;
(e) reference to any promissory note includes any promissory
note which is an extension or renewal thereof or a substitute or
replacement therefor;
(f) reference to any Applicable Law means such Applicable Law
as amended, modified, codified or re-enacted, in whole or in
part, and in effect from time to time, including rules and
regulations promulgated thereunder;
(g) "HEREUNDER", "HEREOF", "HERETO", "HEREIN" and words of
similar import shall be deemed references to this Agreement or
such other Loan Document, as the case may be, as a whole and not
to any particular Article, Section, clause or other provision
hereof or thereof;
(h) any reference to any particular Article, Section or clause
shall be to such Article, Section or clause of this Agreement or
such other Loan Document;
(i) "INCLUDING" means including without limiting the generality
of any description preceding such term;
<PAGE> 40
(j) relative to the determination of any period of time, "FROM"
means "FROM (AND INCLUDING)" and "TO" means "TO (BUT EXCLUDING)";
(k) any reference to a time of day is a reference to London
time;
(l) reference to a "COMPANY" or "CORPORATION" shall be
construed as a reference to the analogous form of business entity
used in any relevant jurisdiction;
(m) when an expression is defined, another part of speech or
grammatical form of that expression has a corresponding meaning;
and
(n) any reference to the "knowledge" of an Obligor or its
Authorized Representative with respect to a certain matter means
either such Person's actual knowledge with respect to such matter
or that of which a Person, in the position of such Obligor or
Authorized Representative and acting reasonably, would be
expected to have knowledge.
2. COMMITMENTS AND PROCEDURES FOR MAKING LOANS; CONTINUATION
PROCEDURES
2.1 COMMITMENTS; MAKING LOANS
(a) Subject to the terms and on the conditions of this
Agreement, the Lenders agree that their Commitments
consist of obligations to make, maintain, continue
and/or convert Loans, in an amount not to exceed the
Aggregate Commitment Amount (for all the Lenders) or
each Lender's Commitment Amount. In no event may Loans
made by all Lenders on either Borrowing Date exceed the
Available Commitment Amount as in effect as at such
Borrowing Date. The Loans may be made on two Borrowing
Dates during the period from the Effective Date to the
Commitment Termination Date, as Dollar Loans or Gold
Loans (but not both).
(b) By delivering a Borrowing Notice to the Administrative
Agent on or before 10:00 a.m., the Borrower may request
on any Business Day during the period described in
CLAUSE (a), on not less than three nor more than five
Business Days' notice (counting the date on which such
notice is given), that Loans be made by all Lenders on
<PAGE> 41
the Borrowing Date set forth in such Borrowing Notice
in a principal amount equal to the then Available
Commitment Amount (or the Current Gold Equivalent
thereof). Upon receipt of a Borrowing Notice
requesting Loans to be made, the Administrative Agent
shall promptly notify each Lender of the contents
thereof, and such Borrowing Notice shall not thereafter
be revocable by the Borrower. The Loans made on the
initial Borrowing Date shall be made solely for use of
the purposes described in the fifth recital. The Loans
made on the second (and final) Borrowing Date shall be
made solely to pay accrued interest on the Loans made
on the initial Borrowing Date and payable on December
31, 1999.
(c) Subject to the terms and conditions of this Agreement,
the Loans requested to be made in the relevant
Borrowing Notice shall be made on the specified
Borrowing Date. The Loans made on the initial
Borrowing Date must be in a Principal Amount of
U.S.$10,500,000. The Loans made on the last Borrowing
Date must be in a Principal Amount of U.S.$500,000. On
such Borrowing Date and subject to such terms and
conditions, each Lender shall, (i) in the case of
Dollar Loans on or before 10:00 a.m., credit a
specifically designated account of the Administrative
Agent at its Dollar Lending Office, with an amount of
Dollars equal to such Lender's Percentage of the
aggregate Principal Amount of the Dollar Loans
requested to be made or (ii) in the case of Gold Loans
on or before 11:00 a.m., credit a specifically
designated account of the Administrative Agent at its
Gold Lending Office with such amounts equal to such
Lender's Percentage of the aggregate Principal Amount
of the Gold Loans requested to be made. To the extent
funds are received by the Administrative Agent from the
Lenders in respect of the Loans as requested pursuant
to the relevant Borrowing Notice, the Administrative
Agent shall make such funds available to the Borrower
by crediting the Principal Amount of such Loans to the
Proceeds Account or such other account as the Borrower
may direct (solely in the case of the initial Loans);
PROVIDED, HOWEVER, that in the case of the second (and
final) Loans advanced hereunder, the Borrower and the
Lenders may offset the Principal Amount of the Loans
made on the Borrowing Date relating thereto against the
payment of interest to be made on December 31, 1999.
<PAGE> 42
(d) The Borrower may, from time to time on any Business Day
prior to the Commitment Termination Date upon which
there then remains any portion of the Available
Commitment Amount, voluntarily reduce the Available
Commitment Amount, as then in effect, in whole or, if
in part, in multiples of U.S.$1,000,000; PROVIDED,
HOWEVER, that the Borrower shall give the
Administrative Agent not less than three nor more than
five Business Days prior written notice (counting the
date on which such notice is given) of any such
reduction which notice shall be irrevocable once given.
On the Commitment Termination Date, the Available
Commitment Amount (if still remaining) shall,
automatically, and without any action by any Person be
reduced to zero.
2.2 CONTINUATION AND CONVERSION ELECTIONS
(a) To convert all or part of a Dollar Loan into a Gold Loan
(or VICE VERSA), the Borrower must deliver a Conversion Notice to
the Administrative Agent no later than 10.00 a.m. five Business
Days prior to the expiration of the relevant Interest Period then
in effect. Conversions of Loans (whether in whole or in part)
shall be permitted only if, after giving effect to such
Conversion Notice: (i) no more than eight Interest Periods with
respect to all the Loans would be outstanding from all Lenders at
such time and (ii) the aggregate Principal Amounts of all Gold
Loans and/or Dollar Loans would be in a multiple of 2,000 Ounces
and/or U.S.$500,000, as the case may be.
(b) The obligations of the Lenders to give effect to any
Conversion Notice are subject to the conditions precedent that on
both the day of delivery of the Conversion Notice and the
proposed Conversion Date:
(i) no Default shall have occurred and be continuing or would
result from such conversion;
(ii) the representations and warranties set forth in ARTICLE 7
and in any other Loan Document shall be true and correct with the
same effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and warranties
shall be true as of such earlier date); and
<PAGE> 43
(iii)none of the circumstances specified in SECTION 5.1 has
occurred and is continuing.
(c) The Borrower may request a maximum of two conversions of
Loans in any calendar year.
(d) (i)If pursuant to any Conversion Notice, the
Borrower seeks to convert all or part of a Dollar
Loan into a Gold Loan, the Borrower shall repay
the Conversion Amount on the Conversion Date
designated in such Conversion Notice and the
Lenders shall make a Gold Loan to the Borrower in
the number of Ounces equal to the Current Gold
Equivalent of the Conversion Amount.
(ii) If pursuant to any Conversion Notice, the Borrower seeks to
convert all or part of a Gold Loan into a Dollar Loan and the
Spot Gold Price exceeds the Original Gold Price with respect to
such Gold Loan, then the Borrower shall repay the Conversion
Amount on the Conversion Date designated in such Conversion
Notice and the Lenders shall make a Dollar Loan to the Borrower
in the number of Dollars equal to the Original Dollar Equivalent
of the Conversion Amount.
(iii)If pursuant to any Conversion Notice, the Borrower seeks to
convert all or part of a Gold Loan into a Dollar Loan and the
Spot Gold Price is less than (or is equal to) the Original Gold
Price with respect to such Gold Loan, then the Borrower shall
repay the Conversion Amount on the Conversion Date designated in
such Conversion Notice and the Lenders shall make a Dollar Loan
to the Borrower in the number of Dollars equal to the then
Current Dollar Equivalent of the Conversion Amount.
(iv) (X) provisions of this Agreement relating to
the making and repayment of Loans shall apply
to the mechanics for converting Loans set
forth in this Section. Solely for the purpose
of this Section, subject to the terms and of
the conditions of this Agreement, the Loans
requested in each relevant Conversion Notice
shall be made on the Conversion Date specified
therein.
<PAGE> 44
(Y) On the Conversion Date specified in each
relevant Conversion Notice (no later than
10.00 a.m.) and subject to the terms and
conditions specified in each relevant
Conversion Notice, each Lender will make
available to the Administrative Agent its
participation (which shall be equal to its
Percentage) in the requested Loans to be made
pursuant to such Conversion Notice. In the
case of Dollar Loans, the Dollars required for
each Lender to participate therein shall be
remitted to a specified account in London of
the Administrative Agent's Dollar Lending
Office. In the case of Gold Loans, the Gold
required for each Lender to participate
therein shall be credited to a specified
account at the Administrative Agent's Gold
Lending Office. To the extent funds are
received by the Administrative Agent from the
Lenders in respect of the Loans to be
converted as a result of any Conversion
Notice, such funds shall be made available to
the Borrower by crediting the Principal Amount
of the Conversion Amount to the Proceeds
Account.
(e) To continue all or part of either a Gold Loan or a Dollar
Loan for the same (or for a different) Interest Period, the
Borrower must deliver a Continuation Notice to the Administrative
Agent no later than 10.00 a.m. five Business Days prior to the
expiration of the relevant Interest Period then in effect. To
the extent the Borrower wishes to issue a Continuation Notice
with respect to part (but not all) of the Loans, such
Continuation Notice must relate to Loans in an aggregate
Principal Amount of multiples of 2,000 Ounces and/or
U.S.$500,000, as the case may be, and a maximum of four Interest
Periods with respect to the Loans may be outstanding at any one
time after giving effect thereto.
(f) (i)Each new Interest Period will commence on the
expiration of the preceding Interest Period
relating to all or that portion of those Loans
made pursuant to a Borrowing Notice continued
pursuant to a Continuation Notice or converted
pursuant to a Conversion Notice.
<PAGE> 45
(ii) The Borrower will select the duration of Interest Periods
such that each Payment Date will fall on the last day of an
Interest Period.
(iii)If the Borrower fails to deliver a Continuation Notice or a
Conversion Notice as and when required, it, subject as provided
in CLAUSES (d) and (e) of the definition of "INTEREST PERIOD",
will be deemed to have requested that any then current Loan be
continued as a loan of that type for an Interest Period that is
the same as the duration of the Interest Period then currently in
effect with respect to that Loan.
(iv) If all or part of any Loan is required to be repaid on a
Payment Date to ensure that the Borrower complies with its
obligations under SECTION 3.1.1 and if an Interest Period
relative to such Loan would, but for the operation of this sub-
clause, extend beyond such Payment Date, then such Interest
Period shall commence upon the expiry of the immediately
preceding Interest Period and expire on the relevant Payment
Date.
(g) A Continuation Notice or a Conversion Notice once given
shall be irrevocable.
2.3 RECORDS
Each Lender's Loans shall be evidenced by loan accounts
maintained by such Lender. The Borrower hereby irrevocably
authorizes each Lender to make (or cause to be made)
appropriate account entries, which account entries, if
made, shall evidence INTER ALIA the date of, the type of,
the principal amount of, any repayments of, the interest
rate on, and the Interest Period applicable to, the Loans
then outstanding to such Lender. Any such account entries
indicating the outstanding Principal Amount of Loans
outstanding to such Lender shall be PRIMA FACIE evidence of
the Principal Amount thereof owing and unpaid, but the
failure to make any such entry shall not limit or otherwise
affect the obligations of the Borrower hereunder to make
payments of the amount of, or interest on, such Loans when
due. The Administrative Agent shall also maintain records
with respect to each of the matters set forth in the first
sentence of this Section and each other party hereto agrees
<PAGE> 46
to deliver such information to the Administrative Agent as
it may reasonably request for the purpose of maintaining
such records. In case of any discrepancy between the
records of the Administrative Agent and the records of any
Lender with respect to any matter referred to in this
Section, the records of such Lender shall be deemed to
control.
2.4 FUNDING
Each Lender may, if it so elects, but subject to Applicable
Law, fulfil its obligation to make, maintain, continue or
convert any portion of its Loans by causing an offshore
branch, Affiliate or banking facility of such Lender to
make, maintain, continue or convert such Loans; PROVIDED,
HOWEVER, that in such event any Loans shall be deemed to
have been made by such Lender, and the obligation of the
Borrower to repay such Loan, and pay interest thereon,
shall nevertheless be to such Lender and shall be deemed to
be held by it, to the extent of such Loan, for the account
of such foreign branch, Affiliate or international banking
facility; and PROVIDED, FURTHER, HOWEVER, that the Borrower
shall be under no obligation to pay any amount to such
Lender pursuant to SECTION 5.1, 5.2, 5.3, 5.4, 5.5 or 5.6
which arises solely as a consequence of an election made by
such Lender pursuant to this Section.
2.5 OBLIGATIONS SEVERAL
The obligations of the Lenders to make, maintain, continue
and convert Loans under this Article are several. No
Lender's obligation under this Article shall be affected by
any other Lender' s failure to meet its obligations
hereunder.
3. PRINCIPAL PAYMENTS; INTEREST; COMMISSIONS
3.1 PRINCIPAL PAYMENTS
3.1.1 SCHEDULED REPAYMENTS
The Borrower shall, on each Payment Date set forth below,
make a mandatory repayment of the Loans in the Principal
Amount such that, after giving effect to such repayment, the
Principal Amount of Loans remaining outstanding would not be
in excess of the figure set below opposite such Payment
Date:
<PAGE> 47
PAYMENT DATE PRINCIPAL AMOUNT REMAINING OUTSTANDING
June 30, 2000 U.S.$ 10,625,000
December 31, 2000 U.S.$ 10,250,000
June 30, 2001 U.S.$ 8,625,000
December 31, 2001 U.S.$ 7,000,000
June 30, 2002 U.S.$ 5,500,000
December 31, 2002 U.S.$ 4,000,000
June 30, 2003 U.S.$ 2,500,000
December 31, 2003 U.S.$ 1,000,000
June 30, 2004 U.S.$ 0
3.1.2 PREPAYMENTS - VOLUNTARY AND MANDATORY
In addition to its obligations under SECTION 3.1.1, the
Borrower:
(a) may, from time to time on any Business Day which is the
last day of any Interest Period or (subject to SECTION
5.3) on any other Business Day, make a voluntary
prepayment, in whole or in part, of the then
outstanding principal amount of all Loans; PROVIDED,
HOWEVER, that:
(i) the Borrower shall give the Administrative Agent not
less than five Business Days' prior written notice
(counting the date on which such notice is given) of
any such voluntary prepayment, which notice, once
given, shall be irrevocable; and
(ii) all such partial voluntary prepayments shall (x) in
the case of Dollar Loans, be in an aggregate Principal
Amount of multiples of U.S.$500,000 and (y) in the
case of Gold Loans, be in an aggregate Principal Amount
of multiples of 2,000 Ounces.
(b) shall, within five Business Days after:
(i) any Business Day on which Gold Loans are
outstanding and on which the Current Dollar
Equivalent of the Principal Amount of all such
Gold Loans outstanding on such Business Day
exceeds the Maximum Dollar Equivalent of the
aggregate Principal Amount of such outstanding
Gold Loans,
or
<PAGE> 48
(ii) any period of 20 consecutive days during which
Gold Loans are outstanding and on each day of
which the Current Dollar Equivalent of the
Principal Amount of all such Gold Loans
outstanding on each such day exceeds one hundred
thirty-three and one-third percent (133 1/3%) of
the Original Dollar Equivalent of the aggregate
Principal Amount of such outstanding Gold Loans on
each such day,
at the Borrower's discretion do any of the following: (x)
make a mandatory prepayment of Gold Loans then outstanding
in an aggregate Principal Amount for all such Gold Loans
having a Dollar equivalent at least equal to the Dollar
equivalent of the excess described in CLAUSE (b)(i) or
(ii), as the case may be (in the case of CLAUSE (b)(ii),
calculated as of the last day of the relevant 20 day
period); (y) arrange for the provision to the
Administrative Agent of collateral (other than collateral
already subject to (or required to be subject to) any
Collateral Agreement) in a form and on terms acceptable to
the Administrative Agent with a value at least equal to the
Dollar equivalent of such excess; or (z) convert, subject
to SECTIONS 2.2 and 5.3, all Gold Loans into Dollar Loans
with an initial Interest Period of three months, or such
other Interest Period as may be requested by the Borrower.
In the absence of any election by the Borrower as aforesaid
the Borrower shall be deemed to have elected to make the
mandatory prepayment referred to in CLAUSE (b)(x) on the
fifth Business Day after the occurrence of the event
described in CLAUSE (b)(i) or (b)(ii), as the case may be.
(c) shall, upon deposit of Compensation or Project
Insurance proceeds which the Collateral Agent requires
to be applied against the Loans pursuant to SECTION
4.3(c)(ii), make a mandatory prepayment of the Loans
outstanding in an amount equal to any such proceeds.
(d) in the event that any Compliance Certificate or the
Base Case as revised by the agreement (or deemed
agreement) of all relevant parties pursuant to SECTION
8.1.6 demonstrates that, as at the current Calculation
Date or any other date described in any of the
foregoing ratios where compliance is required pursuant
to SECTION 8.1.5, the Loan Life Cover Ratio is or would
be lower than 1.5:1.0, the Project Life Cover Ratio is
or would be lower than 2.0:1.0 or the Debt Service
Cover Ratio is or would be lower than 1.25:1.0, the
<PAGE> 49
Borrower shall make a mandatory prepayment of the Loans
outstanding in an amount up to Available Free Cashflow
as at such Calculation Date or at the date of the
revision of the Base Case (or as at a date as close as
practicable thereto) until such time as the ratios
described above would be in compliance with the levels
set forth in SECTION 8.1.5.
3.1.3 PRINCIPAL PAYMENTS GENERALLY
(a) Each repayment or prepayment of any Loans made pursuant
to this Section shall be without premium or payment of
any other additional amount, except as may be required
pursuant to SECTION 5.3. Amounts repaid or prepaid may
not be re-borrowed. Any repayment or prepayment of the
Principal Amount of any Loans shall include accrued
interest on the date of repayment or prepayment on the
principal amount being repaid or prepaid.
(b) Unless any of the clauses of SECTION 3.1.1 or SECTION
3.1.2 requires otherwise, Gold Loans and Dollar Loans
required to be repaid or prepaid pursuant to this
Section shall be paid in Gold and Dollars,
respectively. All such repayments and prepayments
(except for the prepayments described in SECTION
3.1.2(b)) shall be applied PRO RATA against the
Principal Outstandings of Loans according to the Ounces
and Dollars then outstanding. Any amount paid pursuant
to SECTION 3.1.2(a), (c) or (d) shall be applied in
reducing the repayment installments under SECTION 3.1.1
in the inverse order of their maturities.
3.2 INTEREST PAYMENTS
The Borrower shall make payments of interest in accordance
with this Section.
3.2.1 RATE
The Borrower shall pay interest on the Principal Amount of
the Loans outstanding from time to time prior to and at
Maturity at a rate PER ANNUM equal to (a) in the case of
each Gold Loan, the sum of (i) the Gold Rate as in effect
from time to time, (ii) the Applicable Margin plus (iii) the
Additional Costs Rate, if relevant, and (b) in the case of
each Dollar Loan, the sum of (i) the LIBO Rate as in effect
from time to time, (ii) the Applicable Margin plus (iii) the
<PAGE> 50
Additional Costs Rate, if relevant. The Administrative
Agent shall, promptly after the first day of each Interest
Period, notify each Lender of the interest rate applicable
to such Loan during such Interest Period.
3.2.2 POST-MATURITY RATE
After the Maturity of all or any portion of the Principal
Amount of the Loans or after any other Obligations shall
have become due and not been paid, the Borrower shall pay
interest (after as well as before judgment) on:
(a) the Principal Amount of each Gold Loan so matured or on
any such other Obligations due and payable in Gold, at
a rate PER ANNUM equal to the sum of (i) the Gold Rate
for such Interest Periods (of a minimum of three
months) as the Administrative Agent may from time to
time select, (ii) the Applicable Margin, (iii) the
Additional Costs Rate (if relevant) PLUS (iv) two
percent (2%); and
(b) the Principal Amount of each Dollar Loan so matured or
on any such other Obligations due and payable in
Dollars, at a rate PER ANNUM equal to the sum of (i)
the LIBO Rate for such Interest Periods (of a minimum
of three months) as the Administrative Agent may from
time to time select, (ii) the Applicable Margin,
(iii) the Additional Costs Rate (if relevant) PLUS (iv)
two percent (2%).
3.2.3 PAYMENT DATES; CALCULATION OF INTEREST
Interest accrued on each Loan shall be payable, without
duplication, on:
(a) the last day of each Interest Period with respect to such
Loan (and, in addition to such day, if such Interest Period shall
exceed three months, on each date which is the last day of each
successive three-monthly period occurring during such Interest
Period);
(b) the Maturity of such Loan; and
(c) with respect to any portion of any Loan repaid or prepaid
pursuant to SECTION 3.1, 5.1 or 5.5 the date of such repayment or
prepayment, as the case may be.
<PAGE> 51
Interest accrued on each Loan after the Maturity thereof
and interest on other overdue amounts, shall be payable
upon demand. The amount of accruing interest on any Loans
shall be calculated during each Interest Period applicable
thereto by the Administrative Agent on the daily
outstanding principal amount of such Loans. All interest
shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) during
the period for which such interest is payable over a year
comprised of 360 days. Subject to CLAUSES (d) and (e) of
the definition of "INTEREST PERIOD", whenever any payment
to be made shall otherwise be due on a day which is not a
Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be
included in computing interest, if any, in connection with
such payment.
3.2.4 RATE DETERMINATIONS
All determinations by the Administrative Agent of the rate
of interest applicable to any Loan shall be conclusive
absent demonstrated error.
3.3 FEES
The Borrower shall make payments in respect of fees in
accordance with this Section.
3.3.1 AGENTS' FEES
The Borrower confirms and agrees that (without prejudice to
any similar obligation of any other Obligor) it will pay to
the Administrative Agent such underwriting, arrangement and
agency fees (in such amounts, on such dates and pursuant to
such terms) for the account of the Administrative Agent as
are described in a letter of even date herewith from the
Borrower to the Administrative Agent.
4. PROJECT ACCOUNTS
4.1 THE ACCOUNT BANK; THE PROCEEDS ACCOUNT
(a) The Borrower shall maintain the Proceeds Account in its
name with the Account Bank.
<PAGE> 52
(b) MMS may operate local accounts with Banco del Orinoco,
Banco del Orinoco N.V., Fivenez and Banco Lara (collectively, the
"LOCAL ACCOUNTS") for the purpose of making payments, whether in
Dollars or Bolivars, to employees and vendors located in
Venezuela and for making payment of other Operating Expenditures,
Capital Expenditures, and taxes and royalties, in each case as
permitted by the Base Case. The permitted aggregate balance of
the Local Accounts at any time during any calendar month is
limited to the amounts permitted by the Base Case to be spent on
the foregoing uses during such calendar month.
(c) Neither MMS nor the Borrower may open or maintain any bank
account other than the Proceeds Account and the Local Accounts
without the prior written consent of the Administrative Agent.
(d) Except with respect to the proceeds of sales of Gold which
the Government of Venezuela requires MMS to convert into Bolivars
(and MMS agrees to remit those proceeds to the relevant Local
Accounts), each of MMS and the Borrower shall promptly (or
promptly instruct the Account Bank to) convert into Dollars any
moneys received by it in a currency other than Dollars for credit
to the Proceeds Account on the day of conversion.
(e) None of the restrictions contained in this Section on the
withdrawal of funds from the Proceeds Account shall affect the
obligations of the Borrower (or, as the case may be, MMS) to make
all payments required to be made to the Finance Parties on the
relevant due dates in accordance with the relevant Loan
Documents.
(f) Notwithstanding any other provision of any Loan Document,
no withdrawal may be made from the Proceeds Account if the
Proceeds Account would then have a negative balance.
(g) No sum may be transferred or withdrawn from the Proceeds
Account except as expressly permitted or required by this Article
and in accordance with the Account Agreement.
(h) All deposits to and transfers from the Proceeds Account
must be made in accordance with Applicable Law.
<PAGE> 53
4.2 PROCEEDS ACCOUNT
(a) The Borrower (or, as the case may be, MMS) shall cause the
following amounts to be deposited to the relevant Proceeds
Account:
(i) proceeds of all Loans and Subordinated Loans (as may remain
following reimbursement to Hecla Mining for payment of the
Purchase Price) advanced in favor of the Borrower but remitted in
the form of a Capital Contribution or Approved Subordinated
Indebtedness to MMS;
(ii) proceeds of any Conversion Amount advanced in favor of the
Borrower pursuant to SECTION 2.2;
(iii) proceeds of other Capital Contributions and all Approved
Subordinated Indebtedness made to or for the account of the
Borrower;
(iv) proceeds of the export and sale of Project Output;
(v) amounts received by MMS representing business interruption
insurances;
(vi) proceeds of Metal Trading Agreements; and
(vii) all other amounts permitted to be deposited to the Proceeds
Account by Applicable Law.
(b) The Borrower may withdraw sums from the Proceeds Account,
in the following order of priority:
(i) to make payments of Taxes and royalty fees, in each case in
respect of the Project, as and when due;
(ii) to make payments of Capital Expenditures and Operating
Expenditures, in each case in respect of the Project, as and when
due;
(iii) to make transfers to the Local Accounts in order to make
payments of Taxes, royalty fees, Capital Expenditures and
Operating Expenses in each case in respect of the Project, as and
when due, to the extent not made pursuant to SUB-CLAUSE (i) or
(ii) and to the extent permitted by SECTION 4.1(b);
<PAGE> 54
(iv) without duplicating SUB-CLAUSE (v), as are necessary to
make payment of the Obligations as and when due;
(v) to make payments with respect to the Metal Trading
Agreements as and when due; and
(vi) subject to SECTION 8.3.6, for distribution to Hecla Mining
or any other Person permitted by such Section.
(c) The Borrower may, on behalf of MMS, withdraw sums from the
Proceeds Account to make payment of any amount payable by MMS and
permitted by this Section.
4.3 TREATMENT OF PROCEEDS OF PROJECT INSURANCE AND COMPENSATION
(a) MMS shall ensure that all amounts (including amounts
representing business interruption insurances) received by it or
paid to its order with respect to Compensation and Project
Insurance (including amounts representing business interruption
insurances) are paid into the Proceeds Account immediately on
receipt by it or on its behalf.
(b) MMS may direct any amount relating to Compensation or
Project Insurance payable to its order to be paid directly to the
third party on account of whose claim such amounts are payable.
(c) MMS may (or request the Borrower to) withdraw amounts
representing Compensation or Project Insurance proceeds from the
Proceeds Account:
(i) in the case of amounts representing the proceeds of any
claim in respect of physical loss, damage or destruction to any
Project Asset:
(x) where such proceeds do not exceed
U.S.$5,000,000 (or its equivalent in any
other currency), as MMS (or the Borrower) may
direct or
(y) where such proceeds exceed U.S.$5,000,000 (or
its equivalent in any other currency), only
with the consent of the Collateral Agent, not
to be unreasonably withheld,
<PAGE> 55
toward the repair or replacement of the lost, damaged or
destroyed Project Asset;
(ii) in the case of any amounts described in SUB-CLAUSE (i)(y)
where the Collateral Agent shall not have consented to the use of
such proceeds for the repair or replacement of the lost, damaged
or destroyed Project Asset, for the purpose of making the payment
described in SECTION 3.1.2(c); and
(iii)in the case of amounts representing third party liability
claims, toward meeting the relevant liability.
4.4 GENERAL PROVISIONS RELATING TO THE PROCEEDS ACCOUNT AND THE
LOCAL ACCOUNTS
(a) MMS and the Borrower shall deposit moneys to, and moneys
shall be disbursed from, the Proceeds Account and the Local
Accounts solely for the purposes described in this Article,
subject at all times to Applicable Law. The mechanics relating
to the Proceeds Account are more specifically described in the
Account Agreement and the remedies in respect of the Proceeds
Account are more specifically described in the Security Agreement
(U.S. Assets) and the Account Agreement.
(b) At any time when no Default shall then have occurred and be
continuing and subject to Applicable Law, the Borrower may, to
the extent practicable in order to perform its obligations under
each Operative Document to which it is a party, direct the
Account Bank to invest amounts held in the Proceeds Account in
Cash Equivalent Investments, subject at all times to the
provisions of the Account Agreement and the Security Agreement
(U.S. Assets).
(c) At any time following the occurrence and during the
continuation of a Default (other than a Default which does not
itself constitute an Enforcement Event), but prior to the
occurrence of an Enforcement Event, the Borrower and may only
cause moneys to be transferred from the Proceeds Account and/or
invested in Cash Equivalent Investments by requesting the
Collateral Agent to direct the Account Bank to procure such
<PAGE> 56
transfers or make such investments. The parties hereto
agree and acknowledge that in such circumstances the
Collateral Agent may exercise its reasonable discretion
in deciding to accept or reject any such requests from
the Borrower and any refusal by the Collateral Agent of
any such request by the Borrower shall not result in
any liability to the Collateral Agent. Upon the
occurrence of an Enforcement Event, the Borrower shall
not have any rights to direct the transfer of moneys
from the Proceeds Account or investments thereof into
Cash Equivalent Investments, and the Collateral Agent
shall be entitled to direct the Account Bank to
liquidate such Cash Equivalent Investments, it being
expressly understood and agreed that any breakage or
other costs arising from such liquidation shall be for
the account of the Borrower.
5. INCREASED COSTS; TAXES; MARKET DISRUPTIONS; GENERAL PAYMENT
PROVISIONS
5.1 GOLD OR DOLLARS UNAVAILABLE
(a) If, at any time that the Administrative Agent shall be
required to make any determination of the Gold Rate or, as the
case may be, the LIBO Rate for any Interest Period and it shall
have determined or shall have been notified (for any reason
whatsoever) that:
(i) in the case of any Gold Loans outstanding or to be
outstanding during such Interest Period, any Lender is, due to
circumstances outside its control (including the unavailability
of Gold, or the inability of the Lenders to determine the Gold
Rate) unable to conduct transactions in any accessible
international gold market and, as a direct result thereof, to
make or maintain, in whole or in part, its Gold Loans hereunder;
or
(ii) in the case of any Dollar Loans outstanding or to be
outstanding during such Interest Period, either (x) Dollar
certificates of deposit or Dollar deposits, as the case may be,
in the relevant amount and for the relevant Interest Period are
not available to the Lenders in the London interbank market, or
(y) by reason of circumstances affecting the Lenders in the
London interbank market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to such
Dollar Loan,
<PAGE> 57
then the Administrative Agent shall promptly give
telephonic notice of such determination confirmed in
writing to the Borrower (which determination shall, in the
absence of demonstrated error, be conclusive and binding on
the Borrower).
(b) As soon as practicable following the giving of the notice
described in CLAUSE (a), the Administrative Agent, the affected
Lenders acting reasonably and the Borrower shall negotiate for a
period not exceeding 30 days with a view to agreeing to an
alternative basis for making or maintaining the Loans affected by
the circumstances described in CLAUSE (a). During such period
interest shall accrue on the principal amount of each affected
Lender's affected Loans at the rate applicable to such Loans
immediately prior to the giving of such notice. If no such
alternative basis is agreed within such time period, each
affected Lender's affected Loans shall bear interest at a rate
PER ANNUM equal to the sum of (i) the cost to such Lender of
funding such Loans (as determined by such Lender which
determination shall, in the absence of demonstrated error, be
conclusive and binding on the Borrower), (ii) the Applicable
Margin PLUS (iii) the Additional Costs Rate as in effect from
time to time with respect to such Lender.
(c) As an alternative to CLAUSE (b), the Borrower may at any
time elect that the Principal Amount of and interest on all of
the affected Lenders' then outstanding Loans which are affected
by the circumstances described in CLAUSE (a) be immediately
converted using the principles set forth in SECTION 2.2 into a
Gold Loan or a Dollar Loan, or if such type of Loan is
unavailable hereunder, be immediately repaid in full (subject,
however, to SECTION 5.3).
5.2 INCREASED COSTS, ETC.
(a) The Borrower agrees to reimburse each Lender for any
increase (other than as specifically covered in any other Section
of this Article) in the cost to such Lender of making,
converting, continuing or maintaining (or of its obligation to
make, convert, continue or maintain) any Loans, and for any
reduction (other than as specifically covered in any other
Section of this Article) in the amount of any sum
<PAGE> 58
receivable by such Lender hereunder in respect of
making, converting, continuing or maintaining any
portion of any such Loans in either case, from time to
time by reason of any Regulatory Change (including,
solely with respect to any Lender that is a bank or
commercial financial institution, with respect to
Regulation D of the F.R.S. Board but excluding the
Additional Costs Rate (if relevant)), then, in any such
event, such Lender shall promptly notify the
Administrative Agent and the Borrower thereof stating
in reasonable detail the reasons therefor and the
additional amount required fully to compensate such
Lender for such increased cost or reduced amount. Such
notice shall, in the absence of demonstrated error, be
conclusive and binding on the Borrower.
(b) As soon as practicable following the giving of any notice
described in CLAUSE (a), the affected Lender, the Administrative
Agent and the Borrower shall negotiate for a period not exceeding
30 days with a view to avoiding or minimizing the circumstances
described in CLAUSE (a). If no steps mutually agreeable to the
affected Lender, the Administrative Agent and the Borrower are
decided within such 30 day period, the Borrower may elect either
to prepay the principal amount of and interest on such affected
Lender's then outstanding Loans (subject, however, to SECTION
5.3) or pay, within five days after the expiry of such 30 day
period, any additional amount required fully to compensate such
affected Lender for the increased cost or reduced amount
described in CLAUSE (a).
5.3 FUNDING LOSSES
In the event that any Lender shall incur any loss or
expense (including any loss or expense incurred by reason
of the liquidation or reemployment of Gold or Dollar
deposits or other funds or precious metals acquired by such
Lender to make, convert, continue or maintain any portion
of the Principal Amount of any Loan) as a result of:
(a) any payment, prepayment or conversion of the Principal
Amount of either type of Loan on a date other than the scheduled
last day of the Interest Period applicable thereto, whether
pursuant to SECTION 3.1 or otherwise; or
<PAGE> 59
(b) any action of the Borrower resulting in any Loans not being
made, continued or converted in accordance with the Borrowing
Notice, Continuation Notice or Conversion Notice, as the case may
be, given therefor,
then, upon the request of such Lender to the Borrower (with
a copy to the Administrative Agent) the Borrower shall pay
to the Administrative Agent for the account of such Lender
such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or
expense. A statement as to any such loss or expense
(including calculations thereof in reasonable detail) shall
be submitted by such Lender to the Administrative Agent and
the Borrower and shall, in the absence of demonstrated
error, be conclusive and binding on the Borrower.
5.4 INCREASED CAPITAL COSTS
(a) If any Regulatory Change affects or would affect the amount
of capital required to be maintained by any Lender which is a
bank or commercial financial institution or any Person
controlling such Lender, and such Lender determines (in its
reasonable discretion) that the rate of return on its or such
controlling Person's capital is reduced to a level below that
which such Lender or such controlling Person could have achieved
but for the occurrence of any such Regulatory Change, then, in
any such case upon notice from time to time by such Lender to the
Borrower, the Borrower may, at its option (i) within five days of
receipt of such notice, pay directly to such Lender additional
amounts sufficient to compensate such Lender or such controlling
Person for the portion of such reduction in rate of return which
is reasonably allocable to the Facility or (ii) prepay the
principal amount of and interest on such affected Lender's then
outstanding Loans (subject, however, to SECTION 5.3). A
statement of such Lender as to any such additional amount or
amounts (including calculations thereof in reasonable detail)
shall, in the absence of demonstrated error, be conclusive and
binding on the Borrower. In determining such amount, such Lender
may use any method of averaging and attribution that it (in its
reasonable discretion) shall deem applicable.
(b) Notwithstanding CLAUSE (a), the Borrower shall not be
obligated to pay any amount to any Lender in respect of any such
reduction in the rate of return or
<PAGE> 60
increased cost which arises as a consequence of (i) any
law or directive implementing the proposals for
international convergence of capital measurement and
capital standards published by the Basle Committee on
Banking Regulations and Supervisory Practices in July
1988 and/or (ii) the Council of the European
Communities Directive of April 17, 1989, on the own
funds of credit institutions (89/299/EC) and the
Council of the European Communities Directive of
December 18, 1989, on a solvency ratio for credit
institutions (89/647/EC) to the extent that the impact
of any such law or directive can reasonably be
calculated at the Effective Date. In addition, no
Lender may make any claim for compensation in respect
of any such reduction in return or increased cost to
the extent that a notification of the event leading to
such reduction in the rate or return or increased cost
is not given to the Borrower within six months of such
Lender's obtaining knowledge thereof.
5.5 ILLEGALITY
(a) If, as the result of any Regulatory Change, any Lender
shall determine (which determination, in the absence of
demonstrated error, shall be conclusive and binding on the
Borrower) that it is unlawful for such Lender to make any Loan or
the obligations of such Lender to make such Loan shall, upon such
determination (and telephonic notice thereof confirmed in writing
to the Administrative Agent and the Borrower), forthwith be
suspended until such Lender shall become aware that the
circumstances causing such suspension no longer exist and shall
forthwith notify the Administrative Agent and the Borrower to
such effect, at which time the obligation of such Lender to make
such Loan shall be reinstated.
(b) If, as the result of any Regulatory Change, any Lender
shall determine (which determination, in the absence of
demonstrated error, shall be conclusive and binding on the
Borrower) that it is unlawful for such Lender to continue or
convert (but not to maintain) either type of Loan, then, upon
notice by such Lender to the Administrative Agent and the
Borrower, such Lender shall consult with the Borrower and the
Administrative Agent for a period of up to 30 days from the date
of such notice, with a view to agreeing upon a mutually
<PAGE> 61
acceptable alternative arrangement which will avoid or
minimize such illegality. If no steps mutually
agreeable to the affected Lender, the Administrative
Agent and the Borrower are decided within such 30 day
period, the Borrower may, at its option, to the extent
not prohibited from doing so by the relevant illegality
or unlawfulness, continue or convert (using the
principles set forth in SECTION 2.2) such Lender's then
outstanding Loans or prepay, within five days after the
expiry of such 30 day period (unless required to do so
prior thereto) the Principal Amount of and interest on
such affected Lender's then outstanding Loans (subject,
however, to SECTION 5.3).
(c) If the relevant illegality or unlawfulness makes it
unlawful for a Lender to maintain either type of Loan, then upon
notice by such Lender to the Administrative Agent and the
Borrower, the Borrower shall, as soon as practicable after
receiving such notice, prepay the Principal Amount of and any
interest on such affected Lender's outstanding Loans (subject,
however to SECTION 5.3).
5.6 TAXES
All payments by either the Borrower or MMS of principal of,
and interest on, the Loans and all other amounts payable
pursuant to the relevant Finance Parties shall be made free
and clear of, and without deduction for any Taxes (other
than franchise taxes and taxes imposed on or measured by
the recipient's net income or receipts). In the event that
any withholding or deduction from any payment to be made by
such Obligor hereunder or under any other Loan Document is
required in respect of any such Taxes pursuant to any
Applicable Law, then such Obligor will:
(a) pay directly to the relevant authority the full amount to
be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative
Agent evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of each
Person entitled thereto such additional amount or amounts as is
necessary to ensure that the net amount actually received by such
Person will be equal to the full amount such Person would have
received had no such withholding or deduction been required.
<PAGE> 62
Moreover, if any such Taxes are directly asserted against
any Finance Party with respect to any payment received by
such Finance Party, such Finance Party may pay such Taxes
and either the Borrower or MMS will promptly pay such
additional amounts (including any penalties, interest or
expenses) as is or are necessary in order that the net
amount received by such Person after the payment of such
Taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had such
Taxes not been asserted.
If either the Borrower or MMS fails to pay any Taxes when
due to the appropriate taxing authority or fails to remit
to the Administrative Agent, for its own account and/or, as
the case may be, the account of the relevant Finance Party,
the required receipts or other required documentary
evidence, such Obligor shall indemnify the Administrative
Agent or the relevant Finance Party, as the case may be,
for any incremental Taxes, interest or penalties that may
become payable by any such Person as a result of any such
failure. For the purposes of this Section, a distribution
hereunder or under any other Loan Document by the
Administrative Agent or any Finance Party, as the case may
be, to or for the account of any Finance Party shall be
deemed a payment by the relevant Obligor.
The Finance Parties agree to co-operate with the Borrower
and MMS in completing and delivering or filing tax-related
forms which would reduce or eliminate any amount of the
nature referred to in this Section; PROVIDED, HOWEVER, that
no Finance Party shall be under any obligation to execute
and deliver any such form if, in the reasonable opinion of
such Finance Party, completion of any such form could
result in an adverse consequence with respect to the
business or tax position of such Finance Party.
5.7 MITIGATION
(a) In the event that either the Borrower or MMS makes payment
of any amount pursuant to SECTION 5.4 or 5.6 or that any Lender
seeks payment of an amount pursuant to SECTION 5.4 or 5.6 or
because of circumstances resulting in the 30 day negotiation
period described in SECTION 5.1(b), 5.2(b) or 5.5(b), such
affected Lender agrees that it will take such reasonable steps as
may reasonably be open to it to mitigate the effects of the
circumstances described in the
<PAGE> 63
foregoing Sections (such steps to include the transfer
of such Lender's Dollar Lending Office and/or Gold
Lending Office to another jurisdiction and the
application for a Tax Credit); PROVIDED, HOWEVER, that
no Lender shall be obligated to (i) take any such steps
if, in its opinion, such steps would require it to
achieve less than its expected return with respect to
the Facility or would have an adverse effect upon its
assets or financial condition or (ii) achieve any
particular result or incur any liability to either the
Borrower or MMS by virtue of any such steps resulting
in less than complete mitigation of the relevant
circumstances.
(b) If, pursuant to CLAUSE (a), any Lender effectively obtains
a refund of tax or credit (a "TAX CREDIT") against a payment made
by either the Borrower or MMS pursuant to SECTION 5.6 (a "TAX
PAYMENT"), and such Lender is able to identify such Tax Credit as
being attributable to such Tax Payment, then such Lender, after
actual receipt of such Tax Credit, shall reimburse such Obligor
for such amount as such Lender shall reasonably determine to be
the proportion of such Tax Credit as shall be reasonably
attributable to such Tax Payment; PROVIDED, HOWEVER, that no
Lender shall be required to make any such reimbursement which
would cause it to lose the benefit of such Tax Credit or would
otherwise adversely affect any matter relating to such Lender in
connection with the assessment or payment of any Taxes. If any
Lender shall claim any Tax Credit pursuant to this Section, it
shall have absolute discretion in the extent, order and manner in
which it does so. No Lender shall be obligated to disclose
information regarding its tax affairs or computations to either
the Borrower or MMS.
5.8 PAYMENTS, COMPUTATIONS, ETC.
(a) All payments by either the Borrower or MMS pursuant to this
Agreement or any other Loan Document shall be paid in Dollars,
except as specifically set forth therein or except with respect
to the payment of the Principal Amount of any Gold Loan or any
interest accruing thereon, each of which shall be payable in
Gold. All payments under this Agreement or any other Loan
Document shall be made by the relevant Obligor to the
Administrative Agent for the account of each Finance Party
entitled thereto.
<PAGE> 64
(b) All payments under the Facility shall be made by either the
Borrower or MMS:
(i) if in Gold, to the Administrative Agent for the account of
each Finance Party entitled thereto, by delivery of Gold to an
unallocated LOCO London gold account of the Administrative Agent
at the Administrative Agent's Gold Lending Office, which account
shall be designated from time to time by notice to the Borrower
from the Administrative Agent; and
(ii) if in Dollars, to the Administrative Agent for the account
of each Finance Party entitled thereto, by delivery of Dollars in
immediately available funds to an account of the Administrative
Agent in New York City at the Administrative Agent's Dollar
Lending Office, which account shall be designated from time to
time by notice to the Borrower from the Administrative Agent,
in either such case for the account of each Finance Party
entitled thereto and, if such payment shall be of less than
the amount of the relevant payment Obligation then due and
owing, for the PRO RATA benefit of each Finance Party
entitled to share in such payment in accordance with its
respective portion of the aggregate unpaid amount of
similar payment Obligations. All such payments shall be
made, without setoff, deduction, or counterclaim, not later
than (i) 11:00 a.m., on the date when due if such payment
is denominated in Gold, and (ii) 11:00 a.m., New York City
time, on the date when due if such payment is denominated
in Dollars. Any payments received hereunder after the time
and date specified in this Section shall be deemed to have
been received by the Administrative Agent on the next
following Business Day. The Administrative Agent shall
promptly remit to each Finance Party its share (calculated
as aforesaid), if any, of such payments, in kind. If in
Gold, such remittance shall be to an unallocated LOCO
London gold account designated by such Finance Party to the
Administrative Agent by notice from time to time and
maintained at its Gold Lending Office, and, if in Dollars,
such remittance shall be to an account designated by such
Finance Party to the Administrative Agent by notice from
time to time and maintained at its Dollar Lending Office.
<PAGE> 65
5.9 PRORATION OF PAYMENTS
If any Lender shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of setoff,
or otherwise) on account of the principal amount of or
interest on any Loan in excess of its PRO RATA share of
payments then or therewith obtained by all Lenders entitled
thereto upon the principal amount of and interest on all
Loans, such Lender shall purchase from the other Lenders
such participations in Loans held by them as shall be
necessary to cause such purchasing Lender to share the
excess payment or other recovery rateably with each of
them; PROVIDED, HOWEVER, that if all or any portion of the
excess payment or other recovery is thereafter recovered
from such purchasing holder, the purchase shall be
rescinded and the purchase price restored to the extent of
such recovery, but without interest. Each of the Borrower
and MMS agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section
may, to the fullest extent permitted by Applicable Law,
exercise all its rights of payment (including pursuant to
SECTION 5.10) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower
or, as the case may be, MMS in the amount of such
participation. If under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a
secured claim under the Facility in lieu of a setoff to
which this Section applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the
Lenders entitled under this Section to share in the benefit
of any recovery on such secured claim.
5.10 SETOFF
In addition to and not in limitation of any rights of any
of the Finance Parties under Applicable Law, each Finance
Party (or any branch thereof) shall, upon the occurrence of
any Enforcement Event, have the right to appropriate and
apply to the payment of the Obligations owing to it
(whether or not then due), any and all balances, credits,
deposits, accounts or moneys of either the Borrower or MMS
then or thereafter maintained with such Finance Party in
whatever currency or precious metals (including Gold) (and,
as security for the Obligations owing to each such Finance
Party, but not to the exclusion of any other rights such
Finance Party may have, each relevant Obligor hereby grants
<PAGE> 66
to each such Finance Party a continuing security interest
in any and all balances, etc., as aforesaid); PROVIDED,
HOWEVER, that any such appropriation and application shall
be subject to the provisions of SECTION 5.9.
5.11 CONVERSION UPON ACCELERATION, JUDGMENT CURRENCY, ETC.
(a) Upon any Enforcement Event any Lender may, at its option,
and notwithstanding SECTION 2.2, convert any Gold Loan then
outstanding into a Dollar Loan. For the purpose of computing the
Principal Amount of any Loan outstanding after any conversion
pursuant to the foregoing sentence, any such Gold Loan shall be
converted into a Dollar Loan having a Principal Amount equal to
the Dollar equivalent (calculated at the date of conversion) of
the Principal Amount of such Gold Loan. In addition, and upon
any such Enforcement Event, any Lender may, at its option elect
that interest on the Principal Amount of any Gold Loan converted
as aforesaid which would otherwise be payable in Gold shall
instead be payable in Dollars. In addition, if upon any such
Enforcement Event or for the purposes of obtaining a judgment in
any court for any purpose hereunder (including a proceeding under
Title XI of the United States Bankruptcy Code), it becomes
necessary to determine the Dollar equivalent of any payment
obligation hereunder (whether with respect to a Principal Amount
or interest) which is payable in Gold (a "GOLD OBLIGATION"), such
determination shall be made at the time (or from time to time)
and to the extent payment (in whole or in part) has actually been
made by the Borrower or a judgment has been rendered. If the
amount of Gold that could be purchased at the time and with the
proceeds of any such payment or judgment is not sufficient to
satisfy in full the relevant Gold Obligation, the Borrower hereby
indemnifies and holds harmless each affected Lender:
(i) with respect to such deficiency; and
(ii) from all costs and expenses incurred in the event that, as
a result of any default by the Borrower hereunder or under any
other Loan Document, such Lender, at its own expense, must, at
any time or from time to time purchase Gold in an open
<PAGE> 67
exchange market to satisfy its obligations to any
funding source which has provided Gold to such
Lender to make, in whole or in part, any Gold
Loan.
Such indemnity obligations of the Borrower shall:
(A) be payable in Dollars;
(B) be determined in accordance with (and at the times
provided pursuant to) this Section; and
(C) be enforceable, insofar as this clause is
concerned, as a separate or additional cause of
action, and such enforceability shall not be
affected by any prior judgment being obtained for
any other sums due under this Agreement or any
other Loan Document.
(b) The Borrower hereby agrees that:
(i) If, for the purposes of obtaining judgment in any court, it
is necessary to convert a sum due hereunder in Dollars into
another currency, the Borrower agrees, to the fullest extent
permitted by Applicable Law, that the rate of exchange used shall
be that at which in accordance with normal banking or
administrative procedures the Administrative Agent could purchase
Dollars with such other currency on the Business Day preceding
that on which final judgment is given.
(ii) The obligation of the Borrower in respect of any sum due
from it to any Finance Party shall, notwithstanding any judgment
in a currency other than Dollars, be discharged only to the
extent that on the Business Day following receipt by such Finance
Party of any sum adjudged to be so due in such other currency,
such Finance Party may in accordance with normal banking
procedures, purchase Dollars with such other currency. In the
event that the Dollars so purchased are less than the sum
originally due to such Finance Party in Dollars, the Borrower, as
a separate obligation and notwithstanding any such judgment,
hereby indemnifies and holds harmless such Finance Party against
such loss, and if the Dollars so purchased exceed the sum
originally due to such Finance Party, such Finance Party shall
remit to the Borrower such excess.
<PAGE> 68
5.12 APPLICATION OF PROCEEDS
(a) If at any time any amount (including any proceeds received
in respect of any sale of, collection from, or other realization
upon, all or any part of any collateral security subject of any
Collateral Agreement) received by either Agent is less than the
amount then due and payable pursuant to this Agreement or any
other Loan Document such amount may, in the discretion of the
Administrative Agent, be held by the Administrative Agent as
additional collateral security for, or then or at any time
thereafter be applied (after payment of any amounts payable to
the Agents pursuant to SECTIONS 11.3 and 11.4 and similar
provisions contained in the other Loan Documents) in whole or in
part by the Administrative Agent against, all or any part of the
Obligations in the following order:
(i) first, to amounts outstanding to the Finance Parties under
any Loan Document (other than any Metal Trading Agreement) in
respect of any amount other than interest on, or the Principal
Amount of, any Loan;
(ii) second, PRO RATA to amounts outstanding to the Finance
Parties under any Loan Document in respect of interest on any
Loan;
(iii)third, PRO RATA to (x) amounts outstanding to the Finance
Parties under any Loan Document in respect of the Principal
Amount of any Loan and (y) net payment obligations of the
Borrower to the Finance Parties under any Metal Trading
Agreement; and
(iv) fourth, to amounts owing to the Subordinated Lenders, in
the order set forth in Section 4.11(a) of the Subordinated Loan
Agreement.
(b) Any surplus of such cash or cash proceeds held by the
Administrative Agent and remaining after payment in full of all
the Obligations, and the termination of all Commitments (if not
then already terminated), shall be paid over to or to whomsoever
may be lawfully entitled to receive such surplus.
<PAGE> 69
6. CONDITIONS PRECEDENT TO MAKING LOANS
6.1 INITIAL LOANS
The obligations of the Lenders to make the initial Loans
shall be subject to the prior or concurrent satisfaction of
each of the conditions precedent set forth in this Article.
Unless specifically stated to the contrary, each document,
certificate and other Instrument delivered pursuant to this
Section shall be dated on, or prior to, and shall be in
full force and effect on, the Borrowing Date with respect
to the initial Loans.
The Administrative Agent shall have received:
6.1.1 RESOLUTIONS, ETC.
(a) a certificate of an Authorized Representative of each
Obligor and Subordinated Creditor to the effect that
(i) the representations of such Person set forth in
each Loan Document to which it is a party shall be true
and correct as at the Effective Date and after giving
effect to the initial Loan and (ii) no Default shall
have then occurred and be continuing; and
(b) from each Obligor and Subordinated Creditor, a
certificate of its Secretary or similar officer as to:
(i) resolutions of its Board of Directors or similar body then
in force and effect authorizing the execution, delivery and
performance of each Loan Document and any other document to be
executed by it in connection with the transactions contemplated
thereby;
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to each Loan Document and any
other document executed or to be executed by it; and
(iii)its Organic Documents as then in effect,
upon which certificate the Administrative Agent may
conclusively rely until it shall have received a
further certificate of the Secretary or similar officer
of the relevant Person cancelling or amending such
prior certificate.
<PAGE> 70
6.1.2 ACQUISITION TRANSACTION, ETC.
(a) copies of the Acquisition Agreement and each of the
Subscription Agreement and the Royalty Agreement (each
as defined therein), executed by the parties thereto
and certified as being true and accurate by an
Authorized Representative of Hecla Mining or the
Borrower;
(b) evidence that the Acquisition Transaction shall have
been consummated in accordance with its terms and that
all required deliveries to be made thereunder by the
Vendor (including the MRIL Shares, the MMS Shares, and
the Monarch Mexico Shares) shall have been made;
(c) such evidence as the Administrative Agent shall
reasonably require as to the sources of moneys used by
Hecla Mining to fund the Purchase Price (including any
evidence of a drawdown under the Restated Credit
Agreement); and
(d) a resolution of the Board of Directors of the Borrower
issued pursuant to Section 39A2A of the Bermuda
Companies Act 1981, as to the solvency, after giving
effect to the Acquisition Transaction, of the Borrower.
6.1.3 SUBORDINATED LOAN AGREEMENT, ETC.
(a) counterparts of the Subordinated Loan Agreement, duly
executed by the Subordinated Lenders, the Collateral
Agent and the Administrative Agent and an Authorized
Representative of Hecla Mining, as borrower;
(b) counterparts of the Nationsbank Subordination
Agreement, duly executed by Nationsbank N.A., in its
capacity as agent under the Restated Credit Agreement,
as the representative of the senior creditors
thereunder, Standard Bank, as subordinated creditor,
and an Authorized Representative of Hecla Mining,
together with evidence, to be satisfactory in form and
substance to the Administrative Agent, of the granting
of consent by Nationsbank N.A., as agent under the
Restated Credit Agreement, to the execution of the Loan
Documents and the consummation of the transactions
contemplated thereby;
(c) evidence that all conditions precedent to the making of
the Subordinated Loans in the principal amount of
U.S.$3,000,000 shall have been met; and
<PAGE> 71
(d) delivery of a borrowing request for the Subordinated
Loans (in the principal amount of U.S.$3,000,000)
pursuant to the Subordinated Loan Agreement to take
effect on the proposed initial Borrowing Date
hereunder.
6.1.4 BORROWER SHARE CHARGE
(a) counterparts of the Borrower Share Charge, duly
executed by the Collateral Agent and an Authorized
Representative of Hecla Mining;
(b) evidence of the delivery of the MRIL Shares to the
Collateral Agent, together with stock powers executed
in blank; and
(c) evidence that all filings and registrations required
under the laws of Bermuda and New York (including any
required notations to be made in the stock register of
the Borrower) shall have been duly made.
6.1.5 MMS PLEDGE AGREEMENT
(a) counterparts of the MMS Pledge Agreement, duly executed
by the Collateral Agent, the Initial Lenders and an
Authorized Representative of the Borrower;
(b) evidence of the delivery of the MMS Shares to the
Collateral Agent, together with stock powers executed
in blank; and
(c) evidence that all filings and registrations (including
any required notations to be made in the share register
of MMS) required under the laws of Bermuda or Venezuela
shall have been duly made.
6.1.6 SECURITY AGREEMENT (U.S. ASSETS)
(a) counterparts of the Security Agreement (U.S. Assets),
duly executed by the Collateral Agent and Authorized
Representatives of the Borrower;
(b) evidence that Uniform Commercial Code financing
statements naming the Borrower as debtor and the
Collateral Agent as secured party shall have been duly
filed in all offices required under the laws of New
York in order to perfect the Liens under the Security
Agreement (U.S. Assets) over the Collateral described
therein; and
<PAGE> 72
(c) evidence that all necessary counterparty notices
relating to Metal Trading Agreements shall have been
duly given and all acknowledgements from the relevant
counterparties thereunder shall have been duly
obtained.
6.1.7 CANADIAN SECURITY AGREEMENT
(a) counterparts of the Canadian Security Agreement, duly
executed by the Collateral Agent and an Authorized
Representative of Hecla Mining;
(b) acknowledgement by the Vendor of the assignment by
Hecla Mining of its rights under the Acquisition
Agreement, such acknowledgement to be satisfactory in
form and substance to the Collateral Agent and its
counsel; and
(c) evidence that all filings and registrations required
under the laws of Canada shall have been duly made.
6.1.8 MMS GUARANTY
(a) counterparts of the MMS Guaranty, duly executed by the
Collateral Agent and an Authorized Representative of
MMS; and
(b) evidence that all filings and registrations required
under the laws of Venezuela shall have been duly made.
6.1.9 VENEZUELAN SECURITY DOCUMENTS
(a) delivery of powers of attorney from the Initial Lenders
to Messrs. Torres, Plaz & Araujo, Venezuelan counsel to
the Finance Parties, executed and delivered under
Venezuelan law, enabling the execution and registration
of the Venezuelan Security Documents as and when
required pursuant to SECTION 8.2.11(b);
(b) substantial agreement as to the text of the Venezuelan
Security Documents in the forms of the respective
Exhibits attached hereto; and
(c) such other evidence as the Collateral Agent and its
counsel shall reasonably require to ensure the
execution and registration of the Venezuelan Security
Documents as and when required pursuant to SECTION
8.2.11(b).
<PAGE> 73
6.1.10 ACCOUNT AGREEMENT
(a) counterparts of the Account Agreement, duly executed by
the Account Bank and the Collateral Agent and
Authorized Representatives of the Borrower and MMS;
(b) evidence of the execution of all certificates and other
ancillary documentation required thereunder; and
(c) evidence that the Proceeds Account shall have been
opened.
6.1.11 INTERCOMPANY SUBORDINATION AGREEMENT
(a) counterparts of the Intercompany Subordination
Agreement, duly executed by the Collateral Agent and
Authorized Representatives of each of the Borrower and
MMS and of each Subordinated Creditor; and
(b) evidence that all filings and registrations required
under the laws of all applicable jurisdictions shall
have been made.
6.1.12 MISCELLANEOUS DOCUMENTS AND CONDITIONS
(a) counterparts of the Process Agent Acceptance, duly
executed by the Process Agent, together with evidence
of the appointment of the Process Agent by each Obligor
and Subordinated Creditor;
(b) counterparts of the Independent Consultant's
Certificate, duly executed by the Independent
Consultant;
(c) a counterpart of a summary of insurances maintained at
the Project, including as to amount, risks covered and
deductibles (the "INSURANCE SUMMARY") executed by
Sedgewick;
(d) such evidence as to the execution of Metal Trading
Agreements as the Administrative Agent shall reasonably
require;
(e) a counterpart of a Compliance Certificate of the
Borrower, computed as at the initial Borrowing Date,
certified by the chief financial or accounting
Authorized Representative of the Borrower, together
<PAGE> 74
with such information concerning the calculations
involved in such Compliance Certificate as the
Administrative Agent shall have reasonably requested;
and
(f) a counterpart of a policy of political risk insurance
("POLITICAL RISK INSURANCE") issued by a provider
satisfactory to the Administrative Agent, naming the
Collected Lenders as additional loss payees and
satisfactory in form and substance to the
Administrative Agent.
6.1.13 OPINIONS
Opinions addressed to the Finance Parties from:
(a) Debevoise & Plimpton, New York counsel to the Finance
Parties, substantially in the form of EXHIBIT N-1
attached hereto;
(b) Torres, Plaz & Araujo, Venezuelan counsel to the
Finance Parties, substantially in the form of EXHIBIT N-
2 attached hereto;
(c) Neher Von Siegmund Rengifo Diquez, Venezuelan counsel
to the Obligors, substantially in the form of EXHIBIT N-
3 attached hereto;
(d) Conyers Dill & Pearman, Bermudan counsel, substantially
in the form of EXHIBIT N-4 attached hereto;
(e) Nathaniel K. Adams, corporate counsel to Hecla Mining,
substantially in the form of EXHIBIT N-5 attached
hereto; and
(f) Fasken Martineau, Canadian counsel to the Finance
Parties, substantially in the form of EXHIBIT N-6
attached hereto.
The portions of the opinion of the Venezuelan lawyers
described in ITEMS (b) and (c) addressing the Venezuelan
Security Documents to be delivered pursuant to SECTION
8.2.11(b) may be rendered at the same time as such
Venezuelan Security Documents are executed and registered.
6.1.14 APPROVALS, PROJECT DOCUMENTS
(a) copies of the Project Documents (as in effect prior to
the initial Borrowing Date) described in CLAUSES (a)
<PAGE> 75
and (b) of the definition of such term executed and
delivered by the parties thereto, certified by an
Authorized Representative of each Obligor party
thereto;
(b) copies of the Approvals listed in PART A of ITEM 1
("CURRENT MATERIAL APPROVALS") of the Disclosure
Schedule, certified by each Obligor which was granted
such Approval; and
(c) if the Administrative Agent shall have so requested, an
English translation of any of the foregoing documents
not originally executed in English, certified by an
Authorized Representative of each Obligor party
thereto.
Without limiting SECTION 6.1, the obligations of the
Lenders to make all Loans shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent
set forth in this Section.
6.1.15 CLOSING FEES, EXPENSES, ETC.
The Administrative Agent shall have received (including, to
the extent necessary, from the proceeds of the Loans to be
made on the initial Borrowing Date) for the account of the
Finance Parties entitled thereto, all fees and expenses
(including those of the Agents' advisors then invoiced) due
and payable on or prior to such Borrowing Date.
6.2 CONDITIONS TO ALL LOANS
Without limiting SECTION 6.1, the obligations of the Lenders to
make all Loans shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in
this Section.
6.2.1 BORROWING NOTICE
The Administrative Agent shall have received a Borrowing
Notice relating to the Loans, proposed to be made on the
relevant Borrowing Date executed by an Authorized
Representative of the Borrower.
6.2.2 COMPLIANCE WITH WARRANTIES, NO DEFAULTS, ETC.
The representations and warranties of the Obligors set
forth in ARTICLE 7 and in all other Loan Documents shall be
<PAGE> 76
true and correct as of the date initially made, and both
immediately before and after the making of the requested
Loans:
(a) such representations and warranties shall be true and
correct with the same effect as if then made (unless
stated to relate solely to an earlier date, in which
case such representations and warranties shall be true
and correct as of such earlier date); and
(b) no Default shall have then occurred and be continuing.
7. REPRESENTATIONS AND WARRANTIES
In order to induce the Finance Parties to enter into this
Agreement and to make, maintain, convert and continue the
Loans hereunder, each of the Borrower and MMS, individually
for itself and with respect to matters hereinafter relating
to it, represents and warrants unto each of the Finance
Parties, in each case as set forth in this Article. The
representations and warranties set forth in this Article
shall be made on the Effective Date and upon the delivery
of each Borrowing Notice and each Conversion Notice and
shall be deemed to be made as at each Borrowing Date and
each Conversion Date.
7.1 ORGANIZATION, POWER, AUTHORITY, ETC.
(a) The Borrower is a company validly organized and
existing and in good standing under the laws of
Bermuda.
(b) MMS is a company validly organized and existing and in
good standing under the laws of Venezuela.
(c) Each of the foregoing Obligors is duly qualified to do
business and is in good standing (where such concept is
applicable) as a foreign company in each jurisdiction
where the nature of its business makes such
qualification necessary and has full power and
authority, and holds all requisite Approvals, to own
and hold under lease its property and to conduct its
business substantially as currently conducted by it.
Each such Obligor has full power and authority to enter
into and perform its obligations under this Agreement
and the other Operative Documents executed or to be
executed by it.
<PAGE> 77
7.2 DUE AUTHORIZATION; NON-CONTRAVENTION
The execution and delivery by each of the Borrower and MMS
of this Agreement and each other Operative Document
executed or to be executed by it and the performance by
such Obligor of its obligations hereunder and thereunder,
have been duly authorized by all necessary corporate action
on its part, do not and will not require any Approval
(other than (i) those Approvals referred to in PART A and
PART B of ITEM 1 ("CURRENT MATERIAL APPROVALS" and "PENDING
MATERIAL APPROVALS") of the Disclosure Schedule, (ii) the
filings, notarizations and registrations contemplated by
this Agreement in connection with the effectiveness,
perfection and priority of the Collateral Agreements to
which either Obligor is a party and (iii) in the case of
the Project Documents only, Non-Material Approvals), do not
and will not conflict with, result in any violation of, or
constitute any default under, any provision of any
Requirement of Law or Approval (other than Non-Material
Approvals) binding on it, and will not result in or require
the creation or imposition of any Lien on any of its
properties pursuant to the provisions of any Contractual
Obligation (other than pursuant to this Agreement and the
Collateral Agreements to which such Obligor is a party).
7.3 VALIDITY, ETC.
(a) This Agreement constitutes, and each other Operative
Document executed or to be executed by each of the Borrower and
MMS constitutes, or on the due execution by each party thereto
and delivery thereof will constitute, the legal, valid and
binding obligation of such Obligor enforceable in accordance with
its terms, subject as to enforceability, to Applicable Laws
relating to bankruptcy and the enforceability of creditors'
rights generally and by the fact that the availability of
equitable remedies is discretionary and, in the case of any such
Instrument expressed to be governed by the laws of Venezuela, is
or will be in proper form for enforcement in Venezuela.
(b) Each Collateral Agreement to which either the Borrower of
MMS is party will, upon the taking of the various actions
described hereunder and thereunder, create in favor of the stated
beneficiary or secured party (howsoever denominated) thereunder,
a valid and perfected first-priority Lien on all of the assets,
<PAGE> 78
properties and rights purported to be covered thereby
as security for the relevant obligations expressed to
be covered thereby, subject to no Liens, except (i)
Permitted Liens and (ii) for the specific exceptions
set forth in the legal opinions delivered pursuant to
this Agreement.
7.4 LEGAL STATUS
Neither MMS nor the Borrower, and none of its properties or
revenues enjoys any right of immunity from suit, set off,
attachment prior to judgment or in aid of execution, or
execution on a judgment in respect of its obligations under
any of the Loan Documents to which it is a party.
7.5 FINANCIAL STATEMENTS
All balance sheets and all other financial information of
MMS and the Borrower which have been furnished by or on
behalf of such Obligor to (or otherwise received by) the
Administrative Agent for the purposes of or in connection
with this Agreement or any transaction contemplated hereby,
including the consolidated financial statements at December
31, 1998 of MMS and its Affiliates in respect of which an
opinion was given by Baez, Dasilva & Asociados, as
delivered in the form of Schedule L to the Acquisition
Agreement, have been prepared in accordance with GAAP
consistently applied throughout the periods involved
(except as disclosed therein) and do present fairly
(subject in the case of interim financial statements to
year-end audit adjustments) the financial position of the
relevant Obligor as at the dates thereof and the results of
its operations for the periods then ended. Neither the
Borrower nor MMS has on the date hereof any material
Contingent Liability or liability for taxes, long-term
leases or unusual forward or unusual long-term commitments
which are not reflected in its financial statements
described in this Section or in the notes thereto. For the
avoidance of doubt nothing in this Agreement shall require
the Borrower or MMS to restate the financial statements
described in this Section.
The financial projections, estimates and other expressions
of view as to future circumstances supplied by each of the
Borrower and MMS for purposes of the Base Case are fair and
reasonable and, to the best of such Obligor's knowledge,
have been arrived at after reasonable inquiry and have been
made in good faith by the Persons responsible therefor.
<PAGE> 79
7.6 ABSENCE OF DEFAULT
Neither the Borrower nor MMS is in default in the payment
of or in the performance of any material obligation
applicable to any Indebtedness (subject to any applicable
grace period), or in default under any Project Document,
any Requirement of Law or the terms or conditions upon
which any Approval has been granted.
7.7 ACQUISITION AGREEMENT
The Acquisition Transaction has been duly consummated
substantially in accordance with the terms of the
Acquisition Agreement, and, as a result, Hecla Mining is
the sole and duly registered owner of the MRIL Shares, and
the Borrower is the sole and duly registered owner of the
MMS Shares and the Monarch Mexico Shares, in each case free
and clear of Liens, except arising under each relevant
Collateral Agreement. No claim for rescission or material
modification of the Acquisition Transaction is pending or,
to the knowledge of either the Borrower or MMS, threatened
and the terms for all adjustments to the Purchase Price,
all warranty claims and all other material terms relating
to the Acquisition Transaction are contained in the
Acquisition Agreement, as in effect at the date hereof.
7.8 LITIGATION, ETC.
Except as disclosed in ITEM 3 ("LITIGATION") of the
Disclosure Schedule, there is no pending or, to the
knowledge of either the Borrower or MMS, threatened labor
controversy, litigation, arbitration or governmental
investigation or proceeding against such Obligor (including
with respect to the Acquisition Transaction) or to which
any of its business, operations, properties, assets or
revenues is subject as to which there is a reasonable
likelihood of an adverse outcome to such Obligor and which,
if adversely determined, would result in a Materially
Adverse Effect with respect to such Obligor. In the case
of any litigation described in ITEM 3 ("LITIGATION") of the
Disclosure Schedule, there has been no development in such
litigation which would result in a Materially Adverse
Effect with respect to either the Borrower or MMS.
<PAGE> 80
7.9 MATERIALLY ADVERSE EFFECT
Since the date of the most recent audited financial
statements referred to in SECTION 7.5 there have been no
occurrences which, individually or in the aggregate, would
result in a Materially Adverse Effect.
7.10 TAXES AND OTHER PAYMENTS
Except as disclosed in ITEM 4 ("TAXES") of the Disclosure
Schedule, each of the Borrower and MMS has filed all tax
returns and reports required by Applicable Law to have been
filed by it and has paid all taxes and governmental charges
thereby shown to be owing and all claims for sums due for
labor, material, supplies, personal property and services
of every kind and character provided with respect to, or
used in connection with its business and no claim for the
same exists except as permitted hereunder, except (i) any
such taxes and governmental charges which are being
diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on the books of such
Obligor or (ii) in the case of any other claims, where
failure to make payment therefor would not result in a
Materially Adverse Effect with respect to such Obligor.
7.11 MINING RIGHTS
MMS has acquired all material Mining Rights and has
obtained such other surface and other rights as are
reasonably necessary for access rights, water rights, plant
sites, waste dumps, ore dumps, abandoned heaps or ancillary
facilities which are required in connection with the
Project in accordance with sound international mining and
business practice. All Mining Rights and other rights so
acquired by MMS are sufficient in scope and substance for
the operation and maintenance of the Project in accordance
with sound international mining and business practice and
no part of the purchase price (other than any royalty
payments) payable by MMS in connection with its acquisition
of such Mining Rights and other rights remain unpaid.
7.12 OWNERSHIP AND USE OF PROPERTIES; LIENS
(a) MMS has good title to all of the Project Assets it owns or
purports to own, free and clear of all Liens or claims (including
infringement claims with respect
<PAGE> 81
to patents, trademarks, copyrights and the like) except
as permitted pursuant to SECTION 8.3.3 or except as
disclosed in ITEM 5 ("ASSETS; PROPERTIES") of the
Disclosure Schedule.
(b) MMS has complied in all material respects with all
Contractual Obligations relating to any material asset or
property leased, operated, licensed or used (but not owned) by
MMS except as disclosed in ITEM 6 ("CONTRACTUAL OBLIGATIONS") of
the Disclosure Schedule; all of MMS' interests in such assets and
properties are free and clear of all Liens or claims (including
infringement claims with respect to patents, trademarks,
copyrights and the like) except as permitted pursuant to SECTION
8.3.3, except for non-material Liens or claims or except as
disclosed in ITEM 5 ("ASSETS; PROPERTIES") of the Disclosure
Schedule; and all material Instruments pursuant to which MMS is
entitled to lease, operate, license or use such properties and
assets are in full force and effect.
7.13 SUBSIDIARIES
All of the Subsidiaries of each of the Borrower and MMS as
of the Effective Date are listed in ITEM 7
("SUBSIDIARIES") of the Disclosure Schedule.
7.14 INTELLECTUAL PROPERTY
MMS owns and possesses all such material patents, patent
rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service mark rights and
copyrights as MMS considers reasonably necessary for the
conduct of the business of MMS as now conducted without,
individually or in the aggregate, any substantial
infringement upon rights of other Persons and there is no
individual patent or patent license, the loss of which
would result in a Materially Adverse Effect with respect to
MMS, except as may be disclosed in ITEM 8 ("MATERIAL
PATENTS AND TRADEMARKS") of the Disclosure Schedule.
7.15 TECHNOLOGY
Except as disclosed in ITEM 9 ("TECHNOLOGY") of the
Disclosure Schedule, (a) MMS owns or has the right to use
all technologies and processes reasonably required to
<PAGE> 82
operate and maintain the Project and (b) there are no
material license agreements granting MMS or any other
Person rights in any patented process or the right to use
technical or secret know-how that are required for the
operation or maintenance of the Project.
7.16 APPROVALS; PROJECT DOCUMENTS
(a) MMS (or any other Obligor on behalf of and for the benefit
of MMS) has entered into all Instruments and obtained all
Approvals required for the operation and maintenance of the
Project in accordance with Applicable Laws and sound
international mining and business practice (other than (i) those
identified in PART B of ITEM 1 ("PENDING MATERIAL APPROVALS") of
the Disclosure Schedule which MMS believes will be obtained as
and when required and (ii) those of a non-material nature which
MMS expects will be obtained as and when necessary in the course
of the operation and maintenance of the Project (all such
Approvals of a non-material nature, collectively, "NON-MATERIAL
APPROVALS")).
(b) Each of the Project Documents executed at the time this
representation is made or deemed to be made is in full force and
effect, is the legal, valid and binding obligation of MMS thereto
and, to MMS' knowledge, of all other parties thereto in
accordance with its terms, subject to Applicable Laws relating to
bankruptcy and the enforceability of creditors' rights generally
and by the fact that the availability of equitable remedies is
discretionary.
(c) All material performance required under each Project
Document executed at the time this representation is made or
deemed to be made by each party thereto has occurred (except
performance required by such Project Document to be performed at
a later date), and, to MMS' knowledge, no default or event or
condition which with notice, lapse of time or both could
constitute a default thereunder has occurred and is continuing.
(d) Save for the Union Contract, MMS is not, at the time this
representation is made or deemed to be made, party to any
contract or agreement which would be considered a Material
Project Document other than any such contract which complies with
the terms of this Agreement as are related to the Material
Project Documents.
<PAGE> 83
7.17 ENVIRONMENTAL WARRANTIES
Except as disclosed in ITEM 10 ("ENVIRONMENTAL MATTERS") of
the Disclosure Schedule or except where failure of any of
the following statements to be made would not reasonably be
expected to have a Materially Adverse Effect:
(a) MMS (and, to MMS' knowledge, each other Project Party) is,
and has at all times been, in compliance with, or has fully
remedied any non-compliance so as to be in compliance with, all
Environmental Laws in all material respects and all Approvals
(other than Non-Material Approvals) relating to Environmental
Laws necessary in connection with the ownership and operation of
its business (including the Project) are in full force and
effect. There are no acts, omissions, events, states of facts or
circumstances which may reasonably be expected to prevent or
interfere with MMS being in substantial compliance with any
Environmental Laws, including obtaining or being in substantial
compliance with any Approvals (other than Non-Material Approvals)
relating to Environmental Laws in the future, and no material
investment is necessary to obtain or renew any Approval (other
than any Non-Material Approval) relating to Environmental Laws.
(b) There are no present or, to MMS' knowledge, past acts,
omissions, events, states of facts or circumstances which have
resulted in (or could result in) any third party (including any
regulatory authority) taking any action or making any material
claim against MMS under any Environmental Laws including remedial
action (in particular in relation to contaminated land) or the
revocation, suspension, variation or non-renewal of any Approval
under any Environmental Laws and MMS has no notice of any
complaints, demands, civil claims, enforcement proceedings or of
any action required by any regulatory authority and there are no
investigations pending or, to MMS' knowledge, threatened in
relation to the failure of MMS to obtain any Approval (other than
any Non-Material Approval) under, or comply with, any
Environmental Laws.
7.18 PARI PASSU
The payment Obligations of each of the Borrower and MMS
under each Loan Document to which it is a party rank at
<PAGE> 84
least PARI PASSU in right of payment with all of such
Obligor's other unsecured and unsubordinated Indebtedness,
other than any such Indebtedness which is preferred by
mandatory provisions of Applicable Law.
8. COVENANTS
8.1 INFORMATIONAL AND FINANCIAL COVENANTS
Each of the Borrower and MMS agrees with each Finance Party
that, until all Commitments have terminated and all
Obligations have been paid and performed in full and such
Obligor will perform its relevant obligations set forth in
this Section.
8.1.1 FINANCIAL INFORMATION, ETC.
(a) MMS will deliver to the Administrative Agent copies of the
following financial statements, reports and information:
(i) promptly when available, and in any event within 90 days
after the close of each of its Fiscal Years, its consolidated
balance sheet at the close of such Fiscal Year and related
consolidated statements of operations and cashflows, loss and
deficit, and changes in financial position, as may be relevant
(with comparable information at the close of and for the prior
Fiscal Year) and reported on without Impermissible Qualification
by an independent certified public or chartered accountant of
recognized international standing; and
(ii) promptly when available, and in any event within 45 days
after the close of the first three Fiscal Quarters of each of its
Fiscal Years, its consolidated balance sheet at the close of such
Fiscal Quarter and related consolidated statements of operations
and cashflows, loss and deficit, and changes in financial
position, as may be relevant, for such Fiscal Quarter and for the
period in such Fiscal Year ending on the last day of such Fiscal
Quarter (with comparable information at the close of and for the
corresponding Fiscal Quarter of the prior Fiscal Year and for the
corresponding portion of such prior Fiscal Year) and certified by
its accounting or financial Authorized Representative.
<PAGE> 85
(b) The Borrower will deliver to the Administrative Agent
copies of the following reports and information:
(i) promptly when available, and in any event within 90 days
after the close of each of its Fiscal Years, its consolidated
balance sheet at the close of such Fiscal Year and related
consolidated statements of operations and cashflows, loss and
deficit, and changes in financial position, as may be relevant
(with comparable information at the close of and for the prior
Fiscal Year) and reported on without Impermissible Qualification
by an independent certified public or chartered accountant of
recognized international standing;
(ii) promptly when available, and in any event within 45 days
after the close of the first three Fiscal Quarters of each of its
Fiscal Years, its consolidated balance sheet at the close of such
Fiscal Quarter, and related consolidated statements of operations
and cashflows, loss and deficit, and changes in financial
position, as may be relevant, for such Fiscal Quarter and for the
period in such Fiscal Year ending on the last day of such Fiscal
Quarter (with comparable information at the close of and for the
corresponding Fiscal Quarter of the prior Fiscal Year and for the
corresponding portion of such prior Fiscal Year) and certified by
its accounting or financial Authorized Representative;
(iii)as soon as practicable and in any event within 30 days
following each March 31, June 30, September 30 or December 31, a
report (as to counterparties, trading dates, amounts hedged, etc)
in form and substance satisfactory to the Administrative Agent
concerning the Metal Trading Agreements then in effect; and
(iv) no later than 45 days following each June 30 and 60 days
following each December 31 of each calendar year, a Compliance
Certificate demonstrating compliance (or lack of compliance as
the case may be) with the financial ratios set forth in SECTION
8.1.5.
<PAGE> 86
8.1.2 DEFAULTS
As soon as practicable and in any event within three
Business Days after obtaining knowledge of the occurrence
of any Default relating to it, each of the Borrower and MMS
will furnish to the Administrative Agent a statement of its
chief financial Authorized Representative setting forth
details of such Default and the action which it has taken
and proposes to take with respect thereto.
8.1.3 MISCELLANEOUS INFORMATION CONCERNING THE PROJECT
MMS and (in the case of SUB-CLAUSES (a), (f) and (i)), the
Borrower will deliver to the Administrative Agent copies of
the following reports and information:
(a) as soon as practicable and in any event within 20
Business Days following the end of each calendar month,
(i) a production and operating report in form and
substance satisfactory to the Administrative Agent
including information on material developments or
changes (if any) in the production, operational,
economic, environmental and technical circumstances of
the Project for the month then ending, (ii) cashflow
for each of the Borrower and MMS for the month then
ending and (iii) the balances (including any Cash
Equivalent Investments) standing to the credit of the
Proceeds Account for the month then ending;
(b) not later than each March 1 (and as soon as practicable
after the date MMS shall prepare any interim budget or
forecast), a budget in respect of the Project for the
then current calendar year and a forecast in respect of
the Project for the following eight years (or any
shorter period until the Project End Date) in such form
and containing such information as the Administrative
Agent shall reasonably require;
(c) as soon as practicable after the receipt or sending
thereof, copies of any material report or notice in
connection with the Project filed with or received from
any local, governmental or statutory agency;
(d) as soon as practicable and in any event within 30 days
after obtaining knowledge thereof, details of any
material disputes with insurers or any non-payment or
reduction in payment with respect to any Project
Insurances by any insurer;
<PAGE> 87
(e) as soon as practicable prior to January 1st of each
calendar year, a memorandum, dated as at such date,
summarizing the Project Insurances then in effect;
(f) as soon as practicable details of any litigation,
arbitration or administrative proceedings, which if
resolved against either the Borrower or MMS could
result in such Obligor suffering a loss in excess of
U.S.$500,000 (or the equivalent thereof in any other
currency);
(g) not later than 90 days following the end of each of its
Fiscal Years, a report, satisfactory in form and scope
of coverage to the Administrative Agent, summarizing
the compliance (or non-compliance as the case may be)
by the Project with all relevant Environmental Laws for
the Fiscal Year then ending;
(h) not later than 90 days following the end of each of its
Fiscal Years, a report as to Reserves at the Project;
and
(i) all other information relating to its financial
condition, operations or assets the Administrative
Agent (or any Lender by notice to the Administrative
Agent, which notice shall be copied to either the
Borrower or MMS) may from time to time reasonably
request.
8.1.4 BOOKS AND RECORDS; ACCESS
Each of the Borrower and MMS will keep financial records
and statements reflecting all of its business affairs and
transactions in accordance with GAAP. MMS will, upon
reasonable notice and so as not to interfere with the
operations of the Project, permit the Independent
Consultant, any insurance consultant appointed by the
Administrative Agent (an "INSURANCE CONSULTANT"), the
Agents and the Lenders or any of their respective
representatives to inspect any and all of its properties
and operations and, if a Default shall have occurred and be
continuing, to discuss its financial matters with its
officers, independent chartered accountants and certified
public accountants, as the case may be (and hereby
authorizes such independent chartered accountants or
certified public accountants, as the case may be, to
discuss its financial matters with any of the foregoing
Persons or its representatives whether or not any
<PAGE> 88
representative of MMS is present) and to examine (and
photocopy extracts from) any of its books or other
corporate records. Without limiting the generality of the
foregoing, MMS shall provide all relevant and reasonable
assistance to the Independent Consultant, any Insurance
Consultant and the Agents in connection with the
performance of their duties contemplated hereby. It is
expressly understood that none of the Independent
Consultant, any Insurance Consultant or any of the Finance
Parties assumes any obligation to any Obligor in respect of
the Project, unless caused by any such Person's gross
negligence or wilful misconduct.
8.1.5 FINANCIAL COVENANTS OF THE BORROWER
The Borrower agrees with each Finance Party that it shall ensure
that at each Compliance Date:
(a) the Loan Life Cover Ratio, as at any Calculation Date
coinciding with or following such Compliance Date and
with respect to each corresponding Forecast Period to
(and including) the Maturity Date, is not less than
1.5:1.0;
(b) the Project Life Cover Ratio, as at any Calculation
Date coinciding with or following such Compliance Date
and with respect to each corresponding Forecast Period
to (and including) the Project End Date, is not less
than 2.0:1.0;
(c) the Debt Service Cover Ratio for that Measurement
Period coinciding with or following such Compliance
Date (and for each subsequent Measurement Period to
(and including) the Maturity Date) is not less than
1.25:1.0;
(d) the Reserve Debt Cover Ratio is not (or is not
projected to be at any time prior to the Maturity Date)
less than 4.0:1.00; and
(e) the Reserve Tail Cover Ratio is not (or is not
projected to be at any time prior to the Maturity Date)
less than 0.30:1.0.
8.1.6 RECALCULATION OF BASE CASE
The Borrower shall, with the approval of the Administrative
Agent (acting with the assistance of the Independent
<PAGE> 89
Consultant), such approval not to be unreasonably withheld,
update the Base Case from time to time at least on an
annual basis, no later than each April 1, commencing
April 1, 2000. Any such updated Base Case shall be the
Base Case for all purposes of this Agreement and each other
Loan Document. If no agreement between the Borrower, and
the Administrative Agent and the Independent Consultant can
be reached on a revised Base Case by April 1 of the
relevant calendar year, then the Borrower, the
Administrative Agent and the Independent Consultant shall
negotiate further in updating the Base Case so as to be
acceptable to all parties (and may utilize the services of
an independent expert); PROVIDED, HOWEVER, that if such
negotiations have not produced a Base Case acceptable to
the Administrative Agent (acting in consultation with the
Independent Consultant) by the May 30 next following, then
the Base Case then in effect shall remain the Base Case for
all purposes of this Agreement and each other Loan
Document.
8.1.7 ACCURACY OF INFORMATION
All factual information hereafter furnished by or on behalf
of either the Borrower or MMS in writing to any of the
Finance Parties for the purposes of or in connection with
this Agreement or any transaction contemplated hereby will
be true and accurate in every material respect on the date
as of which such information is dated or certified and such
information shall not be incomplete by omitting to state
any material fact necessary to make such information not
misleading.
8.2 AFFIRMATIVE COVENANTS
Each of the Borrower and MMS agrees with each Finance Party
that, until all Commitments have terminated and all
Obligations have been paid and performed in full, such
Obligor will perform its relevant obligations set forth in
this Section.
8.2.1 COMPLIANCE WITH LAWS, ETC.
Each of the Borrower and MMS will comply (a) in all
material respects with all Applicable Laws and (b) the
terms of any Operative Document to which it is a party.
<PAGE> 90
8.2.2 APPROVALS; OPERATIVE DOCUMENTS
(a) Each of the Borrower and MMS will obtain, maintain in
full force and effect, and comply in all material
respects with, all Approvals (including those
identified in ITEM 1 ("APPROVALS") of the Disclosure
Schedule but excluding Non-Material Approvals) as may
be reasonably required from time to time for such
Obligor to (i) execute, deliver, perform and preserve
its rights under any of the Operative Documents
executed or to be executed by it, (ii) grant and
perfect the Liens granted or purported to be granted
and perfected by it pursuant to any Collateral
Agreement to which it is a party and (iii) in the case
of MMS, own, lease, use or license the Project Assets
in which it holds any interest and operate the Project
in accordance with sound mining and business practice.
(b) Without limiting CLAUSE (a), each relevant Obligor will
use its best efforts to obtain all Approvals in PART B
of ITEM 1 ("PENDING MATERIAL APPROVALS") of the
Disclosure Schedule by the date set forth in the
Disclosure Schedule opposite such Approval and, within
five (5) Business Days of obtaining any such Approval
deliver to the Administrative Agent certified copies
(or originals where requested by the Administrative
Agent) of all such Approvals as then in effect.
(c) MMS will, subject to SECTION 8.3.12, enter into and/or
keep in full force and effect the Project Documents
described in ITEM 2 ("CURRENT/PENDING PROJECT
DOCUMENTS") of the Disclosure Schedule and such other
contracts or agreements as may be reasonably required
or advisable from time to time to construct, develop,
operate and maintain the Project substantially in
accordance with sound mining and business practice,
provide to the Administrative Agent (in sufficient
copies for the Lenders) a true and complete copy of all
Project Documents (including, if the Administrative
Agent shall reasonably request, an English translation
of any such Project Document executed in Spanish)
entered into after the date hereof, and shall take all
actions as the Collateral Agent shall reasonably
require in order that MMS' right, title and interest
in, to and under each Project Document will be assigned
by way of security in favor of the Finance Parties.
<PAGE> 91
8.2.3 MAINTENANCE OF CORPORATE EXISTENCE
Each of the Borrower and MMS will do and will cause to be
done at all times all things necessary to maintain and
preserve its corporate existence and to be duly qualified
to do business and be in good standing (where such concept
is relevant) as a foreign corporation in each jurisdiction
where the nature of its business requires it to be so
qualified and where there is reasonable likelihood of a
Material Adverse Effect if such Obligor is not so
qualified.
8.2.4 PAYMENT OF TAXES, ETC.
Each of the Borrower and MMS will pay and discharge, as the
same may become due and payable, all taxes, assessments,
fees and other governmental charges or levies against it or
on any of its property, as well as claims of any kind or
character (including claims for sums due for labor,
material, supplies, personal property and services);
PROVIDED, HOWEVER, that the foregoing shall not require
such Obligor to pay or discharge any such tax, assessment,
fee, charge or levy so long as it shall be diligently
contesting the validity or amount thereof in good faith by
appropriate proceedings and shall have set aside on its
books adequate reserves in accordance with GAAP with
respect thereto or, in the case of any such claims due, to
claims where failure to make payment therefor would not
result in a Materially Adverse Effect with respect to such
Obligor.
8.2.5 INSURANCE
(a) MMS will maintain with responsible insurance companies
satisfactory to the Collateral Agent acting in its reasonable
discretion: (i) insurance as required under this Agreement
(including that referred to in the Insurance Summary), the
Collateral Agreements and/or any other Operative Document, (ii)
such other insurance (including business interruption insurance)
or re-insurance with respect to the properties and business of
MMS against such casualties and contingencies and of such types
and in such amounts as is customary in the case of similar
businesses similarly situated and (iii) such other insurance and
re-insurance as may be required by any Applicable Law. MMS will
not amend in any material respect or dilute
<PAGE> 92
its insurance coverage without the prior written
consent of the Collateral Agent. MMS agrees that the
Agents may employ an Insurance Consultant to advise the
Finance Parties from time to time on the insurance
aspects of the Project and the Facility.
(b) All of the insurance policies referred to in CLAUSE (a)
will, in each case in accordance with standard practice in the
mining industry:
(i) specify the Collateral Agent (for the rateable benefit of
the Finance Parties) as an additional insured or as a loss payee
and/or contain such endorsements in favor of the Collateral Agent
as the Collateral Agent shall reasonably require;
(ii) not be capable of cancellation (or non-renewable or subject
to a material decrease in the scope or amount of coverage
(including by way of increase in any deductible)) as against the
Collateral Agent (including for failure to pay premiums) or
subject to material alteration of any kind without at least 30
days' (or less in case of war and kindred risks) prior written
notice to the Collateral Agent;
(iii)in the case of insurance covering loss or damage to any of
the Project Assets, contain a "breach of warranty" provision
(including that the policy shall not be invalidated as against
the Collateral Agent by reason of any action or failure to act of
MMS or any other Person (including any negligence on behalf of
the foregoing)), provide for waiver of any right of set-off,
recoupment, subrogation, counterclaim or any other deduction, by
attachment or otherwise, with respect to any liability of MMS,
and shall provide that, if the Collateral Agent shall so request,
all amounts payable by reason of loss or damage to any of the
Project Assets shall be payable to the Collateral Agent for
replacement; and
(iv) provide for payments of claims thereunder in Dollars.
(c) MMS will cause proceeds of all Insurances maintained with
respect to the Project to be applied in accordance with ARTICLE
4, the Account Agreement and all relevant Collateral Agreements.
<PAGE> 93
8.2.6 MANAGEMENT AND OPERATION
MMS shall manage, operate and maintain the Project and
produce and process Project Output (and ensure that Project
Output is refined by, and all dore and similar products are
sold and, subject to Applicable Law, exported to, gold
dealers and refiners of international reputation located
outside Venezuela so as to enable the Borrower to meet its
payment and hedging obligations under this Agreement) in
accordance with Applicable Laws and sound international
mining and business practice and its other obligations
arising under the Operative Documents. MMS shall use its
best efforts to ensure that there are sufficient competent
technical and management employees engaged in connection
with the Project in order to comply with the requirements
of the foregoing sentence.
8.2.7 HEDGING - METAL PRICE
(a) The Borrower will at all dates maintain in full force
and effect Metal Trading Agreements sufficient to cover
all Dollar Loans, Taxes and royalty and similar fees
and Operating Expenditures (including Political Risk
Insurance premiums) in respect of the Project, in each
case projected to be outstanding or expended during the
period commencing as at such date and ending on the
Maturity Date (the "HEDGING PERIOD").
(b) The counterparties to all Metal Trading Agreements
shall be banks, other financial institutions or trading
institutions having Indebtedness (with a maturity of
one year or less) of Approved Credit Quality and
otherwise reasonably acceptable to the Administrative
Agent. The Borrower shall ensure that its interest in
all Metal Trading Agreements (including those initially
assigned to the Borrower by Hecla Mining or any of its
Affiliates) is assigned by way of security in favor of
the Collateral Agent (for the benefit of the Finance
Parties) pursuant to the Security Agreement (U.S.
Assets)) and take all steps required by either Agent to
effect such assignment, including requiring that such
counterparties enter into instruments acknowledging
such assignment by way of security.
(c) Notwithstanding the foregoing, the Borrower shall at no
time have in effect Committed Hedging Agreements (other
than Gold Loans) covering more than 75% of Reserves.
<PAGE> 94
(d) To the extent either Hecla Mining or any of its
Affiliates (other than the Borrower) is a party to any
Metal Trading Agreements assigned to the Borrower, the
Borrower will cause such Person to acknowledge that
assignment in such a writing as the Collateral Agent
may request.
8.2.8 ENVIRONMENTAL COVENANT
(a) MMS will, and will use reasonable efforts to ensure
that each other Project Party will, use and operate the
Project, the Project Assets and all of the facilities
and properties related thereto in material compliance
with, keep all Approvals (other than Non-Material
Approvals) relating to environmental matters in effect
and remain in material compliance with and handle all
Hazardous Materials in material compliance with all
applicable Environmental Laws.
(b) MMS will immediately notify the Administrative Agent
and provide copies upon receipt of all material written
claims, complaints, notices or inquiries relating to
the condition of its facilities and properties or
compliance with Environmental Laws, and contest such
claims diligently or in good faith cure and/or (to the
extent practicable) have dismissed with prejudice any
actions and proceedings relating to compliance with
Environmental Laws.
(c) MMS will provide such information and certifications
which either Agent may reasonably request from time to
time to evidence compliance with this Section.
8.2.9 MAINTENANCE OF PROJECT ASSETS
MMS will maintain, preserve, protect and keep:
(a) all of its ownership, lease, use, license and other
interests in the Project Assets (including all Mining
Rights) as are reasonably necessary for MMS to operate
and maintain the Project substantially in accordance
with sound mining and business practice; and
(b) all of the Project Assets in good repair, working order
and condition, and make necessary and proper repairs,
renewals and replacements so that its business carried
on in connection therewith may be properly conducted at
all times, unless the continued maintenance of any of
<PAGE> 95
such Project Assets is no longer necessary or
economically desirable for the operation of the
Project, such operation to be substantially in
accordance with sound mining and business practice.
8.2.10 PARI PASSU
Each of MMS and the Borrower will ensure that its payment
Obligations rank at least PARI PASSU in right of payment
with all of such Obligor's other unsecured and
unsubordinated Indebtedness other than any such
Indebtedness which is preferred by mandatory provisions of
Applicable Law.
8.2.11 COLLATERAL AGREEMENTS; AFTER-ACQUIRED COLLATERAL
(a) Each of the Borrower and MMS will maintain at all times
in full force and effect (or where appropriate,
promptly renew in a timely manner) all collateral which
is the subject of the relevant Collateral Agreements
and from time to time execute, acknowledge and deliver
or cause to be executed, acknowledged and delivered
such further instruments as may be reasonably requested
by the Collateral Agent for perfecting or maintaining
in full force and effect the Liens granted under the
Collateral Agreements (including with respect to any
assets forming part of or relating to the Project
acquired or entered into after the date hereof, whether
pursuant to the Acquisition Transaction or otherwise)
upon the request of the Collateral Agent. Without
limiting the foregoing, each of the Borrower and MMS
will, upon the request of the Collateral Agent, effect,
at its own cost and expense, all relevant
notarizations, registrations and filings, and take all
other actions as may be necessary or advisable, to
ensure that a valid and first priority Lien in any such
asset (including any such asset which is not of a type
encumbered pursuant to any Collateral Agreement as at
the Effective Date) is granted in favor of the Finance
Parties.
(b) MMS will, no later than the date which falls 60 days
after the Effective Date, ensure that the Real Property
Mortgage, the Chattel Mortgage and the Pledge Without
Conveyance are executed and procure that all relevant
notarizations, registrations and filings are made, and
that all other actions as may be necessary or advisable
are taken, in each case to ensure that a valid and
<PAGE> 96
first priority Lien is granted in favor of the Finance
Parties over each asset subject of each relevant
Collateral Agreement.
(c) In addition, as soon as practicable after the date of
execution of any Material Project Document, MMS will,
at its own cost and expense, take such actions as may
be necessary or advisable to ensure that a valid and
first priority Lien in MMS' interest in such Material
Project Document is granted in favor of the Finance
Parties pursuant to an Assignment of Contract Rights,
including ensuring that the relevant contractual
counterparty acknowledges such Lien pursuant to a
written instrument in favor of the Finance Parties.
8.3 NEGATIVE COVENANTS
Each of the Borrower and MMS agrees with each Finance Party
that, until all Commitments have terminated and all
Obligations have been paid and performed in full, such
Obligor will perform its relevant obligations set forth in
this Section.
8.3.1 BUSINESS ACTIVITIES; PLACE OF BUSINESS; ORGANIC
DOCUMENTS; FISCAL YEAR
(a)Neither the Borrower nor MMS will:
(i) maintain any chief executive office or principal
place of business (and, in the case of MMS, the
location of the Project or Puerto Ordaz,
Venezuela) without first taking (to the
satisfaction of the Collateral Agent) all actions
necessary to protect and perfect the Liens granted
pursuant to the relevant Collateral Agreements;
(ii) (x) amend its Organic Documents in any material
respect or (y) change its corporate name;
PROVIDED, HOWEVER, that the Borrower may change
its corporate name to Hecla Resources Investments
Limited and MMS may change its corporate name to
Minera Hecla Venezolana, C.A. as long as such
Obligor first takes (to the satisfaction of the
Collateral Agent) all actions necessary to protect
and perfect the Liens granted pursuant to the
relevant Collateral Agreements as are necessary or
advisable as a result of such corporate name
changes; or
<PAGE> 97
(iii)change its Fiscal Year.
(b) The Borrower shall not engage in any business
activity other than in its capacity as a direct or
indirect shareholder of MMS, Monarch Mexico and other
Subsidiaries engaged in exploration and production
activities in the mining industry.
(c) MMS will not engage in any business activity
other than the operation and maintenance of the Project
(including exploration and development of orebodies in
the immediate area of the Project) and activities
reasonably incidental thereto.
8.3.2 INDEBTEDNESS
Neither the Borrower nor MMS will (or will permit its
Subsidiaries to) create, incur, assume, or suffer to exist
or otherwise become or be liable in respect of any
Indebtedness other than (without duplication):
(a) Indebtedness in respect of the Loans and other
Obligations;
(b) Indebtedness in respect of Metal Trading Agreements
pursuant to SECTION 8.2.7;
(c) in the case of MMS, at any date (i) unsecured
Indebtedness outstanding at such date incurred by way
of open accounts of less than 270 days extended by
suppliers, or letters of credit opened for the benefit
of suppliers, on normal trade terms in connection with
purchases of goods and services in the ordinary course
of business which constitute Capital Expenditures and
Operating Expenditures (and excluding, for the
avoidance of doubt, Indebtedness incurred through the
borrowing of money, Contingent Liabilities or retainage
pursuant to any Project Document), (ii) Indebtedness
not in excess of U.S.$500,000 (or the equivalent
thereof in any other currency) incurred to suppliers of
equipment in respect of the deferred purchase price of
such equipment and (iii) Indebtedness evidenced by the
Project Documents;
(d) Indebtedness in respect of taxes, assessments or
governmental charges, and Indebtedness in respect of
claims for labor, materials or supplies incurred in the
ordinary course of business to the extent that payment
thereof shall not at the time be required to be made in
accordance with the provisions of SECTION 8.2.4;
<PAGE> 98
(e) Indebtedness in respect of judgments or awards,
enforcement of which has not been stayed by reason of a
pending appeal or otherwise, for a period of more than
21 days, which do not, in the aggregate, exceed
U.S.$500,000 (or the equivalent thereof in any other
currency) or the payment of which is not covered in
full by insurance (subject to any customary
deductibles) maintained with responsible insurance
companies;
(f) Approved Subordinated Indebtedness;
(g) any other Indebtedness disclosed in ITEM 11
("INDEBTEDNESS") of the Disclosure Schedule; and
(h) in the case of MMS, Indebtedness (but not for borrowed
money or precious metals) not otherwise permitted by
any of the foregoing, in an aggregate principal amount
not in excess of U.S.$500,000 (or the equivalent
thereof in any other currency) at any one time
outstanding.
8.3.3 LIENS
Neither the Borrower nor MMS will (or will permit its
Subsidiaries to) create, incur, assume or suffer to exist
any Lien upon any of its properties, revenues or assets,
whether now owned or hereafter acquired, except:
(a) Liens in favor of any of the Finance Parties granted
pursuant to any Loan Document;
(b) Liens arising from mandatory provisions of Applicable
Law;
(c) Liens specifically permitted by the Collateral
Agreements and the Account Agreement;
(d) in the case of MMS, Liens in respect of deferred value
added tax relating to imported goods constituting
Project Assets;
(e) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or
thereafter payable without penalty or being contested
in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have
been set aside on its books or in the case of any other
<PAGE> 99
claims, where failure to make payment therefor would
not be likely to result in a Materially Adverse Effect
with respect to such Obligor;
(f) Liens of carriers, warehousemen, mechanics,
materialmen, suppliers and landlords incurred in the
ordinary course of business for sums not overdue or
being contested in good faith by appropriate
proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its
books;
(g) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment
insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than
for borrowed money) entered into in the ordinary course
of business or to secure obligations on surety or
appeal bonds;
(h) judgment Liens (relating to judgments or awards which
do not in the aggregate, exceed U.S.$500,000 (or the
equivalent thereof in any other currency)) in existence
less than 21 days after the entry thereof or with
respect to which execution has been stayed or the
payment of which is covered in full (subject to a
customary deductible) by insurance maintained with
responsible insurance companies;
(i) in the case of MMS, Liens securing Indebtedness
permitted to be incurred pursuant to SECTION
8.3.2(c)(ii); PROVIDED, HOWEVER, that any such Lien
shall attach only to the equipment in respect of which
such Indebtedness is incurred; and
(j) any other Lien disclosed in ITEM 12 ("LIENS") of the
Disclosure Schedule.
8.3.4 CAPITAL EXPENDITURES
MMS will not incur Capital Expenditures other than (i) as
permitted by the Base Case; (ii) those required for
replacements and repairs, the maintenance of satisfactory
operating conditions essential to the Project and ensuring
that the Project is in compliance with its obligations
under SECTION 8.2.8 and (iii) additional Capital
Expenditures in an amount not to exceed U.S.$500,000 (or
its equivalent in any other currency) in any Fiscal Year.
<PAGE> 100
8.3.5 INVESTMENTS
Neither MMS nor the Borrower will acquire all or
substantially all of the assets of any other Person or form
or suffer to exist any Subsidiary (other than any
Subsidiary of the Borrower existing on the Effective Date
and listed in ITEM 7 ("SUBSIDIARIES") of the Disclosure
Schedule) and will not make, incur, assume or suffer to
exist any Investment in any other Person, except:
(a) in the case of the Borrower, Investments by way of
Approved Subordinated Indebtedness made in favor of MMS
(subject at all times to the Intercompany Subordination
Agreement) or Capital Contributions made, whether
directly or indirectly through any intermediate
Subsidiary, in favor of MMS or Monarch Mexico; and
(c) in the case of MMS and the Borrower, Cash Equivalent
Investments permitted to be made with balances standing
to the credit of the Proceeds Account pursuant to
ARTICLE 4.
8.3.6 RESTRICTED PAYMENTS, ETC.
Neither the Borrower nor MMS will:
(a) declare, pay or make any dividend or distribution (in
cash, property or obligations) on any shares of any
class of its capital stock (now or hereafter
outstanding) or on any warrants, options, convertible
securities or other rights with respect to any shares
of any class of its capital stock (now or hereafter
outstanding) or apply any of its funds, property or
assets to the purchase, redemption or other retirement
of any shares of any class of its capital stock (now or
hereafter outstanding) or warrants, options,
convertible securities or other rights with respect to
any shares of any class of its capital stock (now or
hereafter outstanding);
(b) repay, redeem, purchase or otherwise defease any
Indebtedness owing to, or make any other payment to or
on behalf of, any Affiliate (including all Approved
Subordinated Indebtedness); or
(c) make any deposit for any of the foregoing purposes or
otherwise discharge any Indebtedness incurred by any
Affiliate;
<PAGE> 101
PROVIDED, HOWEVER, that the foregoing Obligors may make
payment to any payee of any Indebtedness described above,
make any other payment to any of its Affiliates or take any
other action for any of the foregoing purposes using moneys
in the Proceeds Account so long as:
(i) such payment is made, once during each six month period
(and only on a Payment Date, after giving effect to payments of
Principal Amounts required pursuant to SECTION 3.1.1 or, if the
Principal Amount scheduled to be repaid on a Payment Date is
prepaid pursuant to SECTION 3.1.2(a), on the date of such
prepayment) but only to the extent of Available Free Cashflow
(computed as at such Payment Date) or as at the date of such
prepayment; and
(ii) no Default (including arising under SECTION 8.1.5) shall
have then occurred and be continuing or would result from such
proposed payment.
8.3.7 TAKE OR PAY CONTRACTS
Except as set forth in ITEM 13 ("TAKE OR PAY CONTRACTS") of
the Disclosure Schedule neither MMS nor the Borrower will
not enter into or be a party to any arrangement for the
purchase of materials, supplies, other property or services
if such arrangement by its express terms requires that
payment be made by such Obligor regardless of whether or
not such materials, supplies, other property or services
are delivered or furnished to it. For the avoidance of
doubt, nothing in this Section shall prohibit such Obligor
from entering into any Metal Trading Agreement.
8.3.8 CONSOLIDATION, MERGER, ETC.
Neither the Borrower nor MMS will liquidate or dissolve,
consolidate with, or merge into or with, any other
corporation, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or any
division thereof); PROVIDED, HOWEVER, with the prior
written consent of the Administrative Agent (not to be
unreasonably withheld), each such Obligor may be involved
in reorganizations by Hecla Mining of its Subsidiaries as
long as the structure of and the benefits conferred by the
Liens pursuant to the Collateral Agreements in effect
before such reorganization shall be maintained.
<PAGE> 102
8.3.9 ASSET DISPOSITIONS, ETC.
Neither MMS nor the Borrower will sell, transfer, lease or
otherwise dispose of, or grant options, warrants or other
rights with respect to, any of its assets (including
accounts receivable) to any Person, unless, in the case of
MMS:
(a) such disposition is made in the ordinary course of
business and consists of finished goods inventories
(which may consist of gold bearing concentrates, dore,
gold-bearing ore, refined gold or other product forms
customarily sold as end products in the mining
industry);
(b) such disposition is of obsolete, redundant or replaced
assets, which are no longer used or useful to MMS; or
(c) the net book value of all assets disposed of by MMS
(excluding, however, assets disposed of pursuant to
CLAUSES (a) and (b)) in the same Fiscal Year does not
exceed U.S.$500,000 (or the equivalent thereof in any
other currency) and fair value in cash is received
therefor.
Nothing in this Section is intended to restrict MMS'
ability to sell, transfer or otherwise dispose of the
Monarch Mexico Shares or any assets of Monarch Mexico,
whether to an Affiliate of Hecla Mining or otherwise.
8.3.10 TRANSACTIONS WITH AFFILIATES
Neither MMS nor the Borrower will enter into, or cause,
suffer or permit to exist:
(a) any arrangement or contract pursuant to which any
Indebtedness is extended by such Obligor to any
Affiliate;
(b) any arrangement or contract with any of its Affiliates
of a nature customarily entered into by Persons which
are Affiliates of each other (including management or
similar contracts or arrangements relating to the
allocation of revenues, taxes and expenses or
otherwise) requiring any payments to be made by such
Obligor to any Affiliate unless such arrangement is
fair and equitable to such Obligor; and
<PAGE> 103
(c) any other transaction, arrangement or contract with any
of its other Affiliates which would not be entered into
by a prudent Person in the position of such Obligor
with, or which is on terms which are less favorable to
such Obligor than are obtainable from, any Person which
is not one of its Affiliates.
8.3.11 RESTRICTIVE AGREEMENTS, ETC.
Neither MMS nor the Borrower will enter into any agreement
(excluding this Agreement and the Loan Documents)
prohibiting the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or
hereafter acquired, or the ability of such Obligor to amend
or otherwise modify this Agreement or any other Operative
Document.
8.3.12 PROJECT DOCUMENTS
(a) MMS will not in any material respect (x) amend, modify
or waive, terminate, replace or discharge performance
under any Material Project Document without the prior
written consent of the Administrative Agent or (y)
amend, modify or waive, terminate, replace or discharge
performance under any Project Document (not being a
Material Project Document) without giving notice (as
soon as practicable and in any event within 30 days
following the relevant event) to the Administrative
Agent.
(b) MMS will not enter into any contract or agreement that
would be considered a Material Project Document without
the prior written consent of the Administrative Agent.
For the avoidance of doubt, any such new contract or
agreement entered into by MMS to which the
Administrative Agent shall have granted its consent
shall be considered and designated a "MATERIAL PROJECT
DOCUMENT" for all purposes of this Agreement.
(c) MMS will not enter into any contract or agreement
relating to the operation or maintenance of the Project
with a contractual value (however denominated) in
excess of U.S$500,000 or the equivalent thereof in any
other currency (other than any Material Project
Document, any Project Document described in SUB-CLAUSE
(b) of the definition thereof or any permitted
replacement therefor) without giving notice thereof to
<PAGE> 104
the Administrative Agent as soon as practicable (and in
any event no later than 30 days thereafter). Any such
new contract or arrangement shall be considered and
designated a "PROJECT DOCUMENT".
(d) MMS will, as soon as practicable following execution
thereof, provide a true and complete copy of any new or
replacement contract or agreement (or amendment thereof
or supplement thereto) described in CLAUSE (a), (b) or
(c) to the Administrative Agent and will take all
actions as the Collateral Agent shall reasonably
require in order that MMS' right, title and interest
into and under such contract or agreement will be
assigned by way of security in favor of the Finance
Parties.
8.3.13 ROYALTY AGREEMENTS
MMS will not enter into any agreement relating to the
granting of royalties or net profits interests in
connection with the Project other than as set forth in the
royalty agreements listed in ITEM 14 ("ROYALTY AGREEMENTS")
of the Disclosure Schedule.
9. EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT
The term "EVENT OF DEFAULT" shall mean any of the events
set forth in this Section.
9.1.1 NON-PAYMENT OF OBLIGATIONS
Any Obligor:
(a) shall default in the payment or prepayment when due of
any Principal Amount of or shall default in the
provision of collateral pursuant to an election made
under SECTION 3.1.2(b)(y); or
(b) shall default in the payment when due of any other
Obligation (and such default shall continue unremedied
for a period of two days).
<PAGE> 105
9.1.2 NON-PERFORMANCE OF CERTAIN COVENANTS
(a) At any date or with respect to any date described in
the definitions of any of the ratios set forth in the
following clauses at which compliance is required in
the future: (i) the Loan Life Cover Ratio shall be (or
shall be projected to be) less than 1.25:1.0, (ii) the
Project Life Cover Ratio shall be (or shall be
projected to be) less than 1.5:1.0 or (iii) the Debt
Service Cover Ratio shall be (or shall be projected to
be) less than 1.15:1.0.
(b) Any relevant Obligor shall default in the due
performance and observance of any of its obligations
under SECTION 8.1.5(d) or (e), 8.2.3, 8.2.10 or 8.3
(other than, to the extent such default shall have
arisen as a result of any action or event beyond the
control of the relevant Obligor, SECTION 8.3.2 or
8.3.3).
9.1.3 NON-PERFORMANCE OF OTHER OBLIGATIONS
The Borrower or any other Obligor shall default in the due
performance or observance of any term, condition, covenant
or agreement, whether contained herein or in any other Loan
Document executed by it (other than a default arising
pursuant to SECTION 9.1.1 or 9.1.2) and, if capable of cure
or remedy, such default shall continue unremedied for a
period of 10 Business Days (or such longer period as the
Administrative Agent may agree, if the Administrative Agent
determines that such default is reasonably capable of being
cured within such longer period) after notice thereof shall
have been given to the Borrower or such other Obligor by
the Administrative Agent.
9.1.4 BREACH OF REPRESENTATION OR WARRANTY
Any representation or warranty of the Borrower or any other
Obligor hereunder or in any other Loan Document executed by
it or in any other writing furnished by or on behalf of
such Obligor to any Finance Party for the purposes of or in
connection with this Agreement or any such Loan Document is
or shall be incorrect when made in any material respect.
9.1.5 DEFAULT ON OTHER INDEBTEDNESS
A default shall occur in the payment when due (subject to
any applicable grace period), whether by acceleration or
<PAGE> 106
otherwise, by any of the Borrower or MMS under any
Indebtedness (excluding Indebtedness described in SECTION
9.1.1) of such Obligor having a principal amount,
individually or in the aggregate, in excess of U.S.$500,000
(or the equivalent of any of the foregoing in any other
currency), or a default shall occur in the performance or
observance of any obligation or condition with respect to
such Indebtedness if (a) (i) the effect of such default is
to permit (after the passage of time, the giving of notice,
the making of any required determination or any combination
of the foregoing) the acceleration of the maturity of any
such Indebtedness and (ii) in the reasonable opinion of the
Administrative Agent such default is not capable of being
cured within the applicable period for cure set forth in
the relevant documentation relating to such Indebtedness,
or (b) such default shall continue unremedied for any
applicable period of time sufficient to permit the holder
or holders of such Indebtedness, or any trustee or agent
for such holders, to cause such Indebtedness to become due
and payable prior to its expressed maturity.
9.1.6 BANKRUPTCY, INSOLVENCY, ETC.
Any Obligor shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for such
Person, or any property of any thereof, or make a general
assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for such
Person or for a substantial part of the property of any thereof,
and such trustee, receiver, sequestrator or other custodian shall
not be discharged within 60 days, provided that each of the
Borrower and MMS hereby expressly authorizes the Administrative
Agent to appear in any court conducting any relevant proceeding
during such 60-day period to preserve, protect and defend the
rights of the Finance Parties under the Loan Documents;
<PAGE> 107
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of
any Person and, if such case or proceeding is not commenced by
such Person, such case or proceeding shall be consented to or
acquiesced in by such Person or shall result in the entry of an
order for relief or shall remain for 60 days undismissed,
provided that each of the Borrower and MMS hereby expressly
authorizes the Administrative Agent to appear in any court
conducting any relevant proceeding during such 60-day period to
preserve, protect and defend the rights of the Finance Parties
under the Loan Documents;
(e) suffer any comparable event to any of the foregoing in any
jurisdiction; or
(f) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
9.1.7 METAL TRADING AGREEMENTS
Any default shall occur under any of the Metal Trading
Agreements or any of the foregoing shall terminate or cease
in whole or in part to be the legal, valid and binding
obligation of the counterparty thereunder or the assignment
by Hecla Mining (or any Affiliate thereof other than the
Borrower) of any of such Metal Trading Agreements to the
Borrower shall terminate or cease in whole or in part to
transfer their benefits to the Borrower; PROVIDED, HOWEVER,
that no Event of Default shall be deemed to have occurred
pursuant to this Section if, within five Business Days
after such default, termination or cessation, the Borrower
effects replacement Metal Trading Agreements such that the
Borrower would again be in compliance with the obligations
set forth in SECTION 8.2.7.
9.1.8 PROJECT DOCUMENTS, ETC.
(a) Any of the Project Documents (other than as permitted
by in SECTION 8.3.12(a)) shall terminate or for any
reason cease to be in full force and effect in
accordance with its terms except if such termination or
cessation is (i) capable of cure or remedy by MMS, in
which case such termination or cessation is not
remedied within ten Business Days after the occurrence
thereof or (ii) in the normal course of the relevant
contractual terms of such Project Documents.
<PAGE> 108
(b) A default by any party under any of the Project
Documents (other than as permitted by SECTION
8.3.12(a)) shall occur, and such default would result
in a Materially Adverse Effect with respect to MMS and
such default, if capable of cure or remedy, is not
remedied within twenty (20) Business Days after
notification to MMS from the Administrative Agent that
it is of such opinion.
9.1.9 IMPAIRMENT OF LOAN DOCUMENTS
This Agreement or any other Loan Document shall terminate
or cease in whole or part to be the legal, valid, binding
and enforceable obligation of the relevant Obligor party
thereto; the relevant Obligor shall, directly or
indirectly, contest in any manner such effectiveness,
validity, binding nature or enforceability; or any Lien
securing any Obligation shall, in whole or in part, cease
to be a perfected Lien which, except as permitted by
SECTION 8.3.3, ranks first in priority.
9.1.10 ABANDONMENT, MINING RIGHTS
(a) MMS shall abandon all or any significant portion of its
interest in the Project or any material Project Assets,
put the Project on a care and maintenance basis or
surrender, cancel or release, or suffer any termination
or cancellation of any of its material rights or
interests in the Project or the Project Assets, other
than as specifically permitted by this Agreement or
other than as MMS shall have evidenced to the
Administrative Agent are not required in connection
with the Project.
(b) Any Person other than MMS shall acquire valid Mining
Rights in respect of all or any portion of the Project
Assets, unless the Borrower shall have evidenced to the
Administrative Agent that such Mining Rights (as so
acquired by such other Person) would not be required in
connection with the Project.
9.1.11 JUDGMENTS
Any judgment or order for the payment of money in excess of
U.S.$500,000 (or the equivalent thereof in any other
currency) shall be rendered against either the Borrower and
MMS and either:
(a) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order; or
<PAGE> 109
(b) there shall be any period of 21 consecutive days during
which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not
be in effect, unless the payment of such judgment is
covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance
companies.
9.1.12 CHANGE IN CONTROL
Any Change in Control shall occur.
9.1.13 MATERIALLY ADVERSE EFFECT
Any event (other than as enumerated in any other provision
of this Article) shall occur or condition shall exist which
constitutes a Materially Adverse Effect.
9.1.14 CEASE TO CARRY ON BUSINESS
MMS ceases or threatens to cease to carry on, or is
restrained from carrying on in the ordinary course the
Project, its business or a substantial part thereof, and in
the case of any restraint caused by a Person other than
MMS, MMS does not recommence its business as aforesaid
within 60 days (unless such cessation or restraint is
covered by business interruption insurance and the
Administrative Agent is of the view that MMS would be able
to recommence its business after the end of such 60 day
period and continue to perform its obligations under the
Operative Documents to which it is a party).
9.1.15 POLITICAL RISK EVENTS
(a) Any risk or event covered by Political Risk Insurance
shall occur.
(b) Any Governmental Agency shall condemn, nationalize,
seize or otherwise expropriate all or any substantial
part of the Project or the MMS Shares or assume custody
or control of the Project.
9.2 ACTION IF BANKRUPTCY
If an Insolvency Event shall occur, the Commitments (if not
theretofore terminated) shall automatically terminate,
without notice, and the outstanding principal amount of all
<PAGE> 110
outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable,
without notice or demand.
9.3 ACTION IF OTHER EVENT OF DEFAULT
If any Event of Default (other than an Insolvency Event)
shall occur for any reason, whether voluntary or
involuntary, and be continuing the Administrative Agent may
(acting with the consent of the Required Lenders), and upon
the direction of the Required Lenders, shall, upon notice
or demand to the Borrower, declare all or any portion of
the outstanding principal amount of the Loans to be due and
payable and any or all other Obligations (excluding,
however, unless express instructions to the contrary are
received from the relevant Lender, Obligations in respect
of any Metal Trading Agreement to which such Lender is a
party) to be due and payable and/or the Commitments (if not
theretofore terminated) to be terminated, whereupon the
full unpaid amount of such Loans and any and all other such
Obligations which shall be so declared due and payable
shall be and become immediately due and payable, without
further notice, demand or presentment, and/or, as the case
may be, such Commitments shall terminate.
10. THE AGENTS
10.1 ACTIONS
Each Lender authorizes the Collateral Agent and the
Administrative Agent to act in the relevant capacity on
behalf of such Lender under this Agreement and each other
Loan Document and, in the absence of other written
instructions from the Required Lenders received from time
to time by such Agent (with respect to which such Agent
agrees that it will, subject to the last paragraph of this
Section, comply in good faith except as otherwise advised
by counsel to the effect that any such compliance might
subject such Agent to any liability of whatsoever nature),
to exercise such powers hereunder and thereunder as are
specifically delegated to or required of such Agent by the
terms hereof and thereof, together with such powers as may
be reasonably incidental thereto.
Without limiting the generality of the foregoing, each
Lender hereby authorizes:
<PAGE> 111
(a) the Collateral Agent to act on behalf of such Lender to
execute and accept on its behalf the Collateral
Agreements and to take all such actions thereunder
necessary or appropriate with respect to management or
enforcement of the collateral security provided by such
Collateral Agreements and enforcement of the rights of
the Finance Parties thereunder; and
(b) the Administrative Agent to approve (i) in consultation
with the Borrower and the Independent Consultant, the
Base Case and (ii) take all such actions as may be
necessary or appropriate in connection with the
technical aspects of this Agreement, the other
Operative Documents and the transactions contemplated
hereby and thereby.
Each Lender agrees (which agreement shall survive any
termination of this Agreement) to indemnify each Agent, PRO
RATA, according to such Lender's Percentage, from and
against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever
which may at any time be imposed on, incurred by, or
asserted against such Agent in any way relating to or
arising out of this Agreement or any other Loan Document,
including the reimbursement of each Agent for all
out-of-pocket expenses (including attorneys' fees and
expenses) incurred by such Agent hereunder or in connection
herewith or with any other Loan Document or in enforcing
the Obligations under this Agreement or any other Loan
Document (subject as aforesaid) in all cases as to which
such are not reimbursed by the Borrower (or another
Obligor); PROVIDED, HOWEVER, that no Lender shall be liable
for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements
determined by a court of competent jurisdiction in a final
proceeding to have resulted from either Agent's gross
negligence or wilful misconduct. Neither Agent shall be
required to take any action hereunder or under any other
Loan Document, or to prosecute or defend any suit in
respect of this Agreement or any other Loan Document,
unless it is indemnified to its satisfaction by the
relevant Lenders against loss, costs, liability and
expense. If any indemnity in favor of either Agent shall
become impaired, it may call for additional indemnity and
cease to do the acts indemnified against until such
additional indemnity is given.
<PAGE> 112
10.2 FUNDING RELIANCE, ETC.
Unless the Administrative Agent shall have been notified by
telephone, confirmed in writing, by any Lender by 5:00 p.m.
on the day prior to the proposed Borrowing Date or
Conversion Date that such Lender will not make available
the amount which would constitute its Percentage of the
Loans to be made by all the Lenders on such date, the
Administrative Agent may assume that such Lender has made
such amount available to the Administrative Agent and, in
reliance upon such assumption, make available to the
Borrower a corresponding amount. If and to the extent that
such Lender shall not have made such amount available to
the Administrative Agent, such Lender and the Borrower
severally agree to repay the Administrative Agent forthwith
on demand such corresponding amount together with interest
thereon, for each day from the date the Administrative
Agent made such amount available to the Borrower to the
date such amount is repaid to the Administrative Agent, at
the interest rate applicable at the time to the relevant
Loans.
10.3 EXCULPATION
Neither Agent nor any of its directors, officers, employees
or agents shall be liable to any Finance Party for any
action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection
herewith or therewith, except for its own wilful misconduct
or gross negligence, or responsible for any recitals or
warranties herein or therein, or for the effectiveness,
enforceability, validity or due execution of this Agreement
or any other Loan Document, or to make any inquiry
respecting the performance by the Borrower or any other
Obligor of its obligations hereunder or thereunder, or the
validity, genuineness, creation, perfection or priority of
the Liens created by any Loan Document, or the validity,
genuineness, enforceability, existence, value or
sufficiency of any collateral security. Each Agent shall
be entitled to rely upon advice of counsel concerning legal
matters and upon any notice, consent, certificate,
statement, or writing which it believes to be genuine and
to have been presented by a proper Person.
10.4 SUCCESSORS
Either Agent may resign as such at any time upon at least
30 days' prior notice to the Borrower and all the Lenders.
If either Agent at any time shall resign, the Required
<PAGE> 113
Lenders may appoint another Lender as the relevant
successor Agent which shall thereupon become such Agent
hereunder. If no such successor Agent shall have been so
appointed as aforesaid, and shall have accepted such
appointment, within 30 days after such retiring Agent's
giving notice of resignation, then the retiring Agent may,
on behalf of the Required Lenders, appoint a relevant
successor Agent, which shall be one of the Lenders or a
commercial banking institution having a combined capital
and surplus of at least U.S.$500,000,000 (or the equivalent
thereof in another currency). Upon the acceptance of any
appointment as an Agent hereunder by any successor Agent,
such successor Agent shall be entitled to receive from the
relevant retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request,
and shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the relevant
retiring Agent and the retiring Agent shall be discharged
from its duties and obligations under this Agreement and
each other Loan Document.
10.5 LOANS BY STANDARD BANK
Standard Bank shall have the same rights and powers with
respect to the Loans made by it or any of its Affiliates as
any Lender and may exercise the same as if it were not the
Administrative Agent or the Collateral Agent. Each of
Standard Bank and its Affiliates may accept deposits from,
lend money to, and generally engage in any kind of business
with any Obligor or any Affiliate of any thereof as if
Standard Bank were not an Agent.
10.6 STANDARD BANK AS ADMINISTRATIVE AGENT
In acting as Administrative Agent for the Lenders, Standard
Bank's banking division will be treated as a separate
entity from any other of its divisions (or similar unit of
the Administrative Agent in any subsequent re-organization)
or subsidiaries (the "OTHER DIVISIONS") and, in the event
that the Administrative Agent should act for any Obligor or
Affiliate thereof in a corporate finance or other advisory
capacity ("ADVISORY CAPACITY"), any information given by
such person to one of the Other Divisions is to be treated
as confidential and will not be available to any of the
Finance Parties without the consent of such persons
provided that:-
<PAGE> 114
(a) the consent of such Obligor or Affiliate will not be
required in relation to any information which the
Administrative Agent in its discretion determines
relates to a Default or in respect of which the Lenders
have given a confidentiality undertaking in a form
satisfactory to the Administrative Agent and the
relevant Obligor or Affiliate acting reasonably; and
(b) if representatives or employees of the Administrative
Agent receive information in relation to an Obligor or
Affiliate or while acting in an Advisory Capacity they
will not be obliged to disclose such information to
representatives or employees of the Administrative
Agent in their capacity as agent bank hereunder or to
any of the Lenders if to do so would breach any rule or
regulation or fiduciary duty imposed upon such Persons.
10.7 CREDIT DECISIONS
Each Lender acknowledges that, it has, independently of the
Agents and each other Lender, and based on the financial
and other information referred to in SECTION 7.5 and such
other documents, information and investigations as it has
deemed appropriate, made its own credit decision to
maintain its Commitments and participate in the Facility.
Each Lender also acknowledges that it will, independently
of the Agents and each other Lender, and based on such
other documents, information and investigations as it shall
deem appropriate at any time, continue to make its own
credit decisions as to exercising or not exercising from
time to time any rights and privileges available to it
under this Agreement or any other Loan Document.
10.8 COPIES, ETC
Each Agent shall give prompt notice to each Lender of each
notice or request required or permitted to be given to such
Agent by any Obligor pursuant to the terms of this
Agreement or any of the other Loan Documents. Each Agent
will distribute to the relevant Lenders each Instrument
received for its account (but excluding, for the avoidance
of doubt, any fee letter referred to in SECTION 3.3.1) and
copies of all other communications received by such Agent
from any Obligor for distribution to the Lenders by such
Agent in accordance with the terms of this Agreement or any
other of the Loan Documents.
<PAGE> 115
11. MISCELLANEOUS
11.1 WAIVERS, AMENDMENTS, ETC
The provisions of this Agreement and of each other Loan
Document (except to the extent expressly otherwise set
forth in such Loan Document) may from time to time be
amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by
the Borrower (or any other relevant Obligor party to such
Loan Document), the Required Lenders (or, in the case of
the MMS Guaranty, the Account Agreement and the Collateral
Agreements, the Required Collected Lenders), the Collateral
Agent (but only if such provision involves the rights or
obligations of the Collateral Agent) and the Administrative
Agent (but only if the relevant provision involves the
rights or obligations of the Administrative Agent);
PROVIDED, HOWEVER, that no such amendment, modification or
waiver which would:
(a) modify any requirement hereunder that any particular action
be taken or a determination be made by, or with the consent of or
in consultation with all the Lenders or the Collected Lenders or
by the Required Lenders or by the Required Collected Lenders
shall be effective unless consented to by each Lender;
(b) modify this Section, change the definition of "REQUIRED
LENDERS" or "REQUIRED COLLECTED LENDERS", increase the Aggregate
Commitment Amount, change the definition of "PERCENTAGE" with
respect to any Lender, or otherwise subject any Lender to any
additional obligation hereunder, shall be effective without the
consent of all the Lenders;
(c) extend the due date for, or reduce the amount of, any
payment or prepayment of principal of or interest on any Loan or
any commitment commission or any other amount payable hereunder
or under any other relevant Loan Document shall be made without
the consent of all the Lenders;
(d) reduce any fee described in SECTION 3.3.1 or affect the
interests, rights or obligations of either Agent QUA Agent shall
be made without the consent of such Agent;
<PAGE> 116
(e) except as specifically provided for in this Agreement or
any relevant Collateral Agreement, authorize or effect the
release of any material collateral which is the subject of any
Lien granted or purported to be granted pursuant to any such
Collateral Agreement shall be made without the consent of all the
Lenders or the Collected Lenders; or
(f) modify any term of this Agreement or any other Loan
Document expressly relating to the priority of payment of, or the
granting of any security in respect of, any obligations of the
Borrower under any Metal Trading Agreement or similar arrangement
to which any Lender is a party shall be made without the consent
of such Lender.
No failure or delay on the part of any of the Finance
Parties in exercising any power or right under this
Agreement or any other Loan Document to which it is a party
shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on the
Borrower or MMS in any case shall entitle it to any notice
or demand in similar or other circumstances. No waiver or
approval by any Finance Party under this Agreement or any
other Loan Document to which it is a copy shall, except as
may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or
approval hereunder shall require any similar or dissimilar
waiver or approval thereafter to be granted hereunder.
11.2 NOTICES
All notices and other communications provided to any party
hereto under this Agreement or any other Loan Document
shall be in writing or by telex or by facsimile and
addressed or delivered to it at the relevant address for
such party set forth below its signature hereto and
designated as its "ADDRESS FOR NOTICES" or at such other
address as may be designated by such party in the relevant
Loan Document or a notice to the other parties. Any
notice, if sent by hand delivery or courier delivery, shall
be deemed received on the Business Day when delivered and,
if transmitted by telex or facsimile, shall be deemed given
on the Business Day when transmitted (answerback confirmed
in the case of telexes and transmission confirmed by the
sending facsimile machine in the case of facsimiles).
<PAGE> 117
11.3 COSTS AND EXPENSES
(a) Without prejudice to similar obligations of any Obligor
under any other Loan Document, the Borrower agrees to pay on
demand all Political Risk Insurance premiums (to the extent
payable by either Agent), all reasonable out-of-pocket expenses
(inclusive of United Kingdom Value Added Tax or any other similar
tax) of each Agent for the negotiation, preparation, execution
and delivery of this Agreement and each other Loan Document,
including schedules and exhibits, and any amendments, waivers,
consents, supplements or other modifications to this Agreement or
any other Loan Document as may from time to time hereafter be
required (including the reasonable fees and expenses of counsel
and designated local counsel to either Agent from time to time
incurred in connection therewith), whether or not the
transactions contemplated hereby are consummated, and all
expenses (inclusive as aforesaid) of the Agents (including
reasonable fees and expenses of counsel and designated local
counsel to either Agent and any stamp or other taxes) incurred in
connection with the preparation and review of the form of any
Instrument relevant to this Agreement or any other Loan Document,
the consideration of legal questions relevant hereto and thereto
and the filing, recording, refiling or re-recording of any Loan
Document and all amendments or supplements to any thereof and any
and all other documents or Instruments of further assurance
required to be filed or recorded or refiled or re-recorded by the
terms hereof or of any other Loan Document.
(b) The Borrower agrees to pay on demand all reasonable
expenses of each of the Administrative Agent's officers or agents
in connection with its on-site inspections of the Project and all
fees and reasonable expenses of (i) the independent chartered
accountants and certified public accountants in connection with
the performance of their duties described in SECTION 8.1.4 and
(ii) the Independent Consultant, any Insurance Consultant and the
Account Bank in performing their functions under this Agreement
and each other relevant Loan Document. Notwithstanding the
foregoing, prior to the occurrence of a Default, the Borrower
shall only be required to pay the fees and reasonable expenses of
(i) the Independent Consultant in connection with its semi-annual
on-site
<PAGE> 118
inspections of the Project (during the first two years
following the Effective Date) and its annual on-site
inspections of the Project thereafter, (ii) any
independent chartered accountants and certified public
accountants in case of a BONA FIDE dispute with the
Borrower or MMS concerning the financial statements
delivered pursuant to SECTION 8.1.1(a) or 8.1.1(b) and
(iii) an Insurance Consultant in case of any dispute
with MMS concerning its obligations described in
SECTION 8.2.5.
(c) The Borrower agrees to reimburse each Finance Party upon
demand for all reasonable out-of-pocket expenses (including
attorneys' fees and expenses and inclusive of United Kingdom
Value Added Tax or any other similar tax) incurred by such
Finance Party in connection with (i) the negotiation of any
restructuring or "work-out", whether or not consummated, of any
Obligations and (ii) the enforcement of any such Obligations.
11.4 INDEMNIFICATION
In consideration of the execution and delivery of this
Agreement by each Finance Party and the extension of the
Commitments, each of the Borrower and MMS (without
prejudice to any similar obligations of any of the Obligors
pursuant to any applicable Loan Document) hereby
indemnifies, exonerates and holds each Finance Party and
each of such Finance Party's Affiliates, officers,
directors, shareholders, employees and agents
(collectively, the "INDEMNIFIED PARTIES") free and harmless
from and against any and all actions, causes of action,
suits, losses, costs, liabilities and damages and expenses
in connection therewith, in each case arising from the
claims of third parties including reasonable attorneys'
fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by the Indemnified Parties or any of them as a
result of, or arising out of, or relating to:
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties;
<PAGE> 119
(c) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating
to the protection of the environment or the release by MMS of any
Hazardous Material in connection with the Project; or
(d) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases or
threatened releases from, any real property owned or operated by
MMS of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising
under any Environmental Law), regardless of whether caused by, or
within the control of, MMS,
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the
Borrower and MMS hereby agree to make the maximum
contribution to the payment and satisfaction of each of the
Indemnified Liabilities for which each is liable hereunder
and which is permissible under Applicable Law.
11.5 SURVIVAL
The obligations of the Borrower and MMS under SECTIONS 3.3,
5.2, 5.3, 5.4, 5.6, 11.3 and 11.4 and the obligations of
the relevant Lenders under SECTION 10.1, shall, in each
case, survive any termination of this Agreement. The
representations and warranties made by the Obligors in this
Agreement and in each other Loan Document to which it is a
party shall survive the execution and delivery of this
Agreement and each such other Loan Document.
11.6 SEVERABILITY
Any provision of this Agreement or any other Loan Document
which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or
such other Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
<PAGE> 120
11.7 HEADINGS
The various headings of this Agreement and of each other
Loan Document are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement
or such other Loan Document or any provisions hereof or
thereof.
11.8 COUNTERPARTS; EFFECTIVENESS
This Agreement may be executed by the parties hereto in
several counterparts, each of which shall be executed by
the Borrower, MMS, the Collateral Agent and the
Administrative Agent and be deemed to be an original and
all of which shall constitute together but one and the same
agreement. This Agreement shall become effective on the
date (the "EFFECTIVE DATE") when counterparts hereof
executed on behalf of the Borrower, MMS, the Collateral
Agent and each Lender (or notice thereof satisfactory to
the Administrative Agent) shall have been received by the
Administrative Agent.
11.9 GOVERNING LAW; ENTIRE AGREEMENT
(a) THIS AGREEMENT AND, UNLESS OTHERWISE SPECIFIED THEREIN,
EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK.
(b) This Agreement and the other Loan Documents constitute
the entire understanding among the parties hereto with
respect to the subject matter hereof and thereof and
supersede any prior agreements, written or oral, or
document with respect thereto.
11.10SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that:
(a) neither the Borrower nor MMS may assign or transfer its
rights or obligations without the prior written consent
of the Administrative Agent, the Collateral Agent and
all the Lenders; and
(b) the rights of sale, assignment, and transfer of the
Lenders are subject to SECTION 11.11.
<PAGE> 121
11.11SALE AND TRANSFER OF LOANS; PARTICIPATIONS IN LOANS
Each Lender may assign, or sell participations in, its
Loans and Commitments in accordance with this Section.
11.11.1 ASSIGNMENTS
Any Lender, with notice to the Borrower and the
Administrative Agent, may assign and delegate to any of its
Affiliates or to any other Lender or to one or more
commercial banks, as set forth in this Section. Each
Person described as being the Person from or to whom such
assignment and delegation is to be made, being hereinafter
referred to as an "ASSIGNOR LENDER" or "ASSIGNEE LENDER",
respectively.
Each Assignor Lender may assign and delegate all or any
fraction of such Assignor Lender's total Loans and
Commitments. Such assignment and delegation shall be of a
constant, and not a varying, percentage of all the Assignor
Lender's Loans and Commitments in a minimum aggregate
amount of U.S.$3,000,000 (or the Gold equivalent thereof
calculated at the Original Gold Price); PROVIDED, HOWEVER,
that any transfer by any Lender of any Commitment shall
require the consent (not to be unreasonably withheld or
delayed) of the Administrative Agent; and PROVIDED,
FURTHER, HOWEVER, that, the Borrower, MMS and each Agent
shall be entitled to continue to deal solely and directly
with the Assignor Lender in connection with the interests
so assigned and delegated to an Assignee Lender until:
(a) written notice of such assignment and delegation,
together with payment instructions, addresses and
related information with respect to such Assignee
Lender, shall have been given to the Borrower and the
Administrative Agent by such Assignor Lender and such
Assignee Lender;
(b) such Assignee Lender shall have executed and delivered
to the Borrower and the Administrative Agent a Lender
Assignment Agreement, which shall have been accepted by
the Administrative Agent;
(c) the Administrative Agent shall have been provided with
such evidence as the Administrative Agent may
reasonably request in connection with any Approval
required or advisable in connection with such
assignment and delegation; and
<PAGE> 122
(d) the processing fees (if any) described below shall have
been paid.
From and after the date that the Administrative Agent
accepts such Lender Assignment Agreement (which shall be
promptly after the delivery of the documentation referred
to above and after the Administrative Agent shall be
satisfied that the relevant assignment is in compliance
with the requirements of this Agreement and each other Loan
Document under which the assignment is being effected), (x)
the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the
extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Lender in
connection with such Lender Assignment Agreement, shall
have the rights and obligations of a Lender hereunder and
under the other Loan Documents, (y) the Assignor Lender, to
the extent that rights and obligations hereunder have been
assigned and delegated by it in connection with such Lender
Assignment Agreement, shall be released from its
obligations hereunder and under the other Loan Documents,
and (z) the Collateral Agreements which are expressed to be
governed by the laws of Venezuela shall be endorsed and
amended, and all necessary steps taken in relation thereto,
to reflect such assignment and delegation.
Accrued interest on that part of the Loans assigned to the
Assignee Lender, and accrued fees in respect thereof, shall
be paid as provided in the Lender Assignment Agreement.
Except in the case where any such Assignee Lender is an
Affiliate of such Assignor Lender, such Assignor Lender or
such Assignee Lender shall also pay a processing fee to the
Administrative Agent upon delivery of any Lender Assignment
Agreement in the amount of U.S.$1,500. Any attempted
assignment and delegation not made in accordance with this
Section shall be null and void.
In no event shall the Borrower be required to pay any
amount under SECTIONS 5.2, 5.3, 5.4, 5.5 and 5.6 existing
at the time of any proposed assignment to any Assignee
Lender hereunder which would otherwise be payable if such
assignment took place.
11.11.2 PARTICIPATIONS
Any Lender may at any time sell to one or more commercial
banks (each of such commercial banks and other Persons
being herein called a "PARTICIPANT") participating
interests in any of the Loans, Commitments or other
interests of such Lender; PROVIDED, HOWEVER, that:
<PAGE> 123
(a) no participation contemplated in this Section shall
relieve such Lender from its Commitment or its other
obligations hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitment and such other
obligations;
(c) the Borrower, MMS and each Agent shall continue to deal
solely and directly with such Lender in connection with
such Lender's rights and obligations under this
Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate
of such Lender, or is itself a Lender, shall be
entitled to require such Lender to take or refrain from
taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any
Participant that such Lender will not, without such
Participant's consent, take any actions of the type
described in SECTION 11.1(b) or (c); and
(e) the Borrower shall not be required to pay any amount
under SECTIONS 5.2, 5.3, 5.4, 5.5 and 5.6 that is
greater than the amount which it would have been
required to pay had no participating interest been
sold.
The Borrower acknowledges and agrees that each Participant,
for the purposes of SECTIONS 5.2, 5.3, 5.4, 5.5, 5.6, 5.7,
5.9, 5.10, 5.11, 11.3 and 11.4, shall be considered a
Lender.
11.12OTHER TRANSACTIONS
Without prejudice to the provisions of SECTION 10.5,
nothing contained herein shall preclude any Finance Party
from engaging in any transaction, in addition to those
contemplated by this Agreement or any other Loan Document,
with any Obligor or any of their Affiliates in which such
Obligor or such Affiliate is not restricted hereby from
engaging with any other Person.
11.13FORUM SELECTION AND CONSENT TO JURISDICTION; WAIVER OF
IMMUNITY
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR
IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
<PAGE> 124
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
AGENTS, THE LENDERS, THE BORROWER OR MMS MAY BE BROUGHT AND
MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND IN ADDITION IN THE COURTS OF ANY JURISDICTION
WHERE ANY COLLATERAL OR OTHER PROPERTY OF ANY OBLIGOR MAY
BE FOUND, INCLUDING, IN THE CASE OF MMS, THE COMPETENT
COURTS OF CARACAS, VENEZUELA. EACH OF THE BORROWER AND MMS
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. EACH OF THE BORROWER AND MMS HEREBY
IRREVOCABLY APPOINTS CT CORPORATION SYSTEM WITH OFFICES ON
THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019,
AS ITS AGENT FOR SERVICE OF PROCESS IN NEW YORK (THE
"PROCESS AGENT"). SERVICE OF PROCESS MAY BE MADE UPON EACH
OF THE BORROWER AND MMS BY MAILING OR DELIVERING A COPY OF
SUCH PROCESS TO IT IN CARE OF THE PROCESS AGENT AT THE
PROCESS AGENT'S ADDRESS AND EACH OF THE BORROWER AND MMS
HEREBY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN NEW YORK
ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BY
THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS ADDRESS
FOR NOTICES SET FORTH BELOW ITS SIGNATURE HERETO. EACH OF
THE BORROWER AND MMS HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH
COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO
THE EXTENT THAT EITHER THE BORROWER OR MMS HAS OR HEREAFTER
MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, SUCH OBLIGOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
<PAGE> 125
11.14WAIVER OF JURY TRIAL
THE AGENTS, THE LENDERS, THE BORROWER AND MMS HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENTS, THE
LENDERS, THE BORROWER OR MMS. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO
THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT.
11.15ENGLISH LANGUAGE
This Agreement and the other Loan Documents have been
negotiated in English and, other than the Venezuelan
Security Documents and the MMS Pledge Agreement, executed
in the English language. All certificates, reports,
notices and other documents and communications given or
delivered pursuant to this Agreement and the other Loan
Documents shall be in the English language or, if not in
the English language, shall be accompanied by a certified
English translation thereof. In the case of any document
originally issued in a language other than English, the
English language version of any such document shall, absent
demonstrated error, control the meaning and interpretation
of the matters set forth therein.
<PAGE> 126
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
MONARCH RESOURCES INVESTMENTS
LIMITED
as the Borrower
By: JOHN P. STILWELL
Title: VICE PRESIDENT & CHIEF
FINANCIAL OFFICER
Address for Notices:
care of Hecla Mining Company
6500 Mineral Drive
Coeur d'Alene, Idaho 83815-8788
Facsimile No.: 1-208-769-4159
Attention: Chief Operating Officer
With a copy to:
Chesley White Esq.
Appleby Spurling Kemp
41 Cedar Avenue
Hamilton, Bermuda
HM EX
Facsimile No.: 1-441-295-5328
MONARCH MINERA SURAMERICANA, C.A.
By: JOHN P. STILWELL
Title: VICE PRESIDENT & CHIEF
FINANCIAL OFFICER
Address for Notices:
care of Hecla Mining Company
6500 Mineral Drive
Coeur d'Alene, Idaho 83815-8788
<PAGE> 127
Facsimile No.: 1-208-769-4159
Attention: Chief Operating Officer
With a copy to:
Jorge A. Neher, Esq.
Neher Von Siegmund Rengifo Diquez
Piso 8, Oficina 8-D
Avenida Mohedano, La Castellana
Caracas 10-60, Venezuela
Facsimile No.: 58-2-267-0507
Commitment Amount : U.S.$11,000,000
STANDARD BANK LONDON LIMITED
as a Lender
By: STEVEN L. SHARPE
Title: ASSISTANT GENERAL MANAGER
By: D.M. NEWPORT
Title: HEAD OF MINING FINANCE
Dollar Lending Office:
Gold Lending Office:
Address for Notices:
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
Facsimile No.: 44-171-815-4284
Attention: Steven Sharpe
<PAGE> 128
STANDARD BANK LONDON LIMITED
as Administrative Agent
By: STEVEN L. SHARPE
Title: ASSISTANT GENERAL MANAGER
By: D.M. NEWPORT
Title: HEAD OF MINING FINANCING
Address for Notices:
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
Facsimile No.: 44-171-815-4284
Attention: Steven Sharpe
STANDARD BANK LONDON LIMITED
as Collateral Agent
By: STEVEN L. SHARPE
Title: ASSISTANT GENERAL MANAGER
By: D.M. NEWPORT
Title: HEAD OF MINING FINANCE
Address for Notices:
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
Facsimile No.: 44-171-815-4284
Attention: Steven Sharpe
<PAGE> 129
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 1 - APPROVALS
Part A - Existing Material Approvals
AGENCY REQUIRED APPROVAL DATE OBTAINED
OR NOTIFICATION
Ministry of Energy Mining Companies In effect
and Mines Registration (#3993)
Ministry of Energy Gold, Diamonds and August 17, 1995
and Mines Precious Stones
Merchants registry
(#0708-J)
Venezuelan Central Bank Gold Providers Registry In effect
Venezuelan Central Bank Gold Exporters Registry
(BCV-045) November 17, 1995
Ministry of Energy Foreign Investment In effect
and Mines / Registration
Superintendancy of
Foreign Investments
Office
<PAGE> 130
Item 2 - Current/Pending Project Documents
NAME OF CONTRACT PURPOSE COUNTERPARTY DATE OF EXECUTION
Refining / Refining of Project
TRANSPORTATION Output and shipment
CONTRACT to refiners outside
of Venezuela
ITEM 3 - LITIGATION
N/A
ITEM 4 - TAXES
The assets tax liability owing to the Government of Venezuela for
1997 and 1998, as well as the estimated assets tax for 1999, have
not been paid by MMS but are shown as accrued on the March 31,
1999 financial statements of MRIL delivered in connection with
the Acquisition Agreement. The liability includes interest and
penalties. The liability will continue to accrue interest until
paid.
ITEM 5 - ASSETS; PROPERTIES
N/A
ITEM 6 - CONTRACTUAL OBLIGATIONS
N/A
ITEM 7 - SUBSIDIARIES
The Borrower (or its nominees) owns 100% of the shares of each of
monarch Mexico and MMS.
ITEM 8 - MATERIAL PATENTS AND TRADEMARKS
N/A
ITEM 9 - TECHNOLOGY
N/A
ITEM 10 - ENVIRONMENTAL MATTERS
MMS is subject to the performance of certain obligations to raise
the level of the tailings impoundments and to construct a new
tailings impoundment adjacent to those existing; permits for the
drainage of water therefrom may require amendment and are being
considered for submission to the governmental authorities.
ITEM 11 - INDEBTEDNESS
N/A
ITEM 12 - LIENS
N/A
ITEM 13 - TAKE OR PAY CONTRACTS
N/A
ITEM 14 - ROYALTY AGREEMENTS
N/A
<PAGE> 131
SCHEDULE III
ADDITIONAL COSTS RATE
1. The Additional Costs Rate applicable to an Interest Period
shall be the rate determined by each relevant Lender (and
communicated to the Administrative Agent) to be equal to the
arithmetic mean (rounded upwards, if necessary, to four decimal
places) of the rates resulting from the application of the
following formula:
A x 0.01%
--------
300
where, in each case, on the day of application of that
formula by each relevant Lender:
A is the rate of charge payable by each relevant Lender
to the Financial Services Authority under paragraph
2.02 or 2.03 (as the case may be) of the Fees
Regulations (but where, for this purpose, the figures
at paragraph 2.02(b) and 2.03(b) of the Fees
Regulations shall be deemed to be zero) and expressed
in pounds per 1 million (British pounds) of the Fee
Base of such Lender.
2. For the purposes of this Schedule:-
"ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the
meanings given to those terms under the Bank of England Act
1998 or by the Bank of England (as may be appropriate), on
the day of the application of the formula;
"FEE BASE" has the meaning given to that term for the
purposes of, and shall be calculated in accordance with, the
Fees Regulations;
"FEES REGULATIONS" means, as appropriate, either:
(a) the Banking Supervision (Fees) Regulations 1998; or
(b) such regulations as from time to time may be in force
relating to the payment of fees for banking supervision
in respect of periods subsequent to 28 February 1999.
<PAGE> 132
3. The Additional Costs Rate applicable to a Loan for an
Interest Period shall be calculated at or about 11:00 am on the
first day of that Interest Period and shall be payable on the
date on which interest is payable in respect of that Loan under
this Agreement.
4. Each relevant Lender shall determine the Additional Costs
Rate by application of the formula set out in paragraph 1 above
on the first day of each Interest Period.
5. If there is any change in applicable law or regulation, or
the interpretation thereof, by any governmental authority charged
with the administration thereof, or in the nature of any request
or requirement by the Financial Services Authority, the Bank of
England, or other applicable banking authority, the effect of
which is to impose, modify or deem applicable any fees or any
reserve, special deposit, liquidity or similar requirements
against assets held by, or deposits in, or for the account of, or
advances by such Lender, or in any other respect whatsoever, the
relevant Lender shall be entitled to vary the formula set out in
paragraph 1 above so as (but only so as) to restore such Lender's
position - in terms of overall return to the Lender - to that
which prevailed before that change became necessary. The Lender
shall notify the Borrower and the Administrative Agent of any
such necessary variation to the formula and the formula, as so
varied, shall be the formula for the purposes of this Agreement
with effect from the date of notification.
<PAGE> 1
Exhibit 10.4
CONFORMED COPY
DATED AS OF JUNE 25 1999
------------------------
HECLA MINING COMPANY
as Borrower
THE VARIOUS BANKS AND FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HERETO
as Initial Lenders
STANDARD BANK LONDON LIMITED
as Collateral Agent
and
STANDARD BANK LONDON LIMITED
as Administrative Agent
-----------------------------
SUBORDINATED LOAN AGREEMENT
-----------------------------
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171 638 1111
Fax: 0171 972 7990
TCW/627S00004/1197795
<PAGE> 2
INDEX
1. DEFINITIONS; INTERPRETATION
1.1 Defined Terms
1.2 Use of Defined Terms
1.3 Accounting and Financial Determinations
1.4 Change in Accounting Principles
1.5 General Provisions as to Certificates and Opinions, etc.
1.6 Interpretation
2. COMMITMENTS AND PROCEDURES FOR MAKING LOANS; CONTINUATION
PROCEDURES
2.1 Commitments; Making Loans
2.2 Records
2.3 Funding
2.4 Obligations Several
3. PRINCIPAL PAYMENTS; INTEREST; COMMISSIONS
3.1 Principal Payments
3.1.1 Scheduled Repayments
3.1.2 Prepayments - Voluntary and Mandatory
3.1.3 Principal Payments Generally
3.2 Interest Payments
3.2.1 Rate
3.2.2 Post-Maturity Rate
3.2.3 Payment Dates; Calculation of Interest
3.2.4 Rate Determinations
3.2.5 Capitalization of Interest
3.2.6 Payments Subject to Subordination
3.3 Fees
3.3.1 Agents' Fees
4. INCREASED COSTS; TAXES; MARKET DISRUPTIONS; GENERAL PAYMENT
PROVISIONS
4.1 Dollars Unavailable
4.2 Increased Costs, etc.
4.3 Funding Losses
4.4 Increased Capital Costs
4.5 Illegality
4.6 Taxes
4.7 Mitigation
4.8 Payments, Computations, etc.
4.9 Proration of Payments
4.10 Set-off
4.11 Application of Proceeds
<PAGE> 3
5. CONDITIONS PRECEDENT TO MAKING LOANS
5.1 Initial Loans
5.1.1 Resolutions, etc.
5.1.2 Credit Agreement, Nationsbank Subordination Agreement
5.1.3 Borrowing Notice
5.1.4 Closing Fees, Expenses, etc.
5.1.5 Compliance with Warranties, No Defaults, etc.
6. REPRESENTATIONS AND WARRANTIES
6.1 Organization, Power, Authority, etc.
6.2 Due Authorization; Non-Contravention
6.3 Validity, etc.
6.4 Legal Status
6.5 Financial Information
6.6 Absence of Default
6.7 Litigation, etc.
6.8 Materially Adverse Effect
6.9 Taxes and Other Payments
6.10 Subsidiaries
6.11 Environmental Warranties
6.12 ERISA Liabilities
7. COVENANTS
7.1 Informational and Financial Covenants
7.1.2 Defaults
7.1.3 Miscellaneous Information
7.1.4 Books and Records; Access
7.1.5 Accuracy of Information
7.2 Affirmative Covenants
7.2.1 Compliance with Laws, etc.
7.2.2 Maintenance of Corporate Existence
7.2.3 Payment of Taxes, etc.
7.3 Negative Covenants
7.3.1 Business Activities; Place of Business; Organic Documents;
Fiscal Year
7.3.2 Indebtedness
7.3.3 Liens
7.3.4 ERISA Plans
8. EVENTS OF DEFAULT
8.1 Events of Default
8.1.2 Non-Performance of Certain Covenants
8.1.3 Non-Performance of Other Obligations
8.1.4 Breach of Representation or Warranty
8.1.5 Default on other Indebtedness
<PAGE> 4
8.1.6 Bankruptcy, Insolvency, etc.
8.1.8 Judgments
8.1.9 Change in Control
8.1.10 Materially Adverse Effect
8.2 Action if Bankruptcy
8.3 Action if Other Event of Default
9. THE AGENTS
9.1 Actions
9.2 Funding Reliance, etc.
9.3 Exculpation
9.4 Successors
9.5 Loans by Standard Bank
9.6 Standard Bank as Administrative Agent
9.7 Credit Decisions
9.8 Copies, etc
10. MISCELLANEOUS
10.1 Waivers, Amendments, etc
10.2 Notices
10.3 Costs and Expenses
10.4 Indemnification
10.5 Survival
10.6 Severability
10.7 Headings
10.8 Counterparts; Effectiveness
10.9 Governing Law; Entire Agreement
10.10 Successors and Assigns
10.11 Sale and Transfer of Loans; Participations in Loans
10.11.1 Assignments
10.11.2 Participations
10.12 Other Transactions
10.13 Forum Selection and Consent to Jurisdiction; Waiver of
Immunity
10.14 Waiver of Jury Trial
<PAGE> 5
SCHEDULES AND EXHIBITS
SCHEDULE I Disclosure Schedule
SCHEDULE II Additional Costs Rate
EXHIBIT A Borrowing Notice
EXHIBIT B Lender Assignment Agreement
<PAGE> 6
THIS CREDIT AGREEMENT is dated as of June 25, 1999 (this
"Agreement") AMONG:-
(1) HECLA MINING COMPANY, a Delaware corporation ("HECLA MINING"
or the "BORROWER");
(2) THE PARTIES LISTED ON THE SIGNATURE PAGES HERETO, as the
initial lenders (collectively, the "INITIAL LENDERS");
(3) STANDARD BANK LONDON LIMITED, a bank organized under the
laws of England ("STANDARD BANK"), in its capacity as the
collateral agent (in such capacity, the "COLLATERAL AGENT");
and
(4) STANDARD BANK LONDON LIMITED, in its capacity as the
administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT").
WITNESSETH:-
WHEREAS, Hecla Mining is active in the exploration and
development of precious metals and has entered into the Purchase
Agreement, dated of May 17, 1999 (the "ACQUISITION AGREEMENT"),
pursuant to which the Borrower intends to purchase or effect the
purchase from Monarch Resources Limited, a corporation organized
under the laws of Bermuda, of all of the issued and outstanding
share capital of Monarch Resources Investments Limited ("MRIL");
WHEREAS, MRIL owns all of the issued and outstanding share
capital of Monarch Minera Suramericana, C.A. ("MMS") and also of
Monarch Resources de Mexico, S.A. de C.V., a company organized
under the laws of Mexico ("MONARCH MEXICO");
WHEREAS, MMS owns the La Camorra underground gold mine in
Venezuela (the "PROJECT") and the Project is already engaging in
the commercial production and sale of Gold;
WHEREAS, immediately following completion of the Acquisition
Transaction, MMS intends to initiate certain capital improvements
and installations and to fund certain working capital
requirements at the Project;
<PAGE> 7
WHEREAS, in order to finance its obligations under the
Acquisition Agreement, the Borrower has requested that Standard
Bank make funds available to it and Standard Bank is willing to
make such loans available to the Borrower on the terms and
subject to the conditions of this Agreement and the other Loan
Documents;
WHEREAS, MRIL has requested that the Lenders make additional
funds available to MRIL for the purposes of reimbursing moneys
spent by the Borrower in the Acquisition Transaction and also for
remitting funds to MMS to fund the improvements and working
capital requirements at the Project described in the previous
recital and the Lenders are willing to make such loans available
to MRIL, on the terms and subject to the conditions of the Credit
Agreement (capitalized and other terms used in this Agreement
used as defined in SECTION 1.1) and the other Loan Documents;
WHEREAS, as security for the Borrower's obligations under this
Agreement and for MRIL's obligations under the Credit Agreement:
(a) the Borrower is willing to grant a security interest over the
MRIL Shares and (b) MRIL is willing to grant a security interest
over the MMS Shares;
WHEREAS, as security for the Borrower's obligations under this
Agreement and for MRIL's obligations under the Credit Agreement,
MMS is willing: (a) to guarantee such obligations in favor of the
Lenders and (b) grant security interests over those of its assets
constituting the Project as more particularly set forth in the
Loan Agreements to which it is a party.
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy whereof is hereby acknowledged by each party hereto,
the parties hereto hereby agree as follows:-
1. DEFINITIONS; INTERPRETATION
1.1 DEFINED TERMS
Terms used but not defined in this Agreement have the
meanings assigned to such terms in the Credit Agreement.
In addition, the following terms, when used in this
Agreement, including its preamble and recitals, shall have
the following meanings:
"ACQUISITION AGREEMENT" is defined in the FIRST RECITAL.
<PAGE> 8
"ACQUISITION TRANSACTION" means the purchase by Hecla
Mining of the share capital of MRIL, MMS and Monarch
Mexico, as contemplated by the Acquisition Agreement.
"ADDITIONAL COSTS RATE" means for any funding period by
which the Administrative Agent measures and funds the Loans
hereunder, the applicable rate determined by Administrative
Agent and the relevant Lenders in accordance with SCHEDULE
II.
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE.
"AFFILIATE" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or
under common control with such Person (excluding any
trustee under, or any committee with responsibility for
administering, any compensation, welfare or similar plan).
A Person shall be deemed to be "controlled by" any other
Person if such other Person possesses, directly or
indirectly, power:
(a) to vote twenty percent (20%) or more of the securities
(on a fully diluted basis) having ordinary voting power
for the election of directors or managing general
partners of such Person; or
(b) to direct or cause the direction of the management and
policies of such Person, whether by contract or
otherwise.
"AGENTS" means, collectively, the Administrative Agent and
the Collateral Agent.
"AGGREGATE COMMITMENT AMOUNT" means U.S.$3,000,000, as may
be reduced pursuant to SECTION 2.1(d).
"AGREEMENT" is defined in the PREAMBLE.
"APPLICABLE LAW" means, with respect to any Person or
matter, any supranational, national, provincial, federal,
state, regional or local statute, law, rule, treaty,
convention, regulation, order, decree or other requirement
relating to such Person or matter and, where applicable,
any interpretation thereof by any Governmental Agency
having jurisdiction with respect thereto or charged with
the administration or interpretation thereof (in each case,
whether or not having the force of law, but if not having
the force of law, such statute, law, etc. being of the type
with which such Person would comply in the ordinary course
of business).
<PAGE> 9
"APPROVAL" means each and every approval, authorization,
license, permit, consent, filing and registration by or
with any Governmental Agency or other Person necessary for
the execution, delivery or performance of this Agreement or
any other Loan Document or for the validity or
enforceability hereof or thereof, whether or not referred
to in ITEM 1 ("APPROVALS") of the Disclosure Schedule.
"ASSIGNEE LENDER" is defined in SECTION 10.11.1.
"ASSIGNOR LENDER" is defined in SECTION 10.11.1.
"AUTHORIZED REPRESENTATIVE" means those officers of the
Borrower whose signatures and incumbency shall have been
certified pursuant to SECTION 5.1.1.
"BANK LENDERS" means the banks and financial institutions
from time to time party to the Credit Agreement.
"BANK LENDERS LOANS" means the loans outstanding under the
Credit Agreement.
"BORROWER" is defined in the PREAMBLE.
"BORROWING DATE" means the Business Day on which Loans are
made pursuant to SECTION 2.1.
"BORROWING NOTICE" means a loan request and certificate
duly executed by an Authorized Representative of the
Borrower, substantially in the form of EXHIBIT A hereto.
"BUSINESS DAY" means:-
(a) any day which is not Saturday, Sunday, a legal holiday
or any other day on which banks are closed in London,
England or New York, New York; and
(b) relative to the making, continuing or the calculation
of the LIBO Rate, any day on which dealings in Dollars
are carried on in the London interbank market.
"CAPITALIZED LEASE LIABILITIES" means all monetary
obligations of any Person under any leasing or similar
arrangement which, in accordance with GAAP, would be
<PAGE> 10
classified as capitalized leases, and, for the purposes of
this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with
GAAP, and the stated maturity thereof shall be the date of
the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"CHANGE IN CONTROL" means the occurrence of either of the
following events:-
(a) any Person or two or more Persons acting as a group
shall acquire beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Act of 1934, and
including holding proxies to vote for the election of
directors other than proxies held by the Borrower's
management or their designees to be voted in favor of
Persons nominated by the Borrower's Board of
Directors) of 25% or more of the outstanding voting
securities of Borrower, measured by voting power
(including both common stock and any preferred stock
or other equity securities entitling the holders
thereof to vote with the holders of common stock in
elections for directors of Borrower); or
(b) a majority of the directors of Borrower shall consist
of Persons not nominated by the Borrower's Board of
Directors (not including as Board nominees any
directors which the Board is obligated to nominate
pursuant to shareholders agreements, voting trust
arrangements or similar arrangements).
"COLLATERAL AGENT" is defined in the PREAMBLE.
"COLLECTED LENDERS" means collectively, the Lenders and the
Bank Lenders.
"COMMITMENT" means each Lender's obligation to make,
maintain and continue its Loans in an amount equal to its
Commitment Amount in each case pursuant to the terms and
subject to the conditions of this Agreement.
<PAGE> 11
"COMMITMENT AMOUNT" means (a) relative to any Initial
Lender, the amount set forth opposite its name on the
signature pages hereto under the heading "COMMITMENT
AMOUNT" and (b) relative to any Assignee Lender, the amount
under the heading "COMMITMENT AMOUNT" assumed from the
Assignor Lender pursuant to the Lender Assignment Agreement
by which such Assignee Lender became a party to this
Agreement, in each case as such amount may be adjusted
pursuant to any Lender Assignment Agreement pursuant to
which such Assignor Lender or Assignee Lender, as the case
may be, is a party.
"COMMITMENT TERMINATION DATE" means the earliest to occur
of the following:-
(a) July 31, 1999;
(b) the occurrence of any Enforcement Event;
(c) the Borrowing Date on which the Loans shall have been
made pursuant to SECTION 2.1; and
(d) the termination of the Commitments pursuant to SECTION
2.1(d).
"CONTINGENT LIABILITY" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct
or indirect agreement, contingent or otherwise, to provide
funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness, obligation or any other
liability of any other Person (other than by endorsements
of instruments in the course of collection), or guarantees
the payment of dividends or other distributions upon the
shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to
any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount,
if larger) of the debt, obligation or other liability
guaranteed thereby.
"CONTRACTUAL OBLIGATION" means, relative to any Person, any
provision of any security issued by such Person or of any
Instrument or undertaking to which such Person is a party
or by which it or any of its property is bound.
<PAGE> 12
"CREDIT AGREEMENT" means the Credit Agreement of even date
herewith executed by (1) MRIL, as borrower, (2) MMS, as an
additional Obligor, (3) the various banks and financial
institutions named therein and (4) the Administrative Agent
and the Collateral Agent.
"DEFAULT" means any Event of Default or any condition or
event which, after notice, lapse of time, the making of any
required determination or any combination of the foregoing,
would constitute an Event of Default.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule
attached hereto as SCHEDULE I.
"DOLLAR" and the sign "U.S.$" mean lawful money of the
United States.
"EFFECTIVE DATE" is defined in SECTION 10.8.
"ENFORCEMENT EVENT" means either:-
(a) an Insolvency Event; or
(b) the occurrence of any other Event of Default and the
acceleration of the Obligations pursuant to SECTION
8.3.
"ERISA" means the Employee Retirement Income Security Act
of 1974.
"ERISA AFFILIATE" means the Borrower and all members of a
controlled group of corporations and all trades or business
(whether or not incorporated) under common control that,
together with the Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code.
"ERISA PLAN" means any employee pension benefit plan
subject to Title IV or ERISA maintained by any ERISA
Affiliate with respect to which any Related Person has a
fixed or contingent liability.
"EVENT OF DEFAULT" is defined in SECTION 8.1.
"FACILITY" means the Loans and the financial accommodations
made to the Borrower in connection therewith.
<PAGE> 13
"FINANCE PARTIES" means, collectively, the Lenders and the
Agents.
"FISCAL QUARTER" means any quarter of a Fiscal Year.
"FISCAL YEAR" means any period of twelve consecutive
calendar months ending on December 31.
"FIXED RATE" means __ percent (__%) PER ANNUM.
"F.R.S. BOARD" means the Board of Governors of the FEDERAL
RESERVE SYSTEM.
"INCREASED RATE" means ? percent (?%) PER ANNUM.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or
metals (including Gold) and all obligations evidenced
by bonds, debentures, notes, or other similar
Instruments on which interest charges are customarily
paid;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or
not drawn, and bankers' acceptances and similar
instruments, in each such case issued for the account
of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP,
recorded as Capitalized Lease Liabilities;
(d) net payment liabilities of such Person under all Hedging
Obligations;
(e) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the
deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased
by such Person (including indebtedness arising under
conditional sales or other title retention agreements),
whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
<PAGE> 14
(f) all Contingent Liabilities of such Person in respect of
any of the foregoing items which are the obligations of
any other Person.
"INDEMNIFIED LIABILITIES" is defined in SECTION 10.4.
"INDEMNIFIED PARTIES" is defined in SECTION 10.4.
"INITIAL LENDERS" is defined in the PREAMBLE.
"INSOLVENCY EVENT" means the occurrence of any Default
described in SECTION 8.1.6.
"INTEREST PAYMENT DATE" is defined in SECTION 3.2.5(b).
"LENDER ASSIGNMENT AGREEMENT" means an Assignment
Agreement, duly executed by an Assignor Lender and an
Assignee Lender, substantially in the form of EXHIBIT B
hereto.
"LENDERS" means, collectively, the Initial Lenders and the
Assignee Lenders.
"LENDING OFFICE" means (a) with respect to each Initial
Lender, the office of such Initial Lender designated as
such below its signature hereto or such other office of
such Initial Lender as may be designated from time to time
by notice from such Initial Lender to the Administrative
Agent and the Borrower, (b) with respect to each Assignee
Lender, the office of such Assignee Lender designated as
such in the Lender Assignment Agreement pursuant to which
it became a Lender or as may be designated from time to
time by notice from such Assignee Lender to the
Administrative Agent and the Borrower and (c) with respect
to the Administrative Agent, the office of the
Administrative Agent designated as such from time to time
by notice to the Borrower and each Lender.
"LOAN" means any Lender's loans under this Agreement,
whatever outstanding or to be made.
"LOAN DOCUMENTS" means, collectively, this Agreement, the
Collateral Agreements, the Credit Agreement, the Account
Agreement, the Intercompany Subordination Agreement, the
MMS Guaranty and each other Instrument executed by the
<PAGE> 15
Borrower or any Affiliate of any thereof evidencing any
obligation (monetary or otherwise) in connection with and
pursuant to this Agreement and the transactions
contemplated hereby and representing obligations incurred
to any of the Finance Parties.
"MATERIALLY ADVERSE EFFECT" means an effect, resulting from
any occurrence of whatever nature (including any adverse
determination in any labor controversy, litigation,
arbitration or governmental investigation or proceeding),
which is materially adverse to the ability of the Borrower
to make any payment or perform any other material
obligation required under any Loan Document to which it is
a party.
"MATURITY" means, relative to the Loans, any date on which
the Loans are stated to be due and payable, in whole or in
part, whether by required repayment, prepayment,
declaration or otherwise.
"MATURITY DATE" means June 30, 2004.
"MMS" is defined in the PREAMBLE and means, subject to the
Credit Agreement, such entity to be operating under the
name of Minera Hecla Venezolana, C.A.
"MMS SHARES" means the 24,500 Class A Shares and the 25,500
Class B Shares, each in capital stock of MMS.
"MONARCH MEXICO" is defined in the SECOND RECITAL and
includes any successor by name change.
"MONARCH MEXICO SHARES" means the 8,464,676 shares of
capital stock of Monarch Mexico.
"MRIL " is defined in the PREAMBLE and means, subject to
the Credit Agreement, such entity to be operating under the
name of Hecla Resources Investments Limited.
"MRIL Shares" means the 7,500,000 shares of capital stock
of MRIL.
"OBLIGATIONS" means all obligations of the Borrower with
respect to the repayment or performance of all obligations
(monetary or otherwise) arising under or in connection with
the Facility.
<PAGE> 16
"OBLIGORS" means, collectively, the Borrower, MMS and MRIL.
"ORGANIC DOCUMENT" means the certificate of incorporation
and by-laws of the Borrower and all shareholder agreements,
voting trusts and similar arrangements applicable to any of
its authorized shares of capital stock or other equity
interests.
"PARTICIPANT" is defined in SECTION 10.11.2.
"PERCENTAGE" means, relative to any Lender and at any time,
the ratio (expressed as a percentage) of (i) the Principal
Amount of such Lender's Loans at such time to (ii) the
Principal Amount of all the Lenders' Loans at such time.
"PERMITTED LIENS" means the Liens permitted pursuant to
SECTION 7.3.3.
"PERSON" means any natural person, corporation,
partnership, firm, association, trust, government,
governmental agency or any other entity, whether acting in
an individual, fiduciary or other capacity.
"PRINCIPAL AMOUNT" means the principal amount of any Loan,
which shall include for the avoidance of doubt any interest
and other amounts accruing thereon and capitalized pursuant
to SECTION 3.2.5.
"PRINCIPAL OUTSTANDINGS" means at any time the Principal
Amount of all outstanding Loans at such time.
"PROJECT" is defined in the THIRD RECITAL.
"REGULATORY CHANGE" means the occurrence after the
Effective Date of any change in or
abrogation of, or introduction, adoption, effectiveness,
interpretation, reinterpretation or phase-in of any:-
(a) statute, law, rule, or regulation applicable to any
Finance Party, or
(b) guideline, interpretation, directive, consent decree,
administrative order, request or determination (whether
or not having the force of law but, if not having the
force of law, such guideline, etc. being of the type
<PAGE> 17
with which such Finance Party would comply in the
ordinary course of business) applicable to such Finance
Party of any court, central bank or governmental or
regulatory authority charged with the interpretation or
administration of any statute, law, rule or regulation
referred to in CLAUSE (a) or of any fiscal, monetary,
or other authority having jurisdiction over such
Finance Party.
"RELATED PERSON" means any of the Borrower and each
Obligor.
"REQUIRED COLLECTED LENDERS" means, at any time, Collected
Lenders having, in the aggregate, a percentage of more than
sixty-six and two thirds (66 2/3%), computed by reference
to the ratio of:-
(a) the sum of (i) the principal amount of such Collected
Lenders' Bank Lenders' Loans at such time PLUS (ii)
the Principal Amount of such Collected Lenders' Loans
at such time; to
(b) the sum of (i) the principal amount of all the
Collected Lenders' Bank Lenders' Loans at such time
PLUS (ii) the Principal Amount of all the Collected
Lenders' Loans at such time.
For the purposes of this definition, all Gold Loans under
the Credit Agreement shall be calculated at their Original
Dollar Equivalent.
"REQUIRED LENDERS" means, at any time, Lenders having, in
the aggregate, a Percentage of more than sixty-six and two-
thirds (66 - 2/3%).
"REQUIREMENT OF LAW" means, as to any Person, its Organic
Documents and any Applicable Law or Contractual Obligation
binding on or applying to such Person.
"RESTATED CREDIT AGREEMENT" means the Restated Credit
Agreement, dated May 7, 1999, between Hecla Mining,
Nationsbank, N.A. as Agent and the lenders party thereto.
"STANDARD BANK" is defined in the PREAMBLE.
"TAX CREDIT" is defined in SECTION 4.7(b).
<PAGE> 18
"TAX PAYMENT" is defined in SECTION 4.7(b).
"TAXES" means any present or future income, franchise,
excise, stamp or other taxes, fees, duties, withholdings or
other charges of any nature imposed by any taxing authority
of any jurisdiction.
"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
ERISA Affiliate 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 (3) 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.
"U.S. GAAP" is defined in SECTION 1.3.
1.2 USE OF DEFINED TERMS
Unless otherwise defined or the context otherwise requires,
terms for which meanings are provided in this Agreement
shall have such meanings when used in this Agreement and
each notice and other communication delivered from time to
time in connection therewith.
1.3 ACCOUNTING AND FINANCIAL DETERMINATIONS
Unless otherwise specified, all accounting terms used
herein or in any other Loan Document shall be interpreted,
all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements
required to be delivered hereunder or thereunder shall be
prepared in accordance with, generally accepted accounting
principles in the U.S. ("U.S. GAAP").
<PAGE> 19
1.4 CHANGE IN ACCOUNTING PRINCIPLES
If, after the Effective Date, there shall be any material
change to the Borrower's Fiscal Year, or in the application
of the accounting principles used in the preparation of the
financial statements referred to in SECTION 6.5 as a result
of the promulgation of rules, regulations, pronouncements
or opinions by agencies having jurisdiction over financial
reporting and accounting standards which changes result in
a change in the method of calculation of, or have an
adverse impact on, financial covenants, standards, or terms
applicable to the Borrower found in this Agreement or any
other Loan Document, the Borrower and the Administrative
Agent agree promptly to enter into negotiations in order to
amend such financial covenants, standards or terms so as to
reflect equitably such changes with the desired result that
the evaluations of the Borrower's financial condition shall
be the same after such changes as if such changes had not
been made; PROVIDED, HOWEVER, that until the Required
Lenders have given their consent (such consent not to be
unreasonably withheld, conditioned or delayed) to the
Administrative Agent to such amendments, such Borrower's
financial condition shall continue to be evaluated on the
same principles as those used in the preparation of the
financial statements of the Borrower referred to in SECTION
6.5.
1.5 GENERAL PROVISIONS AS TO CERTIFICATES AND OPINIONS, ETC.
Whenever the delivery of a certificate is a condition
precedent to the taking of any action by either Agent or
any Lender hereunder, the truth and accuracy of the facts
and the diligent and good faith determination of the
opinions stated in such certificate shall in each case be
conditions precedent to the right of the Borrower to have
such action taken, and any certificate executed by the
Borrower shall be deemed to represent and warrant that the
facts stated in such certificate are true and accurate as
of the date stated.
1.6 INTERPRETATION
Unless a clear contrary intention appears, this Agreement
and each other Loan Document shall be construed and
interpreted in accordance with the provisions set forth
below:-
(a) the singular number includes the plural number and vice
versa;
<PAGE> 20
(b) reference to any Person includes such Person's successors,
executors, administrators, substitutes and assigns but, if
applicable, only if such successors, executors, administrators,
substitutes and assigns are permitted by this Agreement or such
other Loan Document, and reference to a Person in a particular
capacity excludes such Person in any other capacity or
individually;
(c) reference to any gender includes any other gender;
(d) reference to any agreement, document or Instrument means
such agreement, document or Instrument as amended, supplemented,
novated, refinanced, replaced, waived, restated or modified, and
in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof;
(e) reference to any promissory note includes any promissory
note which is an extension or renewal thereof or a substitute or
replacement therefor;
(f) reference to any Applicable Law means such Applicable Law
as amended, modified, codified or re-enacted, in whole or in
part, and in effect from time to time, including rules and
regulations promulgated thereunder;
(g) "HEREUNDER", "HEREOF", "HERETO", "HEREIN" and words of
similar import shall be deemed references to this Agreement or
such other Loan Document, as the case may be, as a whole and not
to any particular Article, Section, clause or other provision
hereof or thereof;
(h) any reference to any particular Article, Section or clause
shall be to such Article, Section or clause of this Agreement or
such other Loan Document;
(i) "INCLUDING" means including without limiting the generality
of any description preceding such term;
(j) relative to the determination of any period of time, "FROM"
means "FROM (AND INCLUDING)" and "TO" means "TO (BUT EXCLUDING)";
(k) any reference to a time of day is a reference to London
time;
<PAGE> 21
(l) reference to a "COMPANY" or "CORPORATION" shall be
construed as a reference to the analogous form of business entity
used in any relevant jurisdiction;
(m) when an expression is defined, another part of speech or
grammatical form of that expression has a corresponding meaning;
and
(n) any reference to the "knowledge" of the Borrower or its
Authorized Representative with respect to a certain matter means
either such Person's actual knowledge with respect to such matter
or that of which a Person, in the position of the Borrower or
Authorized Representative and acting reasonably, would be
expected to have knowledge.
2. COMMITMENTS AND PROCEDURES FOR MAKING LOANS; CONTINUATION
PROCEDURES
2.1 COMMITMENTS; MAKING LOANS
(a) Subject to the terms and on the conditions of this
Agreement, the Lenders agree that their Commitments consist of
obligations to make, maintain and continue Loans, in an amount
not to exceed the Aggregate Commitment Amount (for all the
Lenders) or each Lender's Commitment Amount. The Loans may be
made on a single Borrowing Date during the period from the
Effective Date to the Commitment Termination Date.
(b) By delivering a Borrowing Notice to the Administrative
Agent on or before 10:00 a.m., the Borrower may request on any
Business Day during the period described in CLAUSE (a), on not
less than three nor more than five Business Days' notice
(counting the date on which such notice is given), that Loans be
made by all Lenders on the Borrowing Date set forth in such
Borrowing Notice in a principal amount equal to the then
Aggregate Commitment Amount. Upon receipt of a Borrowing Notice
requesting Loans to be made, the Administrative Agent shall
promptly notify each Lender of the contents thereof, and such
Borrowing Notice shall not thereafter be revocable by the
Borrower.
<PAGE> 22
(c) Subject to the terms and conditions of this Agreement, the
Loans requested to be made in the relevant Borrowing Notice shall
be made on the specified Borrowing Date. On such Borrowing Date
and subject to such terms and conditions, each Lender shall, on
or before 10:00 a.m., credit a specifically designated account of
the Administrative Agent at its Lending Office, with an amount of
Dollars equal to such Lender's Percentage of the aggregate
Principal Amount of the Loans requested to be made. To the
extent funds are received by the Administrative Agent from the
Lenders in respect of the Loans as requested pursuant to the
relevant Borrowing Notice, the Administrative Agent shall make
such funds available to the Borrower by crediting the Principal
Amount of such Loans to such account of the Borrower as it may
direct.
(d) The Borrower may, from time to time on any Business Day
prior to the Commitment Termination Date upon which there then
remains any portion of the Aggregate Commitment Amount,
voluntarily reduce the Aggregate Commitment Amount, as then in
effect, in whole or, if in part, in multiples of U.S.$1,000,000;
PROVIDED, HOWEVER, that the Borrower shall give the
Administrative Agent not less than three or nor more then five
Business Days prior written notice (counting the date on which
such notice is given) of any such reduction which notice shall be
irrevocable once given. On the Commitment Termination Date, the
Aggregate Commitment Amount (if still remaining) shall,
automatically, and without any action by any Person be reduced to
zero.
2.2 RECORDS
Each Lender's Loans shall be evidenced by loan accounts
maintained by such Lender. The Borrower hereby irrevocably
authorizes each Lender to make (or cause to be made)
appropriate account entries, which account entries, if
made, shall evidence INTER ALIA the date of, the Principal
Amount of, any repayments of, and the interest rate on, the
Loans then outstanding to such Lender. Any such account
entries indicating the outstanding Principal Amount of
Loans outstanding to such Lender shall be PRIMA FACIE
evidence of the Principal Amount thereof owing and unpaid,
but the failure to make any such entry shall not limit or
<PAGE> 23
otherwise affect the obligations of the Borrower hereunder
to make payments of the amount of, or interest on, such
Loans when due. The Administrative Agent shall also
maintain records with respect to each of the matters set
forth in the first sentence of this Section and each other
party hereto agrees to deliver such information to the
Administrative Agent as it may reasonably request for the
purpose of maintaining such records. In case of any
discrepancy between the records of the Administrative Agent
and the records of any Lender with respect to any matter
referred to in this Section, the records of such Lender
shall be deemed to control.
2.3 FUNDING
Each Lender may, if it so elects, but subject to Applicable
Law, fulfil its obligation to make, maintain or continue
any portion of its Loans by causing an offshore branch,
Affiliate or banking facility of such Lender to make,
maintain or continue such Loans; PROVIDED, HOWEVER, that in
such event any Loans shall be deemed to have been made by
such Lender, and the obligation of the Borrower to repay
such Loan, and pay interest thereon, shall nevertheless be
to such Lender and shall be deemed to be held by it, to the
extent of such Loan, for the account of such foreign
branch, Affiliate or international banking facility; and
PROVIDED, FURTHER, HOWEVER, that the Borrower shall be
under no obligation to pay any amount to such Lender
pursuant to SECTION 4.1, 4.2, 4.3, 4.4, 4.5 or 4.6 which
arises solely as a consequence of an election made by such
Lender pursuant to this Section.
2.4 OBLIGATIONS SEVERAL
The obligations of the Lenders to make, maintain and
continue Loans under this Article are several. No Lender's
obligation under this Article shall be affected by any
other Lender' s failure to meet its obligations hereunder.
3. PRINCIPAL PAYMENTS; INTEREST; COMMISSIONS
3.1 PRINCIPAL PAYMENTS
3.1.1 SCHEDULED REPAYMENTS
(a) The Borrower shall repay the Loans in Principal Amounts of
U.S.$1,000,000 on each of June 30, 2003 and December 31, 2003.
<PAGE> 24
(b) The Borrower shall repay the Principal Amount of the
Loans remaining outstanding in full on the Maturity
Date.
3.1.2 PREPAYMENTS - VOLUNTARY
In addition to its obligations under SECTION 3.1.1, the
Borrower may, from time to time on any Business Day
(subject to SECTION 4.3) make a voluntary prepayment, in
whole or in part, of the then outstanding Principal Amount
of all Loans; PROVIDED, HOWEVER, that:
(a) the Borrower shall give the Administrative Agent not
less than five Business Days' prior written notice
(counting the date on which such notice is given) of
any such voluntary prepayment, which notice, once
given, shall be irrevocable; and
(b) all such partial voluntary prepayments shall be in an
aggregate Principal Amount of multiples of U.S.$500,000.
3.1.3 PRINCIPAL PAYMENTS GENERALLY
(a) Each repayment or prepayment of any Loans made
pursuant to this Section shall be without premium or
payment of any other additional amount, except as may
be required pursuant to SECTION 4.3. Amounts repaid or
prepaid may not be re-borrowed. Except as set forth
in SECTION 3.2, any repayment or prepayment of the
Principal Amount of any Loans shall include accrued
interest on the date of repayment or prepayment on the
Principal Amount being repaid or prepaid.
(b) Loans required to be repaid or prepaid pursuant to
this Section shall be paid in Dollars. Any amount paid
pursuant to SECTION 3.1.2(a) shall be applied in
reducing the repayment installments under SECTION
3.1.1 in the inverse order of their maturities.
3.2 INTEREST PAYMENTS
The Borrower shall make payments of (or capitalize)
interest in accordance with this Section.
<PAGE> 25
3.2.1 RATE
The Borrower shall pay interest on the Principal Amount of
the Loans outstanding from time to time (or interest shall
accrete thereon) at a rate PER ANNUM equal to the sum of
(i) the Fixed Rate plus (ii) the Additional Costs Rate, if
relevant.
3.2.2 POST-MATURITY RATE
After the Maturity of all or any portion of the Principal
Amount of the Loans or after any other Obligations shall
have become due and not been paid, the Borrower shall pay
interest (after as well as before judgment) on the Principal
Amount of each Loan so matured or on any such other
Obligations, at a rate PER ANNUM equal to the sum of (i) the
Increased Rate for such periods (of a minimum of three
months) as the Administrative Agent may from time to time
select plus (ii) the Additional Costs Rate (if relevant).
3.2.3 PAYMENT DATES; CALCULATION OF INTEREST
Interest accrued on each Loan shall, subject to SECTION
3.2.5, be payable on the Maturity Date. In addition,
interest accrued on each Loan after the Maturity thereof and
interest on other overdue amounts shall be payable upon
demand. The amount of accruing and accreting interest on
any Loans shall be calculated by the Administrative Agent on
the daily outstanding Principal Amount of such Loans. All
interest shall be computed on the basis of the actual number
of days (including the first day but excluding the last day)
during the period for which such interest is payable over a
year comprised of 360 days.
3.2.4 RATE DETERMINATIONS
All determinations by the Administrative Agent of the rate
of interest applicable to any Loan shall be conclusive
absent demonstrated error.
3.2.5 CAPITALIZATION OF INTEREST
(a) Notwithstanding the interest payment provisions
contained in this Section, until the date on which the
principal of, and interest on, the Loans shall become
<PAGE> 26
payable in full, whether at the Maturity Date or by
reason of acceleration or if the Maturity of all or
any portion of the Principal Amount of the Loans or
after any Obligations shall have become due and not
been paid, the Borrower may capitalize interest as
provided in this Section.
(b) To the extent the Borrower shall not make any payment of
interest (including for the avoidance of doubt, the Additional
Costs Rate, if relevant) on the Loans in cash on each Payment
Date or when otherwise due (each, an "INTEREST PAYMENT DATE"), an
amount equal to the interest payable on such Interest Payment
Date but not paid in cash shall be added to the Principal Amount
payable hereunder and shall bear interest as provided herein.
(c) For the avoidance of doubt, the payment of each Principal
Amount described in SECTIONS 3.1.1(a) and SECTION 3.1.2 shall be
made without payment of any interest capitalized until such date.
All interest so capitalized shall, subject to this Agreement, be
added to the Principal Amount immediately outstanding after each
such payment and shall be paid in cash at the Maturity Date or on
any other date where interest is actually payable.
(d) To the extent the Borrower shall not make any payment of
interest on the Loans in cash on any Interest Payment Date
occurring after the Maturity of all or any portion of the
Principal Amount of the Loans or after any other Obligations
shall have become due and not been paid, an amount which bears
the same proportion to the total amount of interest which would
be payable on the remaining Principal Amount of the Loans if the
Loans bore interest at the Increased Rate for the period from the
immediately preceding Interest Payment Date until the then
current Interest Payment Date as (i) the amount of interest due
on the current Interest Payment Date at the Fixed Rate but not
paid in cash bears to (ii) the total amount of interest at the
Fixed Rate payable on such Interest Payment Date, shall be added
to the Principal Amount payable hereunder and shall bear interest
as provided herein.
3.2.6 PAYMENTS SUBJECT TO SUBORDINATION
All payments of principal and interest shall be subject to
the terms of the Nationsbank Subordination Agreement.
<PAGE> 27
3.3 FEES
The Borrower shall make payments in respect of fees in
accordance with this Section.
3.3.1 AGENTS' FEES
The Borrower confirms and agrees that it will pay to the
Administrative Agent such underwriting, arrangement and
agency fees (in such amounts, on such dates and pursuant to
such terms) for the account of the Administrative Agent as
are described in a letter of even date herewith from the
Borrower to the Administrative Agent.
4. INCREASED COSTS; TAXES; MARKET DISRUPTIONS; GENERAL PAYMENT
PROVISIONS
4.1 DOLLARS UNAVAILABLE
(a) If, at any time that the Administrative Agent shall be
required to make any determination of the Fixed Rate for any
relevant period in which the Loans are to be outstanding and it
shall have determined or shall have been notified (for any reason
whatsoever) that in the case of any Loans outstanding or to be
outstanding during such period, either (x) Dollar certificates of
deposit or Dollar deposits, as the case may be, in the relevant
amount and for the relevant period are not available to the
Lenders in the London interbank market, or (y) by reason of
circumstances affecting the Lenders in the London interbank
market, adequate means do not exist for ascertaining the interest
rate applicable hereunder to such Loan, then the Administrative
Agent shall promptly give telephonic notice of such determination
confirmed in writing to the Borrower (which determination shall,
in the absence of demonstrated error, be conclusive and binding
on the Borrower).
(b) As soon as practicable following the giving of the notice
described in CLAUSE (a), the Administrative Agent, the affected
Lenders acting reasonably and the Borrower shall negotiate for a
period not exceeding 30 days with a view to agreeing to an
alternative basis for making or maintaining the Loans affected by
the circumstances described in CLAUSE (a). During such
<PAGE> 28
period interest shall accrue on the principal amount of
each affected Lender's affected Loans at the rate
applicable to such Loans immediately prior to the
giving of such notice. If no such alternative basis is
agreed within such time period, each affected Lender's
affected Loans shall bear interest at a rate PER ANNUM
equal to the sum of (i) the cost to such Lender of
funding such Loans (as determined by such Lender which
determination shall, in the absence of demonstrated
error, be conclusive and binding on the Borrower), (ii)
an applicable margin agreed between the Lenders and the
Borrower PLUS (iii) the Additional Costs Rate as in
effect from time to time with respect to such Lender.
4.2 INCREASED COSTS, ETC.
(a) The Borrower agrees to reimburse each Lender for any
increase (other than as specifically covered in any other Section
of this Article) in the cost to such Lender of making, continuing
or maintaining (or of its obligation to make, continue or
maintain) any Loans, and for any reduction (other than as
specifically covered in any other Section of this Article) in the
amount of any sum receivable by such Lender hereunder in respect
of making, continuing or maintaining any portion of any such
Loans in either case, from time to time by reason of any
Regulatory Change (including, solely with respect to any Lender
that is a bank or commercial financial institution, with respect
to Regulation D of the F.R.S. Board but excluding the Additional
Costs Rate (if relevant)), then, in any such event, such Lender
shall promptly notify the Administrative Agent and the Borrower
thereof stating in reasonable detail the reasons therefor and the
additional amount required fully to compensate such Lender for
such increased cost or reduced amount. Such notice shall, in the
absence of demonstrated error, be conclusive and binding on the
Borrower.
(b) As soon as practicable following the giving of any notice
described in CLAUSE (a), the affected Lender, the Administrative
Agent and the Borrower shall negotiate for a period not exceeding
30 days with a view to avoiding or minimizing the circumstances
described in CLAUSE (a). If no steps mutually agreeable to the
affected Lender, the Administrative
<PAGE> 29
Agent and the Borrower are decided within such 30 day
period, the Borrower may elect either to prepay the
principal amount of and interest on such affected
Lender's then outstanding Loans (subject, however, to
SECTION 4.3) or pay, within five days after the expiry
of such 30 day period, any additional amount required
fully to compensate such affected Lender for the
increased cost or reduced amount described in CLAUSE
(a).
4.3 FUNDING LOSSES
In the event that any Lender shall incur any loss or
expense (including any loss or expense incurred by reason
of the liquidation or reemployment of Dollar deposits or
other funds acquired by such Lender to make, continue or
maintain any portion of the Principal Amount of any Loan)
as a result of:-
(a) any payment or prepayment of the Principal Amount of Loans
on a date other than as and when required, whether pursuant to
SECTION 3.1 or otherwise; or
(b) any action of the Borrower resulting in any Loans not being
made, in accordance with the Borrowing Notice, as given therefor,
then, upon the request of such Lender to the Borrower (with
a copy to the Administrative Agent) the Borrower shall pay
to the Administrative Agent for the account of such Lender
such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or
expense. A statement as to any such loss or expense
(including calculations thereof in reasonable detail) shall
be submitted by such Lender to the Administrative Agent and
the Borrower and shall, in the absence of demonstrated
error, be conclusive and binding on the Borrower.
<PAGE> 30
4.4 INCREASED CAPITAL COSTS
(a) If any Regulatory Change affects or would affect the amount
of capital required to be maintained by any Lender which is a
bank or commercial financial institution or any Person
controlling such Lender, and such Lender determines (in its
reasonable discretion) that the rate of return on its or such
controlling Person's capital is reduced to a level below that
which such Lender or such controlling Person could have achieved
but for the occurrence of any such Regulatory Change, then, in
any such case upon notice from time to time by such Lender to the
Borrower, the Borrower may, at its option (i) within five days of
receipt of such notice, pay directly to such Lender additional
amounts sufficient to compensate such Lender or such controlling
Person for the portion of such reduction in rate of return which
is reasonably allocable to the Facility or (ii) prepay the
principal amount of and interest on such affected Lender's then
outstanding Loans (subject, however, to SECTION 4.3). A
statement of such Lender as to any such additional amount or
amounts (including calculations thereof in reasonable detail)
shall, in the absence of demonstrated error, be conclusive and
binding on the Borrower. In determining such amount, such Lender
may use any method of averaging and attribution that it (in its
reasonable discretion) shall deem applicable.
(b) Notwithstanding CLAUSE (a), the Borrower shall not be
obligated to pay any amount to any Lender in respect of any such
reduction in the rate of return or increased cost which arises as
a consequence of (i) any law or directive implementing the
proposals for international convergence of capital measurement
and capital standards published by the Basle Committee on Banking
Regulations and Supervisory Practices in July 1988 and/or (ii)
the Council of the European Communities Directive of April 17,
1989, on the own funds of credit institutions (89/299/EC) and the
Council of the European Communities Directive of December 18,
1989, on a solvency ratio for credit institutions (89/647/EC) to
the extent that the impact of any such law or directive can
reasonably be calculated at the Effective Date. In addition, no
Lender may make any claim for compensation in respect of any such
reduction in return or increased cost to
<PAGE> 31
the extent that a notification of the event leading to
such reduction in the rate or return or increased cost
is not given to the Borrower within six months of such
Lender's obtaining knowledge thereof.
4.5 ILLEGALITY
(a) If, as the result of any Regulatory Change, any Lender
shall determine (which determination, in the absence of
demonstrated error, shall be conclusive and binding on the
Borrower) that it is unlawful for such Lender to make any Loan or
the obligations of such Lender to make such Loan shall, upon such
determination (and telephonic notice thereof confirmed in writing
to the Administrative Agent and the Borrower), forthwith be
suspended until such Lender shall become aware that the
circumstances causing such suspension no longer exist and shall
forthwith notify the Administrative Agent and the Borrower to
such effect, at which time the obligation of such Lender to make
such Loan shall be reinstated.
(b) If, as the result of any Regulatory Change, any Lender
shall determine (which determination, in the absence of
demonstrated error, shall be conclusive and binding on the
Borrower) that it is unlawful for such Lender to continue its
Loan, then, upon notice by such Lender to the Administrative
Agent and the Borrower, such Lender shall consult with the
Borrower and the Administrative Agent for a period of up to 30
days from the date of such notice, with a view to agreeing upon a
mutually acceptable alternative arrangement which will avoid or
minimize such illegality. If, no steps mutually agreeable to the
affected Lender, the Administrative Agent and the Borrower are
decided within such 30 day period, the Borrower may, at its
option, to the extent not prohibited from doing so by the
relevant illegality or unlawfulness, continue such Lender's then
outstanding Loans or prepay, within five days after the expiry of
such 30 day period (unless required to do so prior thereto) the
principal amount of and interest on such affected Lender's then
outstanding Loans (subject, however, to SECTION 4.3).
<PAGE> 32
(c) If the relevant illegality or unlawfulness makes it
unlawful for a Lender to maintain its Loan, then upon
notice by such Lender to the Administrative Agent and
the Borrower, the Borrower shall, as soon as
practicable after receiving such notice, prepay the
Principal Amount of any interest on such affected
Lender's outstanding Loans (subject, however, to
SECTION 4.3)
4.6 TAXES
All payments by the Borrower of principal of, and interest
on, the Loans and all other amounts payable pursuant to the
relevant Finance Parties shall be made free and clear of,
and without deduction for any Taxes (other than franchise
taxes and taxes imposed on or measured by the recipient's
net income or receipts). In the event that any withholding
or deduction from any payment to be made by the Borrower
hereunder or under any other Loan Document is required in
respect of any such Taxes pursuant to any Applicable Law,
then the Borrower will:-
(a) pay directly to the relevant authority the full amount to
be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative
Agent evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of each
Person entitled thereto such additional amount or amounts as is
necessary to ensure that the net amount actually received by such
Person will be equal to the full amount such Person would have
received had no such withholding or deduction been required.
Moreover, if any such Taxes are directly asserted against
any Finance Party with respect to any payment received by
such Finance Party, such Finance Party may pay such Taxes
and the Borrower will promptly pay such additional amounts
(including any penalties, interest or expenses) as is or
are necessary in order that the net amount received by such
Person after the payment of such Taxes (including any Taxes
on such additional amount) shall equal the amount such
Person would have received had such Taxes not been
asserted.
<PAGE> 33
If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the
Administrative Agent, for its own account and/or, as the
case may be, the account of the relevant Finance Party, the
required receipts or other required documentary evidence,
the Borrower shall indemnify the Administrative Agent or
the relevant Finance Party, as the case may be, for any
incremental Taxes, interest or penalties that may become
payable by any such Person as a result of any such failure.
For the purposes of this Section, a distribution hereunder
or under any other Loan Document by the Administrative
Agent or any Finance Party, as the case may be, to or for
the account of any Finance Party shall be deemed a payment
by the Borrower.
The Finance Parties agree to co-operate with the Borrower
in completing and delivering or filing tax-related forms
which would reduce or eliminate any amount of the nature
referred to in this Section; PROVIDED, HOWEVER, that no
Finance Party shall be under any obligation to execute and
deliver any such form if, in the reasonable opinion of such
Finance Party, completion of any such form could result in
an adverse consequence with respect to the business or tax
position of such Finance Party.
4.7 MITIGATION
(a) In the event that the Borrower makes payment of any amount
pursuant to SECTION 4.4 or 4.6 or that any Lender seeks payment
of an amount pursuant to SECTION 4.4 or 4.6 or because of
circumstances resulting in the 30 day negotiation period
described in SECTION 4.1(b), 4.2(b) or 4.5(b), such affected
Lender agrees that it will take such reasonable steps as may
reasonably be open to it to mitigate the effects of the
circumstances described in the foregoing Sections (such steps to
include the transfer of such Lender's Lending Office to another
jurisdiction and the application for a Tax Credit); PROVIDED,
HOWEVER, that no Lender shall be obligated to (i) take any such
steps if, in its opinion, such steps would require it to achieve
less than its expected return with respect to the Facility or
would have an adverse effect upon its assets or financial
condition or (ii) achieve any particular result or incur any
liability to the Borrower by virtue of any such steps resulting
in less than complete mitigation of the relevant circumstances.
<PAGE> 34
(b) If, pursuant to CLAUSE (a), any Lender effectively obtains
a refund of tax or credit (a "TAX CREDIT") against a payment made
by the Borrower pursuant to SECTION 4.6 (a "TAX PAYMENT"), and
such Lender is able to identify such Tax Credit as being
attributable to such Tax Payment, then such Lender, after actual
receipt of such Tax Credit, shall reimburse the Borrower for such
amount as such Lender shall reasonably determine to be the
proportion of such Tax Credit as shall be reasonably attributable
to such Tax Payment; PROVIDED, HOWEVER, that no Lender shall be
required to make any such reimbursement which would cause it to
lose the benefit of such Tax Credit or would otherwise adversely
affect any matter relating to such Lender in connection with the
assessment or payment of any Taxes. If any Lender shall claim any
Tax Credit pursuant to this Section, it shall have absolute
discretion in the extent, order and manner in which it does so.
No Lender shall be obligated to disclose information regarding
its tax affairs or computations to the Borrower.
4.8 PAYMENTS, COMPUTATIONS, ETC.
(a) All payments by the Borrower pursuant to this Agreement or
any other Loan Document shall be paid in Dollars, except as
specifically set forth therein. All payments under this Agreement
or any other Loan Document shall be made by the Borrower to the
Administrative Agent for the account of each Finance Party
entitled thereto.
(b) All payments under the Facility shall be made by the
Borrower to the Administrative Agent for the account of each
Finance Party entitled thereto, by delivery of Dollars in
immediately available funds to an account of the Administrative
Agent in New York City at the Administrative Agent's Lending
Office, which account shall be designated from time to time by
notice to the Borrower from the Administrative Agent, for the
account of each Finance Party entitled thereto and, if such
payment shall be of less than the amount of the relevant payment
Obligation then due and owing, for the PRO RATA benefit of each
Finance Party entitled to share in such payment in accordance
with its respective portion of the aggregate unpaid amount of
<PAGE> 35
similar payment Obligations. All such payments shall be
made, without setoff, deduction, or counterclaim, not
later than 11:00 a.m., New York City time, on the date
when due. Any payments received hereunder after the
time and date specified in this Section shall be deemed
to have been received by the Administrative Agent on
the next following Business Day. The Administrative
Agent shall promptly remit to each Finance Party its
share (calculated as aforesaid), if any, of such
payments, in kind. Such remittance shall be to an
account designated by such Finance Party to the
Administrative Agent by notice from time to time and
maintained at its Lending Office.
4.9 PRORATION OF PAYMENTS
If any Lender shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of setoff,
or otherwise) on account of the principal amount of or
interest on any Loan in excess of its PRO RATA share of
payments then or therewith obtained by all Lenders entitled
thereto upon the principal amount of and interest on all
Loans, such Lender shall purchase from the other Lenders
such participations in Loans held by them as shall be
necessary to cause such purchasing Lender to share the
excess payment or other recovery rateably with each of
them; PROVIDED, HOWEVER, that if all or any portion of the
excess payment or other recovery is thereafter recovered
from such purchasing holder, the purchase shall be
rescinded and the purchase price restored to the extent of
such recovery, but without interest. The Borrower agrees
that any Lender so purchasing a participation from another
Lender pursuant to this Section may, to the fullest extent
permitted by Applicable Law, exercise all its rights of
payment (including pursuant to SECTION 4.10) with respect
to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a
secured claim under the Facility in lieu of a setoff to
which this Section applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the
Lenders entitled under this Section to share in the benefit
of any recovery on such secured claim.
<PAGE> 36
4.10 SET-OFF
In addition to and not in limitation of any rights of any
of the Finance Parties under Applicable Law, each Finance
Party (or any branch thereof) shall, upon the occurrence of
any Enforcement Event, have the right to appropriate and
apply to the payment of the Obligations owing to it
(whether or not then due), any and all balances, credits,
deposits, accounts or moneys of the Borrower then or
thereafter maintained with such Finance Party in whatever
currency (and, as security for the Obligations owing to
each such Finance Party, but not to the exclusion of any
other rights such Finance Party may have, the Borrower
hereby grants to each such Finance Party a continuing
security interest in any and all balances, etc., as
aforesaid); PROVIDED, HOWEVER, that any such appropriation
and application shall be subject to the provisions of
SECTION 4.9.
4.11 APPLICATION OF PROCEEDS
(a) If at any time any amount (including any proceeds received
in respect of any sale of, collection from, or other realization
upon, all or any part of any collateral security subject of any
Collateral Agreement) received by either Agent is less than the
amount then due and payable pursuant to this Agreement or any
other Loan Document such amount may, in the discretion of the
Administrative Agent, be held by the Administrative Agent as
additional collateral security for, or then or at any time
thereafter be applied (after payment of any amounts payable to
the Agents pursuant to SECTIONS 10.3 and 10.4 and similar
provisions contained in the other Loan Documents) in whole or in
part by the Administrative Agent against, all or any part of the
Obligations in the following order:-
(i) first, to amounts owing to the Bank Lenders in the order
set forth in Section 5.12(a) of the Credit Agreement;
(ii) second, to amounts outstanding to the Finance Parties under
any Loan Document in respect of any amount other than interest
on, or the Principal Amount of, any Loan;
<PAGE> 37
(iii)third, PRO RATA to amounts outstanding to the Finance
Parties under any Loan Document in respect of interest on any
Loan; and
(iv) fourth, PRO RATA to amounts outstanding to the Finance
Parties under any Loan Document in respect of the Principal
Amount of any Loan.
(b) Any surplus of such cash or cash proceeds held by the
Administrative Agent and remaining after payment in full of all
the Obligations, and the termination of all Commitments (if not
then already terminated), shall be paid over to or to whomsoever
may be lawfully entitled to receive such surplus.
5. CONDITIONS PRECEDENT TO MAKING LOANS
5.1 INITIAL LOANS
The obligations of the Lenders to make the Loans shall be
subject to the prior or concurrent satisfaction of each of
the conditions precedent set forth in this Article. Unless
specifically stated to the contrary, each document,
certificate and other Instrument delivered pursuant to this
Section shall be dated on, or prior to, and shall be in full
force and effect on, the Borrowing Date with respect to the
Loans.
The Administrative Agent shall have received:
5.1.1 RESOLUTIONS, ETC.
(a) a certificate of an Authorized Representative to the
effect that (i) the representations of such Person set
forth in each Loan Document to which it is a party
shall be true and correct as at the Effective Date and
after giving effect to the initial Loan and (ii) no
Default shall have then occurred and be continuing; and
(b) a certificate of the Secretary or similar officer of
the Borrower as to:
(i) resolutions of its Board of Directors or similar body then
in force and effect authorizing the execution, delivery and
performance of each Loan Document and any other document to be
executed by it in connection with the transactions contemplated
thereby;
<PAGE> 38
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to each Loan Document and any
other document executed or to be executed by it; and
(iii)its Organic Documents as then in effect,
upon which certificate the Administrative Agent may
conclusively rely until it shall have received a further
certificate of the Secretary or similar officer of the
relevant Person cancelling or amending such prior
certificate.
5.1.2 CREDIT AGREEMENT, NATIONSBANK SUBORDINATION AGREEMENT
(a) counterparts of the Credit Agreement, duly executed by
MRIL, as borrower, MMS, as an additional Obligor, the
Bank Lenders, the Administrative Agent and the
Collateral Agent;
(b) evidence that all conditions precedent to the making of
the Bank Lenders Loans shall have been met;
(c) delivery of a borrowing request for the Bank Lenders
Loans pursuant to the Credit Agreement to take effect
on the proposed Borrowing Date hereunder; and
(d) counterparts of the Nationsbank Subordination
Agreement, duly executed by Nationsbank N.A., in its
capacity as agent under the Restated Credit Agreement,
Standard Bank, as subordinated creditor and an
Authorized Representative of Hecla Mining, together
with evidence satisfactory in form and substance to the
Administrative Agent, of the granting of consent by
Nationsbank N.A., as agent under the Restated Credit
Agreement, to the execution of the Loan Documents and
the consummation of the transactions contemplated
thereby.
5.1.3 BORROWING NOTICE
The Administrative Agent shall have received a Borrowing
Notice relating to the Loans, executed by an Authorized
Representative of the Borrower.
<PAGE> 39
5.1.4 CLOSING FEES, EXPENSES, ETC.
The Administrative Agent shall have received (including, to
the extent necessary, from the proceeds of the Loans to be
made on the Borrowing Date) for the account of the Finance
Parties entitled thereto, all fees and expenses due
(including those of the Agent's advisors then invoked) and
payable on or prior to such Borrowing Date.
5.1.5 COMPLIANCE WITH WARRANTIES, NO DEFAULTS, ETC.
The representations and warranties of the Borrower set
forth in ARTICLE 6 and in all other Loan Documents shall be
true and correct as of the date initially made, and both
immediately before and after the making of the requested
Loans:
(a) such representations and warranties shall be true and
correct with the same effect as if then made (unless
stated to relate solely to an earlier date, in which
case such representations and warranties shall be true
and correct as of such earlier date); and
(b) no Default shall have then occurred and be continuing.
6. REPRESENTATIONS AND WARRANTIES
In order to induce the Finance Parties to enter into this
Agreement and to make, maintain and continue the Loans
hereunder, the Borrower, individually for itself and with
respect to matters hereinafter relating to it, represents
and warrants unto each of the Finance Parties, in each
case as set forth in this Article. The representations and
warranties set forth in this Article shall be made on the
Effective Date and upon the delivery of the Borrowing
Notice and shall be deemed to be made as at the Borrowing
Date.
6.1 ORGANIZATION, POWER, AUTHORITY, ETC.
(a) The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware.
<PAGE> 40
(b) The Borrower is qualified to do business and is in good
standing (where such concept is applicable) as a foreign company
in each jurisdiction where the nature of its business makes such
qualification necessary and has full power and authority, and
holds all requisite Approvals, to own and hold under lease its
property and to conduct its business substantially as currently
conducted by it. The Borrower has full power and authority to
enter into and perform its obligations under this Agreement and
the other Loan Documents executed or to be executed by it.
6.2 DUE AUTHORIZATION; NON-CONTRAVENTION
The execution and delivery by the Borrower of this
Agreement and each other Loan Document executed or to be
executed by it and the performance by the Borrower of its
obligations hereunder and thereunder, have been duly
authorized by all necessary corporate action on its part,
do not and will not require any Approval (other than the
filings, notarizations and registrations contemplated by
this Agreement in connection with the effectiveness,
perfection and priority of the Collateral Agreements to
which the Borrower is a party) do not and will not conflict
with, result in any violation of, or constitute any default
under, any provision of any Requirement of Law or Approval
binding on it, and will not result in or require the
creation or imposition of any Lien on any of its properties
pursuant to the provisions of any Contractual Obligation
(other than pursuant to this Agreement and the Collateral
Agreements to which the Borrower is a party).
6.3 VALIDITY, ETC.
(a) This Agreement constitutes, and each other Operative
Document executed or to be executed by the Borrower constitutes,
or on the due execution by each party thereto and delivery
thereof will constitute, the legal, valid and binding obligation
of the Borrower enforceable in accordance with its terms, subject
as to enforceability, to Applicable Laws relating to bankruptcy
and the enforceability of creditors' rights generally and by the
fact that the availability of equitable remedies is
discretionary.
<PAGE> 41
(b) Each Collateral Agreement to which the Borrower is a party
will, upon the taking of the various actions described hereunder
and thereunder, create in favor of the stated beneficiary or
secured party (howsoever denominated) thereunder, a valid and
perfected first-priority Lien on all of the assets, properties
and rights purported to be covered thereby as security for the
relevant obligations expressed to be covered thereby, subject to
no Liens, except (i) Permitted Liens and (ii) for the specific
exceptions set forth in the legal opinions delivered pursuant to
this Agreement.
6.4 LEGAL STATUS
Neither the Borrower nor any of its properties or revenues
enjoys any right of immunity from suit, set off, attachment
prior to judgment or in aid of execution, or execution on a
judgment in respect of its obligations under any of the
Loan Documents to which it is a party.
6.5 FINANCIAL INFORMATION
All balance sheets and all other financial information of
the Borrower which have been furnished by it to the
Administrative Agent for the purposes of or in connection
with this Agreement or any transaction contemplated hereby,
including:-
(a) the consolidated balance sheet at December 31, 1998 and the
related consolidated statements of operations and cashflows, loss
and deficit and change in financial position for the Fiscal Year
then ended, of Hecla Mining and its Subsidiaries in respect of
which an opinion was given by PricewaterhouseCoopers LLC; and
(b) the consolidated balance sheet at March 31, 1999 and the
related consolidated statement of profit and loss and cashflows
for the Fiscal Quarter then ended, of Hecla Mining and its
Subsidiaries, certified by the principal financial or accounting
Authorized Representative of Hecla Mining,
<PAGE> 42
have been prepared in accordance with GAAP consistently
applied throughout the periods involved (except as
disclosed therein) and do present fairly (subject in the
case of interim financial statements to year-end audit
adjustments) the financial position of the Borrower as at
the dates thereof and the results of its operations for the
periods then ended. The Borrower on the date hereof does
not have any material Contingent Liability or liability for
taxes, long-term leases or unusual forward or unusual
long-term commitments which are not reflected in its
financial statements described in this Section or in the
notes thereto.
6.6 ABSENCE OF DEFAULT
The Borrower is not in default in the payment of or in the
performance of any material obligation applicable to any
Indebtedness (subject to any applicable grace period), or
in default under any Requirement of Law or the terms or
conditions upon which any Approval has been granted.
6.7 LITIGATION, ETC.
Except as disclosed in ITEM 1 ("LITIGATION") of the
Disclosure Schedule, there is no pending or, to the
knowledge of the Borrower, threatened labor controversy,
litigation, arbitration or governmental investigation or
proceeding against the Borrower (including with respect to
the Acquisition Transaction) or to which any of its
business, operations, properties, assets or revenues is
subject as to which there is a reasonable likelihood of an
adverse outcome to the Borrower and which, if adversely
determined, would result in a Materially Adverse Effect
with respect to the Borrower. In the case of any
litigation described in ITEM 1 ("LITIGATION") of the
Disclosure Schedule, there has been no development in such
litigation which would result in a Materially Adverse
Effect with respect to the Borrower.
6.8 MATERIALLY ADVERSE EFFECT
Since the date of the most recent audited financial
statements referred to in SECTION 6.5 there have been no
occurrences which, individually or in the aggregate, would
result in a Materially Adverse Effect.
<PAGE> 43
6.9 TAXES AND OTHER PAYMENTS
Except as disclosed in ITEM 2 ("TAXES") of the Disclosure
Schedule, the Borrower has filed all tax returns and
reports required by any Applicable Law to have been filed
by it and has paid all taxes and governmental charges
thereby shown to be owing and all claims for sums due for
labor, material, supplies, personal property and services
of every kind and character provided with respect to, or
used in connection with its business and no claim for the
same exists except as permitted hereunder, except (i) any
such taxes and governmental charges which are being
diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on the books of the
Borrower or (ii) in the case of any other claims, where
failure to make payment therefor would not result in a
Materially Adverse Effect with respect to the Borrower.
6.10 SUBSIDIARIES
All of the Subsidiaries of the Borrower as of the Effective
Date are listed in ITEM 3 ("SUBSIDIARIES") of the
Disclosure Schedule.
6.11 ENVIRONMENTAL WARRANTIES
Except as disclosed in ITEM 4 ("ENVIRONMENTAL MATTERS") of
the Disclosure Schedule or except where failure of any of
the following statements to be made would not reasonably be
expected to have a Materially Adverse Effect:-
(a) The Borrower is, and has at all times been, in compliance
with, or has fully remedied any non-compliance so as to be in
compliance with, all Environmental Laws in all material respects
and all material Approvals relating to Environmental Laws
necessary in connection with the ownership and operation of its
business and that of its subsidiaries are in full force and
effect. There are no acts, omissions, events, states of facts or
circumstances which may reasonably be expected to prevent or
interfere with the Borrower or any of its Subsidiaries being in
substantial compliance with any Environmental Laws, including
obtaining or being in substantial compliance with any material
Approvals relating to Environmental Laws in the future, and no
material investment is necessary to obtain or renew any material
Approval and that of its Subsidiaries relating to Environmental
Laws.
<PAGE> 44
(b) There are no present or, to the Borrower's knowledge, past
acts, omissions, events, states of facts or circumstances which
have resulted in (or could result in) any third party (including
any regulatory authority) taking any action or making any
material claim against the Borrower under any Environmental Laws
including remedial action (in particular in relation to
contaminated land) or the revocation, suspension, variation or
non-renewal of any Approval under any Environmental Laws and the
Borrower has no notice of any complaints, demands, civil claims,
enforcement proceedings or of any action required by any
regulatory authority and there are no investigations pending or,
to the Borrower's knowledge, threatened in relation to the
failure of the Borrower to obtain any material Approval (other
than any Non-Material Approval) under, or comply with, any
Environmental Laws.
6.12 ERISA LIABILITIES
All currently existing ERISA Plans are listed in ITEM 5
("ERISA PLANS") the Disclosure Schedule. Except as
disclosed in the Disclosure Schedule, 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:-
(a) no "accumulated funding deficiency" (as defined in
Section 4.12(a) of the Internal Revenue Code) exists
with respect to any ERISA Plan, whether or not waived
by the Secretary of the Treasury or his delegate; and
(b) 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 U.S.$500,000.
<PAGE> 45
7. COVENANTS
7.1 INFORMATIONAL AND FINANCIAL COVENANTS
The Borrower agrees with each Finance Party that, until all
Commitments have terminated and all Obligations have been
paid and performed in full the Borrower will perform its
relevant obligations set forth in this Section.
7.1.1. FINANCIAL INFORMATION, ETC.
The Borrower will deliver to the Administrative Agent
copies of the following reports and information:-
(a) promptly when available, and in any event within 90 days
after the close of each of its Fiscal Years, its consolidated
balance sheet at the close of such Fiscal Year and related
consolidated statements of operations and cashflows, loss and
deficit, and changes in financial position, as may be relevant
(with comparable information at the close of and for the prior
Fiscal Year) and reported on without Impermissible Qualification
by an independent certified public or chartered accountant of
recognized international standing; and
(b) promptly when available, and in any event within 45 days
after the close of the first three Fiscal Quarters of each of its
Fiscal Years, its consolidated balance sheet at the close of such
Fiscal Quarter and related consolidated statements of operations
and cashflows, loss and deficit, and changes in financial
position, as may be relevant, for such Fiscal Quarter and for the
period in such Fiscal Year ending on the last day of such Fiscal
Quarter (with comparable information at the close of and for the
corresponding Fiscal Quarter of the prior Fiscal Year and for the
corresponding portion of such prior Fiscal Year) and certified by
its accounting or financial Authorized Representative.
7.1.2 DEFAULTS
As soon as practicable and in any event within three
Business Days after obtaining knowledge of the occurrence
of any Default relating to it, the Borrower will furnish to
the Administrative Agent a statement of its chief financial
Authorized Representative setting forth details of such
Default and the action which it has taken and proposes to
take with respect thereto.
<PAGE> 46
7.1.3 MISCELLANEOUS INFORMATION
The Borrower will deliver to the Administrative Agent
copies of the following reports and information:-
(a) as soon as practicable details of any litigation,
arbitration or administrative proceedings, which if
resolved against the Borrower could result in the
Borrower suffering a loss in excess of U.S.$1,000,000
(or the equivalent thereof in any other currency); and
(b) all other information relating to its financial
condition, operations or assets the Administrative
Agent (or any Lender by notice to the Administrative
Agent, which notice shall be copied to the Borrower)
may from time to time reasonably request.
7.1.4 BOOKS AND RECORDS; ACCESS
The Borrower will keep financial records and statements
reflecting all of its business affairs and transactions in
accordance with GAAP.
7.1.5 ACCURACY OF INFORMATION
All factual information hereafter furnished by or on behalf
of the Borrower in writing to any of the Finance Parties
for the purposes of or in connection with this Agreement or
any transaction contemplated hereby will be true and
accurate in every material respect on the date as of which
such information is dated or certified and such information
shall not be incomplete by omitting to state any material
fact necessary to make such information not misleading.
7.2 AFFIRMATIVE COVENANTS
The Borrower agrees with each Finance Party that, until all
Commitments have terminated and all Obligations have been
paid and performed in full, the Borrower will perform its
relevant obligations set forth in this Section.
7.2.1 COMPLIANCE WITH LAWS, ETC.
The Borrower will comply (a) in all material respects with
all Applicable Laws and (b) the terms of any Loan Document
to which it is a party.
<PAGE> 47
7.2.2 MAINTENANCE OF CORPORATE EXISTENCE
The Borrower will do and will cause to be done at all times
all things necessary to maintain and preserve its corporate
existence and to be duly qualified to do business and be in
good standing (where such concept is relevant) as a foreign
corporation in each jurisdiction where the nature of its
business requires it to be so qualified and where there is
a reasonable likelihood of a Material Adverse Effect if the
Borrower is not so qualified.
7.2.3 PAYMENT OF TAXES, ETC.
The Borrower will pay and discharge, as the same may become
due and payable, all taxes, assessments, fees and other
governmental charges or levies against it or on any of its
property, as well as claims of any kind or character
(including claims for sums due for labor, material,
supplies, personal property and services); PROVIDED,
HOWEVER, that the foregoing shall not require the Borrower
to pay or discharge any such tax, assessment, fee, charge
or levy so long as it shall be diligently contesting the
validity or amount thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate
reserves in accordance with GAAP with respect thereto or,
in the case of any such claims due, to claims where failure
to make payment therefor would not result in a Materially
Adverse Effect.
7.3 NEGATIVE COVENANTS
The Borrower agrees with each Finance Party that, until all
Commitments have terminated and all Obligations have been
paid and performed in full, the Borrower will perform its
relevant obligations set forth in this Section.
7.3.1 BUSINESS ACTIVITIES; PLACE OF BUSINESS; ORGANIC
DOCUMENTS; FISCAL YEAR
The Borrower shall not:-
(i) maintain any chief executive office or principal place of
business without first taking (to the satisfaction of the
Collateral Agent) all actions necessary to protect and perfect
the Liens granted pursuant to the relevant Collateral Agreements;
<PAGE> 48
(ii) amend its Organic Documents in any material respect or
change its corporate name; or
(iii)change its Fiscal Year.
7.3.2 INDEBTEDNESS
The Borrower will not (and will not permit its Subsidiaries
to) create, incur, assume, or suffer to exist or otherwise
become or be liable in respect of any Indebtedness other
than (without duplication):-
(a) Indebtedness in respect of the Loans and other Obligations;
(b) Indebtedness in respect of taxes, assessments or
governmental charges, and Indebtedness in respect of claims for
labor, materials or supplies incurred in the ordinary course of
business to the extent that payment thereof shall not at the time
be required to be made in accordance with the provisions of
SECTION 7.2.3;
(c) Indebtedness in respect of judgments or awards, enforcement
of which has not been stayed by reason of a pending appeal or
otherwise, for a period of more than 21 days, which do not, in
the aggregate, exceed U.S.$50,000 (or the equivalent thereof in
any other currency) or the payment of which is not covered in
full by insurance (subject to any customary deductibles)
maintained with responsible insurance companies;
(d) any other Indebtedness disclosed in ITEM 6 ("INDEBTEDNESS")
of the Disclosure Schedule;
(e) Indebtedness in respect of the Restated Credit Agreement
and all Indebtedness permitted pursuant to Section 7.1(a) of the
Restated Credit Agreement; provided, however, the Borrower may
not increase the Maximum Credit Amount (as defined in the
Restated Credit Agreement) in excess of U.S.$82,500,000 without
the prior written consent of the Administrative Agent such
consent not to be unreasonably withheld or delayed. The Borrower
shall only be required to notify the Administrative Agent of any
increase in the Maximum Credit Amount which is not in excess of
U.S.$82,500,000;
<PAGE> 49
(f) Indebtedness existing at the time of the purchase of any
asset or property in the ordinary course of business and/or
incurred only in connection with the acquisition, development and
improvement of such asset or property and without any recourse to
(or any other form of financial support) from the Borrower; and
(g) Indebtedness in respect of and otherwise permitted by the
Credit Agreement.
7.3.3 LIENS
The Borrower will not (and will not permit its Subsidiaries
to) create, incur, assume or suffer to exist any Lien upon
any of its properties, revenues or assets, whether now
owned or hereafter acquired, except:
(a) Liens in favor of any of the Finance Parties granted
pursuant to any Loan Document;
(b) Liens arising from mandatory provisions of Applicable
Law;
(c) Liens specifically permitted by the Collateral
Agreements and the Account Agreement;
(d) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or
thereafter payable without penalty or being contested
in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have
been set aside on its books or in the case of any other
claims, where failure to make payment therefor would
not be likely to result in a Materially Adverse Effect
with respect to the Borrower;
(e) Liens of carriers, warehousemen, mechanics,
materialmen, suppliers and landlords incurred in the
ordinary course of business for sums not overdue or
being contested in good faith by appropriate
proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its
books;
<PAGE> 50
(f) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment
insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than
for borrowed money) entered into in the ordinary course
of business or to secure obligations on surety or
appeal bonds;
(g) judgment Liens (relating to judgments or awards which
do not in the aggregate, exceed U.S.$1,000,000 (or the
equivalent thereof in any other currency)) in existence
less than 21 days after the entry thereof or with
respect to which execution has been stayed or the
payment of which is covered in full (subject to a
customary deductible) by insurance maintained with
responsible insurance companies;
(h) any other Lien disclosed in ITEM 7 ("LIENS") of the
Disclosure Schedule;
(i) Liens arising under and permitted by the Credit Agreement;
(j) Liens under and permitted by the Restated Credit Agreement
and permitted by Section 7.1(b) of the Restated Credit Agreement;
and
(k) Liens securing Indebtedness described in SECTION 7.3.2 (f).
7.3.4 ERISA PLANS
No related Person will incur any obligation to contribute
to any "multiemployer plan" as defined in Section 4001 of
ERISA.
7.3.5NOTIFICATIONS UNDER RESTATED CREDIT AGREEMENT
The Borrower will not, without prior notice to the
Administrative Agent:
(a) amend any of Sections 7.1, 7.11, 7.12 or 7.13 of
the Restated Credit Agreement; or
<PAGE> 51
(b) agree to or take any action which would postpone
the Maturity Date (as defined in the Restated Credit
Agreement) as in effect on the date hereof.
8. EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT
The term "EVENT OF DEFAULT" shall mean any of the events
set forth in this Section.
8.1.1NON-PAYMENT OF OBLIGATIONS
The Borrower:-
(a) shall default in the payment or prepayment when due of
any Principal Amount of; or
(b) shall default in the payment when due of any other
Obligation (and such default shall continue unremedied
for a period of two days).
8.1.2 NON-PERFORMANCE OF CERTAIN COVENANTS
The Borrower shall default in the due performance and
observance of any of its obligations under SECTION 7.2.3 or
7.3 (other than, to the extent such default shall have
arisen as a result of any action or event beyond the control
of the Borrower, SECTION 7.3.1 or 7.3.2).
8.1.3 NON-PERFORMANCE OF OTHER OBLIGATIONS
The Borrower shall default in the due performance or
observance of any term, condition, covenant or agreement,
whether contained herein or in any other Loan Document
executed by it (other than a default arising pursuant to
SECTION 8.1.1 or 8.1.2) and, if capable of cure or remedy,
such default shall continue unremedied for a period of 10
Business Days (or such longer period as the Administrative
Agent may agree, if the Administrative Agent determines
that such default is reasonably capable of being cured
within such longer period) after notice thereof shall have
been given to the Borrower by the Administrative Agent.
<PAGE> 52
8.1.4 BREACH OF REPRESENTATION OR WARRANTY
Any representation or warranty of the Borrower hereunder or
in any other Loan Document executed by it or in any other
writing furnished by or on behalf of the Borrower to any
Finance Party for the purposes of or in connection with
this Agreement or any such Loan Document is or shall be
incorrect when made in any material respect.
8.1.5 DEFAULT ON OTHER INDEBTEDNESS
A default shall occur in the payment when due (subject to
any applicable grace period), whether by acceleration or
otherwise, by the Borrower under any Indebtedness
(excluding Indebtedness described in SECTION 8.1.1) of the
Borrower having a principal amount, individually or in the
aggregate, in excess of U.S.$1,000,000 (or the equivalent
of any of the foregoing in any other currency), or the
maturity of any such Indebtedness shall be accelerated.
8.1.6 BANKRUPTCY, INSOLVENCY, ETC.
The Borrower shall:-
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for such
Person, or any property of any thereof, or make a general
assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for such
Person or for a substantial part of the property of any thereof,
and such trustee, receiver, sequestrator or other custodian shall
not be discharged within 60 days, provided that the Borrower
hereby expressly authorizes the Administrative Agent to appear in
any court conducting any relevant proceeding during such 60-day
period to preserve, protect and defend the rights of the Finance
Parties under the Loan Documents;
<PAGE> 53
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of
any Person and, if such case or proceeding is not commenced by
such Person, such case or proceeding shall be consented to or
acquiesced in by such Person or shall result in the entry of an
order for relief or shall remain for 60 days undismissed,
provided that the Borrower hereby expressly authorizes the
Administrative Agent to appear in any court conducting any
relevant proceeding during such 60-day period to preserve,
protect and defend the rights of the Finance Parties under the
Loan Documents;
(e) suffer any comparable event to any of the foregoing in any
jurisdiction; or
(f) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
8.1.7IMPAIRMENT OF LOAN DOCUMENTS
This Agreement or any other Loan Document shall terminate
or cease in whole or part to be the legal, valid, binding
and enforceable obligation of the Borrower; the Borrower
shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability;
or any Lien securing any Obligation shall, in whole or in
part, cease to be a perfected Lien which, except as
permitted by SECTION 7.3.2, ranks first in priority.
8.1.8 JUDGMENTS
Any judgment or order for the payment of money in excess of
U.S.$1,000,000 (or the equivalent thereof in any other
currency) shall be rendered against the Borrower and
either:-
(a) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order; or
(b) there shall be any period of 21 consecutive days during
which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not
be in effect, unless the payment of such judgment is
covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance
companies.
<PAGE> 54
8.1.9 CHANGE IN CONTROL
Any Change in Control shall occur.
8.1.10 MATERIALLY ADVERSE EFFECT
Any event (other than as enumerated in any other provision
of this Article) shall occur or condition shall exist which
constitutes a Materially Adverse Effect.
8.2 ACTION IF BANKRUPTCY
If an Insolvency Event shall occur, the Commitments (if not
theretofore terminated) shall automatically terminate,
without notice, and the outstanding principal amount of all
outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable,
without notice or demand.
8.3 ACTION IF OTHER EVENT OF DEFAULT
If any Event of Default (other than an Insolvency Event)
shall occur for any reason, whether voluntary or
involuntary, and be continuing the Administrative Agent may
(acting with the consent of the Required Lenders), and upon
the direction of the Required Lenders, shall, upon notice
or demand to the Borrower, declare all or any portion of
the outstanding principal amount of the Loans to be due and
payable and any or all other Obligations to be due and
payable and/or the Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid
amount of such Loans and any and all other such Obligations
which shall be so declared due and payable shall be and
become immediately due and payable, without further notice,
demand or presentment, and/or, as the case may be, such
Commitments shall terminate.
9. THE AGENTS
9.1 ACTIONS
Each Lender authorizes the Collateral Agent and the
Administrative Agent to act in the relevant capacity on
behalf of such Lender under this Agreement and each other
Loan Document and, in the absence of other written
<PAGE> 55
instructions from the Required Lenders received from time
to time by such Agent (with respect to which such Agent
agrees that it will, subject to the last paragraph of this
Section, comply in good faith except as otherwise advised
by counsel to the effect that any such compliance might
subject such Agent to any liability of whatsoever nature),
to exercise such powers hereunder and thereunder as are
specifically delegated to or required of such Agent by the
terms hereof and thereof, together with such powers as may
be reasonably incidental thereto.
Without limiting the generality of the foregoing, each
Lender hereby authorizes the Collateral Agent to act on
behalf of such Lender to execute and accept on its behalf
the Collateral Agreements and to take all such actions
thereunder necessary or appropriate with respect to
management or enforcement of the collateral security
provided by such Collateral Agreements and enforcement of
the rights of the Finance Parties thereunder.
Each Lender agrees (which agreement shall survive any
termination of this Agreement) to indemnify each Agent, PRO
RATA, according to such Lender's Percentage, from and
against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever
which may at any time be imposed on, incurred by, or
asserted against such Agent in any way relating to or
arising out of this Agreement or any other Loan Document,
including the reimbursement of each Agent for all
out-of-pocket expenses (including attorneys' fees and
expenses) incurred by such Agent hereunder or in connection
herewith or with any other Loan Document or in enforcing
the Obligations under this Agreement or any other Loan
Document (subject as aforesaid) in all cases as to which
such are not reimbursed by the Borrower; PROVIDED, HOWEVER,
that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements determined by a court of competent
jurisdiction in a final proceeding to have resulted from
either Agent's gross negligence or wilful misconduct.
Neither Agent shall be required to take any action
hereunder or under any other Loan Document, or to prosecute
or defend any suit in respect of this Agreement or any
other Loan Document, unless it is indemnified to its
satisfaction by the relevant Lenders against loss, costs,
liability and expense. If any indemnity in favor of either
Agent shall become impaired, it may call for additional
indemnity and cease to do the acts indemnified against
until such additional indemnity is given.
<PAGE> 56
9.2 FUNDING RELIANCE, ETC.
Unless the Administrative Agent shall have been notified by
telephone, confirmed in writing, by any Lender by 5:00 p.m.
on the day prior to the proposed Borrowing Date that such
Lender will not make available the amount which would
constitute its Percentage of the Loans to be made by all
the Lenders on such date, the Administrative Agent may
assume that such Lender has made such amount available to
the Administrative Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not
have made such amount available to the Administrative
Agent, such Lender and the Borrower severally agree to
repay the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for
each day from the date the Administrative Agent made such
amount available to the Borrower to the date such amount is
repaid to the Administrative Agent, at the interest rate
applicable at the time to the relevant Loans.
9.3 EXCULPATION
Neither Agent nor any of its directors, officers, employees
or agents shall be liable to any Finance Party for any
action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection
herewith or therewith, except for its own wilful misconduct
or gross negligence, or responsible for any recitals or
warranties herein or therein, or for the effectiveness,
enforceability, validity or due execution of this Agreement
or any other Loan Document, or to make any inquiry
respecting the performance by the Borrower of its
obligations hereunder or thereunder, or the validity,
genuineness, creation, perfection or priority of the Liens
created by any Loan Document, or the validity, genuineness,
enforceability, existence, value or sufficiency of any
collateral security. Each Agent shall be entitled to rely
upon advice of counsel concerning legal matters and upon
any notice, consent, certificate, statement, or writing
which it believes to be genuine and to have been presented
by a proper Person.
<PAGE> 57
9.4 SUCCESSORS
Either Agent may resign as such at any time upon at least
30 days' prior notice to the Borrower and all the Lenders.
If either Agent at any time shall resign, the Required
Lenders may appoint another Lender as the relevant
successor Agent which shall thereupon become such Agent
hereunder. If no such successor Agent shall have been so
appointed as aforesaid, and shall have accepted such
appointment, within 30 days after such retiring Agent's
giving notice of resignation, then the retiring Agent may,
on behalf of the Required Lenders, appoint a relevant
successor Agent, which shall be one of the Lenders or a
commercial banking institution having a combined capital
and surplus of at least U.S.$500,000,000 (or the equivalent
thereof in another currency). Upon the acceptance of any
appointment as an Agent hereunder by any successor Agent,
such successor Agent shall be entitled to receive from the
relevant retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request,
and shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the relevant
retiring Agent and the retiring Agent shall be discharged
from its duties and obligations under this Agreement and
each other Loan Document.
9.5 LOANS BY STANDARD BANK
Standard Bank shall have the same rights and powers with
respect to the Loans made by it or any of its Affiliates as
any Lender and may exercise the same as if it were not the
Administrative Agent or the Collateral Agent. Each of
Standard Bank and its Affiliates may accept deposits from,
lend money to, and generally engage in any kind of business
with the Borrower or any Affiliate of any thereof as if
Standard Bank were not an Agent.
9.6 STANDARD BANK AS ADMINISTRATIVE AGENT
In acting as Administrative Agent for the Lenders, Standard
Bank's banking division will be treated as a separate
entity from any other of its divisions (or similar unit of
the Administrative Agent in any subsequent re-organization)
or subsidiaries (the "OTHER DIVISIONS") and, in the event
that the Administrative Agent should act for the Borrower
or Affiliate thereof in a corporate finance or other
<PAGE> 58
advisory capacity ("ADVISORY CAPACITY"), any information
given by such person to one of the Other Divisions is to be
treated as confidential and will not be available to any of
the Finance Parties without the consent of such persons
provided that:-
(a) the consent of the Borrower or Affiliate will not be
required in relation to any information which the
Administrative Agent in its discretion determines
relates to a Default or in respect of which the Lenders
have given a confidentiality undertaking in a form
satisfactory to the Administrative Agent and the
Borrower or Affiliate acting reasonably; and
(b) if representatives or employees of the Administrative
Agent receive information in relation to the Borrower
or Affiliate or while acting in an Advisory Capacity
they will not be obliged to disclose such information
to representatives or employees of the Administrative
Agent in their capacity as agent bank hereunder or to
any of the Lenders if to do so would breach any rule or
regulation or fiduciary duty imposed upon such Persons.
9.7 CREDIT DECISIONS
Each Lender acknowledges that, it has, independently of the
Agents and each other Lender, and based on the financial
and other information referred to in SECTION 6.5 and such
other documents, information and investigations as it has
deemed appropriate, made its own credit decision to
maintain its Commitments and participate in the Facility.
Each Lender also acknowledges that it will, independently
of the Agents and each other Lender, and based on such
other documents, information and investigations as it shall
deem appropriate at any time, continue to make its own
credit decisions as to exercising or not exercising from
time to time any rights and privileges available to it
under this Agreement or any other Loan Document.
9.8 COPIES, ETC
Each Agent shall give prompt notice to each Lender of each
notice or request required or permitted to be given to such
Agent by the Borrower pursuant to the terms of this
Agreement or any of the other Loan Documents. Each Agent
will distribute to the relevant Lenders each Instrument
<PAGE> 59
received for its account (but excluding, for the avoidance
of doubt, any fee letter referred to in SECTION 3.3.1) and
copies of all other communications received by such Agent
from the Borrower for distribution to the Lenders by such
Agent in accordance with the terms of this Agreement or any
other of the Loan Documents.
10. MISCELLANEOUS
10.1 WAIVERS, AMENDMENTS, ETC
The provisions of this Agreement and of each other Loan
Document (except to the extent expressly otherwise set
forth in such Loan Document) may from time to time be
amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by
the Borrower (or any other relevant Obligor party to such
Loan Document), the Required Lenders (or, in the case of
the MMS Guaranty, the Account Agreement and the Collateral
Agreements, the Required Collected Lenders), the Collateral
Agent (but only if such provision involves the rights or
obligations of the Collateral Agent) and the Administrative
Agent (but only if the relevant provision involves the
rights or obligations of the Administrative Agent);
PROVIDED, HOWEVER, that no such amendment, modification or
waiver which would:-
(a) modify any requirement hereunder that any particular action
be taken or a determination be made by, or with the consent of or
in consultation with all the Lenders or the Collateral Lenders by
the Required Lenders or by the Required Collected Lenders shall
be effective unless consented to by each Lender;
(b) modify this Section, change the definition of "REQUIRED
LENDERS" or "REQUIRED COLLECTED LENDERS", increase the Aggregate
Commitment Amount, change the definition of "PERCENTAGE" with
respect to any Lender, or otherwise subject any Lender to any
additional obligation hereunder, shall be effective without the
consent of all the Lenders;
(c) extend the due date for, or reduce the amount of, any
payment or prepayment of principal of or interest on any Loan or
any commitment commission or any other amount payable hereunder
or under any other relevant Loan Document shall be made without
the consent of all the Lenders;
<PAGE> 60
(d) reduce any fee described in SECTION 3.3.1 or affect the
interests, rights or obligations of either Agent QUA Agent shall
be made without the consent of such Agent; or
(e) except as specifically provided for in this Agreement or
any relevant Collateral Agreement, authorize or effect the
release of any material collateral which is the subject of any
Lien granted or purported to be granted pursuant to any such
Collateral Agreement shall be made without the consent of all the
Lenders or the Collected Lenders.
No failure or delay on the part of any Finance Parties in
exercising any power or right under this Agreement or any
other Loan Document to which it is a party shall operate as
a waiver thereof, nor shall any single or partial exercise
of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or
right. No notice to or demand on the Borrower in any case
shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by any Finance
Party under this Agreement or any other Loan Document to
which it is a copy shall, except as may be otherwise stated
in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
10.2 NOTICES
All notices and other communications provided to any party
hereto under this Agreement or any other Loan Document
shall be in writing or by telex or by facsimile and
addressed or delivered to it at the relevant address for
such party set forth below its signature hereto and
designated as its "ADDRESS FOR NOTICES" or at such other
address as may be designated by such party in the relevant
Loan Document or a notice to the other parties. Any
notice, if sent by hand delivery or courier delivery, shall
be deemed received on the Business Day when delivered and,
if transmitted by telex or facsimile, shall be deemed given
on the Business Day when transmitted (answerback confirmed
in the case of telexes and transmission confirmed by the
sending facsimile machine in the case of facsimiles).
<PAGE> 61
10.3 COSTS AND EXPENSES
(a) Without prejudice to similar obligations of the Borrower
under any other Loan Document, the Borrower agrees to pay on
demand all, reasonable out-of-pocket expenses (inclusive of
United Kingdom Value Added Tax or any other similar tax) of each
Agent for the negotiation, preparation, execution and delivery of
this Agreement and each other Loan Document, including schedules
and exhibits, and any amendments, waivers, consents, supplements
or other modifications to this Agreement or any other Loan
Document as may from time to time hereafter be required
(including the reasonable fees and expenses of counsel and
designated local counsel to either Agent from time to time
incurred in connection therewith), whether or not the
transactions contemplated hereby are consummated, and all
expenses (inclusive as aforesaid) of the Agents (including
reasonable fees and expenses of counsel and designated local
counsel to either Agent and any stamp or other taxes) incurred in
connection with the preparation and review of the form of any
Instrument relevant to this Agreement or any other Loan Document,
the consideration of legal questions relevant hereto and thereto
and the filing, recording, refiling or re-recording of any Loan
Document and all amendments or supplements to any thereof and any
and all other documents or Instruments of further assurance
required to be filed or recorded or refiled or re-recorded by the
terms hereof or of any other Loan Document.
(b) The Borrower agrees to reimburse each Finance Party upon
demand for all reasonable out-of-pocket expenses (including
attorneys' fees and expenses and inclusive of United Kingdom
Value Added Tax or any other similar tax) incurred by such
Finance Party in connection with (i) the negotiation of any
restructuring or "work-out", whether or not consummated, of any
Obligations and (ii) the enforcement of any such Obligations.
10.4 INDEMNIFICATION
In consideration of the execution and delivery of this
Agreement by each Finance Party and the extension of the
Commitments, the Borrower (without prejudice to any similar
obligations of any of the Obligors pursuant to any
applicable Loan Document) hereby indemnifies, exonerates
<PAGE> 62
and holds each Finance Party and each of such Finance
Party's Affiliates, officers, directors, shareholders,
employees and agents (collectively, the "INDEMNIFIED
PARTIES") free and harmless from and against any and all
actions, causes of action, suits, losses, costs,
liabilities and damages and expenses in connection
therewith, in each case arising from the claims of third
parties including reasonable attorneys' fees and
disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
the Indemnified Parties or any of them as a result of, or
arising out of, or relating to:-
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties,
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to
the payment and satisfaction of each of the Indemnified
Liabilities for which each is liable hereunder and which is
permissible under Applicable Law.
10.5 SURVIVAL
The obligations of the Borrower under SECTIONS 3.3, 4.2,
4.3, 4.4, 4.6, 10.3 and 10.4 and the obligations of the
relevant Lenders under SECTION 9.1, shall, in each case,
survive any termination of this Agreement. The
representations and warranties made by the Obligors in this
Agreement and in each other Loan Document to which it is a
party shall survive the execution and delivery of this
Agreement and each such other Loan Document.
10.6 SEVERABILITY
Any provision of this Agreement or any other Loan Document
which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or
such other Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
<PAGE> 63
10.7 HEADINGS
The various headings of this Agreement and of each other
Loan Document are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement
or such other Loan Document or any provisions hereof or
thereof.
10.8 COUNTERPARTS; EFFECTIVENESS
This Agreement may be executed by the parties hereto in
several counterparts, each of which shall be executed by
the Borrower, the Collateral Agent and the Administrative
Agent and be deemed to be an original and all of which
shall constitute together but one and the same agreement.
This Agreement shall become effective on the date (the
"EFFECTIVE DATE") when counterparts hereof executed on
behalf of the Borrower, the Collateral Agent and each
Lender (or notice thereof satisfactory to the
Administrative Agent) shall have been received by the
Administrative Agent.
10.9 GOVERNING LAW; ENTIRE AGREEMENT
(a) THIS AGREEMENT AND, UNLESS OTHERWISE SPECIFIED THEREIN,
EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK.
(b) This Agreement and the other Loan Documents constitute
the entire understanding among the parties hereto with
respect to the subject matter hereof and thereof and
supersede any prior agreements, written or oral, or
document with respect thereto.
10.10SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that:
(a) the Borrower may not assign or transfer its rights or
obligations without the prior written consent of the
Administrative Agent, the Collateral Agent and all the
Lenders; and
(b) the rights of sale, assignment, and transfer of the
Lenders are subject to SECTION 10.11.
<PAGE> 64
10.11SALE AND TRANSFER OF LOANS; PARTICIPATIONS IN LOANS
Each Lender may assign, or sell participations in, its
Loans and Commitments in accordance with this Section.
10.11.1 ASSIGNMENTS
Any Lender, with notice to the Borrower and the
Administrative Agent, may assign and delegate to any of its
Affiliates or to any other Lender or to one or more
commercial banks, as set forth in this Section. Each
Person described as being the Person from or to whom such
assignment and delegation is to be made, being hereinafter
referred to as an "ASSIGNOR LENDER" or "ASSIGNEE LENDER",
respectively.
Each Assignor Lender may assign and delegate all or any
fraction of such Assignor Lender's total Loans and
Commitments. Such assignment and delegation shall be of a
constant, and not a varying, percentage of all the Assignor
Lender's Loans and Commitments in a minimum aggregate
amount of U.S.$1,000,000; PROVIDED, HOWEVER, that any
transfer by any Lender of any Commitment shall require the
consent (not to be unreasonably withheld or delayed) of the
Administrative Agent; and PROVIDED, FURTHER, HOWEVER, that,
the Borrower and each Agent shall be entitled to continue
to deal solely and directly with the Assignor Lender in
connection with the interests so assigned and delegated to
an Assignee Lender until:
(a) written notice of such assignment and delegation,
together with payment instructions, addresses and
related information with respect to such Assignee
Lender, shall have been given to the Borrower and the
Administrative Agent by such Assignor Lender and such
Assignee Lender;
(b) such Assignee Lender shall have executed and delivered
to the Borrower and the Administrative Agent a Lender
Assignment Agreement, which shall have been accepted by
the Administrative Agent;
(c) the Administrative Agent shall have been provided with
such evidence as the Administrative Agent may
reasonably request in connection with any Approval
required or advisable in connection with such
assignment and delegation; and
(d) the processing fees (if any) described below shall have
been paid.
<PAGE> 65
From and after the date that the Administrative Agent
accepts such Lender Assignment Agreement (which shall be
promptly after the delivery of the documentation referred
to above and after the Administrative Agent shall be
satisfied that the relevant assignment is in compliance
with the requirements of this Agreement and each other Loan
Document under which the assignment is being effected), (x)
the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the
extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Lender in
connection with such Lender Assignment Agreement, shall
have the rights and obligations of a Lender hereunder and
under the other Loan Documents, (y) the Assignor Lender, to
the extent that rights and obligations hereunder have been
assigned and delegated by it in connection with such Lender
Assignment Agreement, shall be released from its
obligations hereunder and under the other Loan Documents,
and (z) the Collateral Agreements which are expressed to be
governed by the laws of Venezuela shall be endorsed and
amended, and all necessary steps taken in relation thereto,
to reflect such assignment and delegation.
Accrued interest on that part of the Loans assigned to the
Assignee Lender, and accrued fees in respect thereof, shall
be paid as provided in the Lender Assignment Agreement.
Except in the case where any such Assignee Lender is an
Affiliate of such Assignor Lender, such Assignor Lender or
such Assignee Lender shall also pay a processing fee to the
Administrative Agent upon delivery of any Lender Assignment
Agreement in the amount of U.S.$1,500. Any attempted
assignment and delegation not made in accordance with this
Section shall be null and void.
In no event shall the Borrower be required to pay any
amount under SECTIONS 4.2, 4.3, 4.4, 4.5 and 4.6 existing
at the time of any proposed assignment to any Assignee
Lender hereunder which would otherwise be payable if such
assignment took place.
10.11.2 PARTICIPATIONS
Any Lender may at any time sell to one or more commercial
banks (excluding the Borrower or any Affiliate of the
Borrower) (each of such commercial banks and other Persons
being herein called a "PARTICIPANT") participating
interests in any of the Loans, Commitments or other
interests of such Lender; PROVIDED, HOWEVER, that:
<PAGE> 66
(a) no participation contemplated in this Section shall
relieve such Lender from its Commitment or its other
obligations hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitment and such other
obligations;
(c) the Borrower and each Agent shall continue to deal
solely and directly with such Lender in connection with
such Lender's rights and obligations under this
Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate
of such Lender, or is itself a Lender, shall be
entitled to require such Lender to take or refrain from
taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any
Participant that such Lender will not, without such
Participant's consent, take any actions of the type
described in SECTION 10.1(b) or (c); and
(e) the Borrower shall not be required to pay any amount
under SECTIONS 4.2, 4.3, 4.4, 4.5 and 4.6 that is
greater than the amount which it would have been
required to pay had no participating interest been
sold.
The Borrower acknowledges and agrees that each Participant,
for the purposes of SECTIONS 4.2, 4.3, 4.4, 4.5, 4.6, 4.7,
4.9, 4.10, 4.11, 10.3 and 10.4, shall be considered a
Lender.
10.12OTHER TRANSACTIONS
Without prejudice to the provisions of SECTION 9.5, nothing
contained herein shall preclude any Finance Party from
engaging in any transaction, in addition to those
contemplated by this Agreement or any other Loan Document,
with the Borrower or any of their Affiliates in which the
Borrower or such Affiliate is not restricted hereby from
engaging with any other Person.
<PAGE> 67
10.13FORUM SELECTION AND CONSENT TO JURISDICTION; WAIVER OF
IMMUNITY
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR
IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
AGENTS, THE LENDERS OR THE BORROWER MAY BE BROUGHT AND
MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND IN ADDITION IN THE COURTS OF ANY JURISDICTION
WHERE ANY COLLATERAL OR OTHER PROPERTY OF THE BORROWER MAY
BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. THE BORROWER HEREBY IRREVOCABLY
APPOINTS THE PROCESS AGENT AS ITS AGENT FOR SERVICE OF
PROCESS IN NEW YORK. SERVICE OF PROCESS MAY BE MADE UPON
THE BORROWER BY MAILING OR DELIVERING A COPY OF SUCH
PROCESS TO IT IN CARE OF THE PROCESS AGENT AT THE PROCESS
AGENT'S ADDRESS AND THE BORROWER HEREBY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING IN NEW YORK ARISING OUT OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT BY THE MAILING OF COPIES OF SUCH
PROCESS TO IT AT ITS ADDRESS FOR NOTICES SET FORTH BELOW
ITS SIGNATURE HERETO. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO
THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO
THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
<PAGE> 68
10.14WAIVER OF JURY TRIAL
THE AGENTS, THE LENDERS AND THE BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN), OR ACTIONS OF THE AGENTS, THE LENDERS OR THE
OBLIGORS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
AGENTS AND THE LENDERS ENTERING INTO THIS AGREEMENT AND
EACH OTHER LOAN DOCUMENT.
<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
HECLA MINING COMPANY
as the Borrower
By: JOHN P. STILWELL
Title: VICE PRESIDENT & CHIEF
FINANCIAL OFFICER
Address for Notices:
6500 Mineral Drive
Coeur d'Alene
Idaho 83815-8788
U.S.
Facsimile No.: 1-208-709-7612
Attention: Chief Operating
Officer
Commitment Amount : U.S.$3,000,000
STANDARD BANK LONDON LIMITED
as a Lender
By: STEVEN L. SHARPE
Title: ASSISTANT GENERAL MANAGER
By: D.M. NEWPORT
Title: HEAD OF MINING FINANCE
Lending Office:
Address for Notices:
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
Facsimile No.: 44-171-815-4284
Attention: Steven Sharpe
<PAGE> 70
STANDARD BANK LONDON LIMITED
as Administrative Agent
By: STEVEN L. SHARPE
Title: ASSISTANT GENERAL MANAGER
By: D.M. NEWPORT
Title: HEAD OF MINING FINANCE
Address for Notices:
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
Facsimile No.: 44-171-815-4284
Attention: Steven Sharpe
STANDARD BANK LONDON LIMITED
as Collateral Agent
By: STEVEN L. SHARPE
Title: ASSISTANT GENERAL MANAGER
By: D.M. NEWPORT
Title: HEAD OF MINING FINANCE
Address for Notices:
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
Facsimile No.: 44-171-815-4284
Attention: Steven Sharpe
<PAGE> 71
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 1 - LITIGATION
As described in Hecla Mining Company's annual and quarterly
reports on Form 10-K and Form 10-Q for the 1998 Fiscal Year and
the Fiscal Quarter ending March 31, 1999, respectively.
ITEM 2 - TAXES
As described in Hecla Mining Company's annual and quarterly
reports on Form 10-K and Form 10-Q for the 1998 Fiscal Year and
the Fiscal Quarter ending March 31, 1999, respectively.
ITEM 3 - SUBSIDIARIES
As described in Hecla Mining Company's annual and quarterly
reports on Form 10-K and Form 10-Q for the 1998 Fiscal Year and
the Fiscal Quarter ending March 31, 1999, respectively.
ITEM 4 - ENVIRONMENTAL MATTERS
As described in Hecla Mining Company's annual and quarterly
reports on Form 10-K and Form 10-Q for the 1998 Fiscal Year and
the Fiscal Quarter ending March 31, 1999, respectively.
ITEM 5 - ERISA PLANS
As described in Hecla Mining Company's annual and quarterly
reports on Form 10-K and Form 10-Q for the 1998 Fiscal Year and
the Fiscal Quarter ending March 31, 1999, respectively.
ITEM 6 - INDEBTEDNESS
N/A
ITEM 7 - LIENS
N/A
<PAGE> 72
SCHEDULE II
ADDITIONAL COSTS RATE
1. The Additional Costs Rate applicable to a funding period
shall be the rate determined by each relevant Lender (and
communicated to the Administrative Agent) to be equal to the
arithmetic mean (rounded upwards, if necessary, to four decimal
places) of the rates resulting from the application of the
following formula:
A x 0.01%
--------
300
where, in each case, on the day of application of that
formula by each relevant Lender:-
A is the rate of charge payable by each relevant Lender
to the Financial Services Authority under paragraph
2.02 or 2.03 (as the case may be) of the Fees
Regulations (but where, for this purpose, the figures
at paragraph 2.02(b) and 2.03(b) of the Fees
Regulations shall be deemed to be zero) and expressed
in pounds per 1 million (British pounds) of the Fee
Base of such Lender.
2. For the purposes of this Schedule:-
"ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the
meanings given to those terms under the Bank of England Act
1998 or by the Bank of England (as may be appropriate), on
the day of the application of the formula;
"FEE BASE" has the meaning given to that term for the
purposes of, and shall be calculated in accordance with, the
Fees Regulations;
"FEES REGULATIONS" means, as appropriate, either:-
(a) the Banking Supervision (Fees) Regulations 1998; or
(b) such regulations as from time to time may be in force
relating to the payment of fees for banking supervision
in respect of periods subsequent to 28 February 1999.
<PAGE> 73
3. The Additional Costs Rate applicable to a Loan for a
funding period shall be calculated at or about 11.00 am on the
first day of that funding period and shall be payable on the date
on which interest is payable in respect of that Loan under this
Agreement.
4. Each relevant Lender shall determine the Additional Costs
Rate by application of the formula set out in paragraph 1 above
on the first day of each funding period.
5. If there is any change in applicable law or regulation, or
the interpretation thereof, by any governmental authority charged
with the administration thereof, or in the nature of any request
or requirement by the Financial Services Authority, the Bank of
England, or other applicable banking authority, the effect of
which is to impose, modify or deem applicable any fees or any
reserve, special deposit, liquidity or similar requirements
against assets held by, or deposits in, or for the account of, or
advances by such Lender, or in any other respect whatsoever, the
relevant Lender shall be entitled to vary the formula set out in
paragraph 1 above so as (but only so as) to restore such Lender's
position - in terms of overall return to the Lender - to that
which prevailed before that change became necessary. The Lender
shall notify the Borrower and the Administrative Agent of any
such necessary variation to the formula and the formula, as so
varied, shall be the formula for the purposes of this Agreement
with effect from the date of notification.
<PAGE> 1
Exhibit 10.5
CONFORMED COPY
DATED AS OF June 25, 1999
-------------------------
NATIONSBANK, N.A.
as Senior Creditor
STANDARD BANK LONDON LIMITED
as Subordinated Creditor
and
HECLA MINING COMPANY
as the Company
--------------------------------
NATIONSBANK SUBORDINATION
AGREEMENT
--------------------------------
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171 638 1111
Fax: 0171 972 7990
TCW/627S00004/1259027.2
<PAGE> 2
NATIONSBANK SUBORDINATION AGREEMENT
THIS NATIONSBANK SUBORDINATION AGREEMENT is dated as of June 25,
1999 (this "Agreement")
AMONG:
(1) NATIONSBANK, N.A. ("NationsBank"), a United States national
banking association, individually and as agent under the
Senior Credit Agreement as such and other terms used as
defined and interpreted in accordance with ARTICLE 1 (in
such capacity, the "Senior Creditor");
(2) STANDARD BANK LONDON LIMITED ("Standard Bank"), a bank
organized under the laws of England and Wales, individually
and as agent under the Subordinated Credit Agreement (in
such capacity, the "Subordinated Creditor"); and
(3) HECLA MINING COMPANY, a Delaware corporation ("Hecla Mining"
or the "Company").
WITNESSETH:-
WHEREAS, two subsidiaries of Hecla Mining, Monarch Resources
Investments Limited ("MRIL") and Monarch Minera Suramericana,
C.A. ("MMS") have entered into the credit agreement, dated as of
June 25, 1999 (the "Project Credit Agreement") among (1) MRIL, as
borrower, (2) MMS, as an additional obligor, (3) the bank parties
thereto, (4) Standard Bank as Administrative Agent and (5)
Standard Bank as Collateral Agent, in order to fund the
acquisition and upgrade of the La Camorra underground gold mine
(the "Project") in Venezuela;
WHEREAS, Hecla Mining has entered into the credit agreement dated
as of June 25, 1999 (the "Subordinated Credit Agreement") among
(1) Hecla Mining, as borrower, (2) the bank parties thereto, (3)
Standard Bank as Administrative Agent and (4) Standard Bank as
Collateral Agent;
WHEREAS, Hecla Mining is party to the Restated Credit Agreement
dated as of May 7, 1999 (the "Senior Credit Agreement"), among
(1) Hecla Mining, as borrower, (2) certain subsidiaries of Hecla
Mining, (3) the banks party thereto, and (4) NationsBank, as
Agent;
WHEREAS, the execution and delivery by (a) MRIL and MMS of the
Project Credit Agreement will require the consent of the Senior
Creditor (acting on behalf of the Majority Senior Lenders) and
(b) Hecla Mining of the Subordinated Credit Agreement will
require the consent of the Senior Creditor (acting on behalf of
the Majority Senior Lenders) and also that the Subordinated
Creditor subordinates its rights under the Subordinated Credit
Agreement to the rights of the Senior Creditor under the Senior
Credit Agreement on terms satisfactory to the Senior Creditor;
<PAGE> 3
WHEREAS, the parties hereto have agreed to enter into this
Agreement in order to set out the arrangements described in the
previous recital; and
WHEREAS, this Agreement is the "NationsBank Subordination
Agreement" referred to in the Project Credit Agreement and the
Subordinated Credit Agreement and it is a condition precedent to
the effectiveness of both documents and to the making of the
loans thereunder that each of the parties hereto execute and
deliver this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged by the Senior
Creditor, each of the Subordinated Creditor and the Company
undertakes and agrees, for the benefit of the Senior Creditor, as
follows:
1 . DEFINITIONS; INTERPRETATION
1.1 DEFINITIONS. In this Agreement (including its preamble and
recitals), the following capitalized terms shall have the
following meanings:
"Agreement" is defined in the PREAMBLE.
"Acquisition Agreement" is defined in the Subordinated
Credit Agreement.
"Company" is defined in the PREAMBLE.
"Default" means, as the context may require, a Default under
(and as defined in) the Senior Credit Agreement and/or the
Subordinated Credit Agreement.
"Default Notice" is defined in SECTION 4.1.
"Hecla Mining" is defined in the PREAMBLE.
"Insolvency Proceeding" means, with respect to any Person,
any voluntary or involuntary liquidation, dissolution, sale
of all or substantially all of such Person's assets,
marshaling of assets or liabilities, receivership,
conservatorship, assignment for the benefit of creditors,
insolvency, bankruptcy, reorganization, arrangement or
composition of such person or entity (whether or not
pursuant to bankruptcy, insolvency or other similar laws)
and any other proceeding under laws for the protection of
debtors involving such Person or any of its assets.
<PAGE> 4
"Liabilities" means all indebtedness and obligations of
Hecla Mining, howsoever created, arising or evidenced,
whether created directly or acquired by assignment or
otherwise whether direct or indirect, absolute or contingent
or now or hereafter existing, or due or to become due,
whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise, and whether
for principal, interest, fees, expenses or otherwise.
"Lien" means, with respect to any property or assets, any
right or interest therein of a creditor to secure
indebtedness owed to it or any other arrangement with such
creditor which provides for the payment of such indebtedness
out of such property or assets or which allows such creditor
to have such indebtedness 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 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.
"Majority Senior Lenders" means the Majority Lenders under
(and as defined in) the Senior Credit Agreement.
"MMS" is defined in the PREAMBLE.
"MRIL" is defined in the PREAMBLE.
"NationsBank" is defined in the PREAMBLE.
"Person" means an individual, corporation, partnership,
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.
"Project" is defined in the FIRST RECITAL.
"Project Credit Agreement" is defined in the FIRST RECITAL.
"Senior Credit Agreement" is defined in the THIRD RECITAL.
<PAGE> 5
"Senior Creditor" is defined in the PREAMBLE and shall mean
NationsBank in its individual capacity and in its capacity
as agent for all lenders (howsoever denominated) party from
time to time to the Senior Credit Agreement.
"Senior Liabilities" means all Liabilities owing from Hecla
Mining to the Senior Creditor and all other lenders party
from time to time to the Senior Credit Agreement arising
under the Senior Credit Agreement and all other Senior Loan
Documents executed and delivered by the Company and/or any
of its subsidiaries. "Senior Liabilities" shall include all
amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. 263(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy
Code, 11 U.S.C. 502(b) and 506(b) and any other similar
provisions arising under applicable law and shall include
interest accruing after the commencement of any Insolvency
Proceeding whether or not such interest is an allowed claim
enforceable in such Insolvency Proceeding.
"Senior Loan Documents" means the Senior Credit Agreement
and all documents and instruments delivered pursuant thereto
or in connection therewith.
"Standard Bank" is defined in the PREAMBLE.
"Subordinated Credit Agreement" is defined in the SECOND
RECITAL.
"Subordinated Creditor" is defined in the PREAMBLE and shall
mean Standard Bank in its individual capacity and in its
capacity as agent for all lenders (howsoever denominated)
party from time to time to the Subordinated Credit
Agreement.
"Subordinated Liabilities" means all Liabilities from time
to time owing by Hecla Mining to the Subordinated Creditor
and all other lenders (howsoever denominated) party from
time to time to the Subordinated Credit Agreement arising
under the Subordinated Credit Agreement and all other
Subordinated Loan Documents executed and delivered by the
Company and/or any of its subsidiaries (other than MMS and
MRIL and any successor entities in connection with the
financial accommodation provided to and in connection with
the Project). "Subordinated Liabilities" shall include all
amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. 263(a) and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy
Code, 11 U.S.C. 502(b) and 506(b) and any other similar
provisions arising under applicable law and shall include
interest accruing after the commencement of any Insolvency
Proceeding whether or not such interest is an allowed claim
enforceable in such Insolvency Proceeding.
<PAGE> 6
"Subordinated Loan Documents" means the Subordinated Credit
Agreement and all documents and instruments delivered
pursuant thereto or in connection therewith.
"Termination Date" means the earliest date after the date
hereof on which all Senior Liabilities have been paid in
cash and satisfied in full and neither the Senior Creditor
nor any lender (howsoever denominated) then party to the
Senior Credit Agreement has any outstanding commitment
(whether or not conditioned on the satisfaction of any
condition precedent) to lend money or otherwise extend
credit to Hecla Mining.
"Trigger Default" means (i) the failure of the Company or
any subsidiary of the Company to pay any component of any
Senior Liability when due and payable, 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, or (ii) the failure of the
Company or any subsidiary of the Company to duly observe,
perform or comply with the terms and provisions of Sections
7.1, 7.11, 7.12, or 7.13 of the Senior Credit Agreement.
1.2 INTERPRETATION
Unless the context otherwise requires or unless otherwise
provided herein, references in this Agreement to a
particular agreement, instrument or document also refer to
and include all renewals, extensions, amendments,
modifications, supplements or restatements of any, such
agreement, instrument or document (to the extent permitted
by the terms thereof); PROVIDED, HOWEVER, that nothing
contained in this Section shall be construed to authorize
any party hereto to execute or enter into any such renewal,
extension, amendment, modification, supplement or
restatement. The headings used herein are for purposes of
convenience only and shall not be used in construing the
provisions hereof. The words "this Agreement," "this
instrument," "herein," "hereof," "hereby" and words of
similar import refer to this Agreement as a whole and not to
any particular subdivision unless expressly so limited. 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.
2. SUBORDINATION TERMS
2.1 SUBORDINATION OF LIABILITIES
(a) The Subordinated Creditor, individually and on behalf
of all lenders (howsoever denominated) party from time
to time to the Subordinated Credit Agreement, hereby
until the Termination Date (but subject to SECTION 2.3)
expressly and in all respects, subordinates and makes
junior and inferior;
<PAGE> 7
(i) all Subordinated Liabilities and the payment of
the Subordinated Liabilities, to
(ii) the Senior Liabilities and the payment of the
Senior Liabilities.
(b) Without the prior written consent of the Senior Creditor,
prior to the Termination Date (but subject to SECTION 2.3), the
Subordinated Creditor shall not accept, receive or collect (by
set-off or other manner) any payment or distribution on account
of, or ask for, demand or accelerate, directly or indirectly, any
Subordinated Liability, and Hecla Mining shall not make any such
payment, except that Hecla Mining may make principal payments of
(i) U.S. $1,000,000 to the Subordinated Creditor on June 30,
2003;
(ii) U.S.$1,000,000 to the Subordinated Creditor on December 31,
2003;
(iii) U.S.$1,000,000 to the Subordinated Creditor on June 30,
2004 (plus accrued and accreted interest until such time) on
June 30, 2004 (if the Senior Credit Agreement shall still be in
effect); and
(iv) All amounts owing under Sections 3.3.1, 4.2, 4.3, 4.4, 4.6
and 10.3 of the Subordinated Credit Agreement and in respect of
the "Additional Costs Rate" thereunder
so long as no Trigger Default has occurred and is
continuing at the time of such payment.
2.2 SUBORDINATION OF LIENS. Except for the right to set off
against the Subordinated Liabilities any balances, credit,
deposits accounts or moneys of Hecla Mining at the banks and
financial institutions that are parties to the Subordinated
Credit Agreement, any Liens granted by Hecla Mining or any
of its subsidiaries (other than those granted by Hecla
Mining, MRIL and MMS, and any successor entities, in the
share capital or assets of MRIL or MMS or such successor
entities, or in connection with the Acquisition Agreement,
in each case in connection with the financial accommodation
provided to and in connection with the Project) at any time
securing the Subordinated Liabilities are hereby made, and
will at all times prior to the Termination Date be, subject,
subordinate, junior and inferior in all respects to all
Liens securing the Senior Liabilities; provided that this
Section shall not be construed as a consent by Senior
Creditor to any Liens prohibited by the Senior Credit
Agreement or any other Loan Document.
<PAGE> 8
2.3 ASSETS WRONGLY RECEIVED. If the Subordinated Creditor
receives any payment or distribution of any kind (whether in
cash, securities or other property) in contravention of this
Agreement, it shall hold such payment or distribution in
trust for the Senior Creditor, shall segregate the same from
all other cash or assets it holds, and shall immediately
deliver the same to Senior Creditor for the benefit of
Senior Creditor in the form received by Subordinated
Creditor (together with any necessary endorsement) to be
applied to or, at Senior Creditor's option held as
collateral for, the payment or prepayment of the Senior
Liabilities.
2.4 NO ACCELERATION, INSTITUTION OF COLLECTION PROCEEDINGS OR
INTERFERENCE WITH SENIOR CREDITOR'S COLLATERAL. (a) Prior
to the Termination Date, the Subordinated Creditor shall not
accelerate or collect or attempt to collect any part of the
Subordinated Liabilities, whether through the commencement
or joinder of an action or proceeding (judicial or
otherwise) or an Insolvency Proceeding, the enforcement of
any rights against any property of Hecla Mining (including
any such enforcement by foreclosure, repossession or
sequestration proceedings), or otherwise except when Senior
Creditor shall either request that Subordinated Creditor
join it in bringing any such proceeding or request that
Subordinated Creditor file claims in connection with any
such proceeding. The restriction described in this clause
shall not apply to the Subordinated Creditor if:
(i) an Insolvency Proceeding with respect to Hecla
Mining is commenced by Persons other than
Subordinated Creditor; or
(ii) the Senior Creditor accelerates the Senior
Liabilities or enforces against the collateral
securing the Senior Liabilities; PROVIDED,
HOWEVER, that in no event shall the Subordinated
Creditor commence an Insolvency Proceeding against
Hecla Mining or any of its subsidiaries other than
MRIL and MMS and any of their successors.
(b) For the avoidance of doubt, any moneys received under
this Section shall be subject to the Subordinated
Creditor's obligations under SECTIONS 2.1, 2.3 and 2.5.
2.5 INSOLVENCY PROCEEDINGS.
(a) Upon any distribution of all or any of the assets of
Hecla Mining, upon the dissolution, winding up,
liquidation or reorganization of Hecla Mining (whether
or not in any Insolvency Proceeding), or upon an
assignment for the benefit of creditors or any other
marshaling of the assets and liabilities of Hecla
Mining, then any payment or distribution of any kind
(whether in cash,
<PAGE> 9
securities or other property) which otherwise would be
payable or deliverable upon or with respect to the
Subordinated Liabilities shall be paid and delivered
directly to the Senior Creditor to be applied to or, at
Senior Creditor's option held as collateral for, the
payment or prepayment of the Senior Liabilities.
(b) During the pendency of any Insolvency Proceeding with
respect to Hecla Mining, Subordinated Creditor shall
promptly execute, deliver and file any documents and
instruments which Senior Creditor may from time to time
request in order to (i) file appropriate proofs of
claim in respect of the Subordinated Liabilities in
such Insolvency Proceeding, (ii) instruct any receiver,
trustee in bankruptcy, liquidating trustee, agent or
other Person making any payment or distribution in such
Insolvency Proceeding to make all payments which might
otherwise be payable or deliverable in respect of the
Subordinated Liabilities directly to Senior Creditor,
and (iii) otherwise effect the purposes of this
Agreement.
(c) Cumulative of the foregoing, Subordinated Creditor
hereby grants to Senior Creditor the express power and
authority (which power and authority are coupled with
an interest and shall be irrevocable) to do the
following until the Termination Date in the name of and
on behalf of Subordinated Creditor if Subordinated
Creditor fails to do so within ten (10) days after
written request therefor by Senior Creditor:
(i) to file appropriate claims (whether by proofs of
claim or otherwise) in any Insolvency Proceeding
and to take such other actions in such Insolvency
Proceeding as may be necessary or, in the
reasonable opinion of the Senior Creditor,
desirable to prevent the waiver or release of any
claims for Subordinated Liabilities or to enforce
the terms of this Agreement.
(ii) to prosecute and enforce such claims in such
Insolvency Proceeding, to initiate and participate
in other proceedings to enforce such Subordinated
Liabilities, and to collect and receive any and
all such cash or other assets which may be paid on
account of Subordinated Liabilities in such
Insolvency Proceeding or in any other proceeding.
Senior Creditor shall, however, have no duty to
Subordinated Creditor to exercise any of the foregoing
power and authority, and Senior Creditor may do so or
decline to do so in its sole and absolute discretion.
2.6 ASSIGNMENT AND MARKING OF SUBORDINATED LIABILITIES. Prior to
the Termination Date, Subordinated Creditor shall not without
the prior consent of Senior Creditor:
<PAGE> 10
(a) transfer, assign, pledge, encumber or otherwise dispose
of any right, claim or interest in all or any part of
the Subordinated Liabilities to any Person other than
the Senior Creditor; provided, however, that the
foregoing shall not apply to transfers and assignments
to lenders and other financial institutions
participating in the Subordinated Credit Agreement,
(b) subordinate any of the Subordinated Liabilities to any
Liabilities other than the Senior Liabilities.
The Subordinated Creditor shall cause each instrument to
which it is a party that evidences all or any part of the
Subordinated Liabilities to bear upon its face a conspicuous
statement or legend to the effect that such instrument and
the indebtedness evidenced thereby are subordinate to the
payment of all Senior Liabilities pursuant to this
Agreement.
2.7 WAIVER. The Subordinated Creditor hereby waives promptness,
diligence, notice of acceptance, and any notice (other than
as specifically provided in ARTICLE 4) with respect to any
of the Senior Liabilities and this Agreement, and any
requirement that the Senior Creditor exhaust any other right
or take any action against the Subordinated Creditor or any
other Person or any collateral.
2.8 SUBROGATION.
(a) No payment or distribution to the Senior Creditor
pursuant to the provisions of this Agreement shall
entitle the Subordinated Creditor to exercise any
rights of subrogation in respect thereof prior to the
Termination Date, and until such time the Subordinated
Creditor shall not have any right of subrogation to the
Senior Creditor on account of this Agreement.
(b) After the Termination Date, and provided that no
payments received by the Senior Creditor are voidable
or must otherwise be returned, the Subordinated
Creditor shall be subrogated to the rights of the
Senior Creditor to receive distributions applicable to
the Senior Liabilities to the extent that distributions
otherwise payable to the Subordinated Creditor have
been applied to the payment of the Senior Liabilities
owing to the Senior Creditor.
(c) Any distribution made pursuant to this Agreement to the
Senior Creditor on account of the Subordinated
Liabilities owing by Hecla Mining to the Subordinated
Creditor, shall not, as between such Persons, be
considered a payment of the Subordinated Liabilities.
<PAGE> 11
2.9 REINSTATEMENT. The Subordinated Creditor agrees that this
Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment (in whole or
in part) of any of the Senior Liabilities owing to it is
rescinded or must otherwise be restored by the Collateral
Agent, upon an Insolvency Proceeding or otherwise, all as
though such payment had not been made.
2.10 OBLIGATIONS HEREUNDER NOT AFFECTED. No action or inaction
of Senior Creditor or any other Person, and no change of law
or circumstances, shall release or diminish the obligations,
liabilities, agreements or duties hereunder of Subordinated
Creditor, affect this Agreement in any way, or afford any
Person any recourse against Senior Creditor. Without
limiting the generality of the foregoing, none of the
obligations, liabilities, agreements and duties of the
Subordinated Creditor under this Agreement shall be
released, diminished, impaired, reduced or affected by the
occurrence of any of the following at any time or from time
to time, even if occurring without notice to or without the
consent of the Subordinated Creditor (any right of the
Subordinated Creditor to be so notified or to require such
consent being hereby waived, except as set forth in
ARTICLE 5):
(a) the release (by operation of law or otherwise) of Hecla
Mining from its duty to pay any of the Senior
Liabilities.
(b) any invalidity, deficiency, illegality or
unenforceability of any of the Senior Liabilities or
the documents and instruments evidencing, governing or
securing the Senior Liabilities, in whole or in part,
any bar by any statute of limitations or other law to
recovery on any of the Senior Liabilities, or any
defense or excuse for failure to perform on account of
force majeure, act of God, casualty, impracticability
or other defense or excuse with respect to the Senior
Liabilities whatsoever.
(c) the taking or accepting by Senior Creditor of any
additional security for or subordination to any or all
of the Senior Liabilities.
(d) any release, discharge, surrender, exchange,
subordination, non-perfection, impairment, modification
or stay of actions or lien enforcement proceedings
against, or loss of any security at any time existing
with respect to, the Senior Liabilities.
(e) the modification or amendment of, or waiver of
compliance with, any terms of the documents and
instruments evidencing, governing or securing the
Senior Liabilities.
(f) the insolvency, bankruptcy or disability of the Company
or the filing or commencement of any Insolvency
Proceeding involving the Company or other proceeding
with respect thereto.
<PAGE> 12
(g) any increase or decrease in the amount of the Senior
Liabilities or in the time, manner or terms in
accordance with which the Senior Liabilities are to be
paid, or any adjustment, indulgence, forbearance,
waiver or compromise that may be granted or given with
respect to the Senior Liabilities.
(h) any neglect, delay, omission, failure or refusal of
Senior Creditor to take or prosecute any action for the
collection of the Senior Liabilities or to foreclose or
take or prosecute any action in connection with any
instrument or agreement evidencing or securing all or
part of the Senior Liabilities.
(i) any release of the proceeds of collateral which may
come into the possession of Senior Creditor or its
affiliates.
(j) any judgment, order or decree by any court or
governmental agency or authority that a payment or
distribution by Hecla Mining to Senior Creditor upon
the Senior Liabilities is a preference or fraudulent
transfer under applicable bankruptcy or similar laws
for the protection of creditors or is for any other
reason required to be refunded by Senior Creditor or
paid by Senior Creditor to any other Person.
(k) any modification of, or waiver of compliance with, any
terms of this Agreement with respect to any party
hereto.
(l) any neglect, delay, omission, failure or refusal of
Senior Creditor to take or prosecute any action against
any Person in connection with this Agreement.
3. AMENDMENTS TO DOCUMENTS
3.1 AMENDMENTS TO SUBORDINATED CREDIT AGREEMENT. Neither Hecla
Mining nor the Subordinated Creditor will, without the
prior written consent of the Senior Creditor:
(a) agree to or take any action which would increase the
rate of interest payable (or accreting) under the
Subordinated Credit Agreement or otherwise increase the
cost to Hecla Mining of the Subordinated Liabilities
other than as contemplated by the Subordinated Credit
Agreement as in effect at the date hereof;
(b) agree to or take any action which would postpone the
Maturity Date (as defined in the Subordinated Credit
Agreement) as in effect at the date hereof;
(c) agree to or take any action which would increase the
Aggregate Commitment Amount (as defined in the
Subordinated Credit Agreement) as in effect at the date
hereof;
<PAGE> 13
(d) agree to or take any action to amend the timings and
amounts of the payments of principal and interest in
respect of the Subordinated Liabilities as in effect at
the date hereof;
(e) agree to or take any action to amend any provisions of
the Subordinated Credit Agreement referred to in CLAUSE
2.1(B)(IV); and
(f) agree to or take any action to extend or create a lien
(howsoever denominated) over any property of Hecla
Mining or its subsidiaries which lien would secure or
purport to secure the Subordinated Liabilities, other
than as in effect at the date hereof and other than as
related to Hecla Mining's direct and indirect ownership
in the Project.
4. INFORMATION AND COOPERATION
4.1 DEFAULTS. Upon the Senior Creditor and/or the Subordinated
Creditor becoming aware of the occurrence of any relevant
Default, the Senior Creditor and/or the Subordinated Creditor
will use its best efforts to promptly notify the other in
writing thereof (a "Default Notice"); provided that the
failure to give a Default Notice shall not impair the
subordination made hereby in any manner or impose any
liability on Senior Creditor..
4.2 WAIVERS. Upon the waiver or remedy of any relevant Default,
the Senior Creditor and/or the Subordinated Creditor will
use its best efforts to promptly notify the other in writing
of such waiver or remedy; provided that the failure to give
such notice shall not impair the subordination made hereby
in any manner or impose any liability on Senior Creditor.
5. CONSENTS BY THE SENIOR CREDITOR
5.1 STATUS OF MMS AND MRIL. The Senior Creditor agrees that,
notwithstanding Section 6.14 of the Senior Credit Agreement,
none of MMS, MRIL, any successor entity of either of the
foregoing or any other subsidiary of Hecla Mining acquired
or incorporated solely in connection with the Project shall
be considered, or shall be required to become, a Subsidiary
Guarantor under (and as defined in) the Senior Credit
Agreement and shall not be bound by any provisions of the
Senior Credit Agreement (or any related document) relating
to any Person otherwise designated as a "Subsidiary
Guarantor".
5.2 CERTAIN WAIVERS. The Senior Creditor agrees to waive
Sections 7.1(a), 7.1(b), only with respect to setoff against
Hecla Mining as described in SECTION 2.2 and the Liens
granted by Hecla Mining, MRIL or MMS in the share capital or
assets of
<PAGE> 14
MRIL or MMS or their successors, or in connection with the
Acquisition Agreement, and Section 7.7 of the Senior Credit
Agreement insofar as such provisions relate to the execution
and delivery of the Subordinated Credit Agreement and the
performance by Hecla Mining of its obligations thereunder
subject to the limitations on investment in and loans to
MRIL and MMS set forth in the Senior Credit Agreement.
5.3 CONSENT BY SENIOR CREDITOR. The Senior Creditor consents to
the execution and delivery of the Subordinated Credit
Agreement and agrees that no Default under the Senior Credit
Agreement shall arise by reason of such execution and
delivery.
6. MISCELLANEOUS
6.1 WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement
may from time to time be amended, modified or waived, if
such amendment, modification or waiver is in writing and
consented to by Hecla Mining, the Subordinated Creditor and
the Senior Creditor.
No failure or delay on the part of either the Senior
Creditor or the Subordinated Creditor in exercising any
power or right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further
exercise thereof or the exercise of any other power or
right. No notice to or demand on either the Senior Creditor
or the Subordinated Creditor in any case shall entitle it to
any notice or demand in similar or other circumstances. No
waiver or approval by either the Senior Creditor or the
Subordinated Creditor under this Agreement shall, except as
may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or
approval thereafter to be granted hereunder.
6.2 NOTICES. All notices and other communications provided to
any party to this Agreement shall be in writing or by telex
or by facsimile and addressed or delivered to it at its
address set forth below its signature hereto and designated
as its "Address for Notices" or at such other address as may
be designated by such party in a notice to the other
parties. Any notice, if sent by hand delivery or courier
delivery, shall be deemed received when delivered and, if
transmitted by telex or facsimile, shall be deemed given
when transmitted (answerback confirmed in the case of
telexes and transmission confirmed by the sending facsimile
machine in the case of facsimiles).
<PAGE> 15
6.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto (and,
in the case of each of the Senior Creditor and the
Subordinated Creditor, to the benefit of the respective
lenders and other financial institutions participating in
the Senior Credit Agreement and the Subordinated Credit
Agreement, respectively, and their respective successors and
assigns); PROVIDED, HOWEVER, that Hecla Mining may not
assign or transfer its rights or obligations hereunder
without the prior written consent of the Senior Creditor and
the Subordinated Creditor.
6.4 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other
jurisdiction.
6.5 HEADINGS. The various headings of this Agreement are
inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or any
provisions hereof or thereof.
6.6 GOVERNING LAW; ENTIRE AGREEMENT.
(a) THIS AGREEMENT SHALL BE DEEMED A CONTRACT AND
INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF TEXAS
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF SUCH STATE AND THE LAWS OF
THE UNITED STATES OF AMERICA, APPLICABLE THEREIN,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(b) This Agreement constitutes the entire understanding
between the parties hereto with respect to the subject
matter hereof and supersedes any prior agreements,
written or oral, with respect thereto.
6.7 Waiver of Jury Trial. THE SENIOR CREDITOR, THE SUBORDINATED
CREDITOR AND HECLA MINING HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE SENIOR CREDITOR, THE
SUBORDINATED CREDITOR OR HECLA MINING.
6.8 COUNTERPARTS; FAX. This Agreement may be separately executed
in any number of counterparts, each of which when so
executed shall be deemed to constitute one and the same
agreement. This Agreement may be duly executed by facsimile
or other electronic transmission.
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
NATIONSBANK, N.A.
in its capacity as the Senior
Creditor
By: /s/ David C. Rubenking
Title: Managing Director
Address for Notices:
NationsBank Plaza
901 Main Street, 49th Floor
Dallas, TX 75383, U.S.A.
Attn: Energy Lending Group
with a copy to:
Facsimile No.:
Attention:
NationsBank N.A.
Denver Energy Group
370 Seventeenth, Suite 3250
Denver, CO 80202, U.S.A.
Facsimile No.:
Attention:
STANDARD BANK LONDON LIMITED
in its capacity as the Subordinated
Creditor
By: /s/ Steven Sharpe
Title: Assistant General Manager
By:
Title:
Address for Notices:
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
England
Facsimile No.: 44-171-815-4284
Attention: Mr. Steven Sharpe
<PAGE> 17
ACKNOWLEDGEMENT AND AGREEMENT
The undersigned, Hecla Mining Company, hereby acknowledges
receipt of a copy of the foregoing Subordination Agreement,
waives notice of acceptance thereof by the Senior Creditor and
agrees to be bound by the terms and provisions thereof, to make
no payments or distributions contrary to the terms and provisions
thereof, and to do every other act and thing necessary or
appropriate to carry out such terms and provisions,
HECLA MINING COMPANY
By: /s/ John P. Stilwell
Title: Vice President - Chief
Financial Officer
Address for Notices:
Hecla Mining Company
6500 Mineral Drive
Coeur d'Alene, Idaho
83815-8788
Facsimile No.: 1-208-769-4159
Dated
<PAGE> 1
Exhibit 12
HECLA MINING COMPANY
FIXED CHARGE COVERAGE RATIO CALCULATION
For the Six Months Ended June 30, 1999 and 1998
(In thousands, except ratios)
Six Months Six Months
1999 1998
---------- ----------
Income before income taxes and
cumulative effect of change in
accounting principle $ 2,375 $ 5,553
Add: Fixed Charges 6,840 6,423
Less: Capitalized Interest - - (588)
-------- --------
Adjusted income before income taxes
and cumulative effect of change in
accounting principle $ 9,215 $ 11,388
======== ========
Fixed charges:
Preferred stock dividends $ 4,025 $ 4,025
Income tax effect on preferred
stock dividends 279 172
Interest portion of rentals 654 621
Interest expense 1,882 1,605
-------- --------
Total fixed charges $ 6,840 $ 6,423
======== ========
Fixed Charge Ratio 1.35 1.77
Write-downs and other noncash charges:
DD&A(a) (mining activity) $ 11,944 $ 10,174
DD&A(a) (corporate) 173 193
Provision for closed operations
and environmental matters 610 131
-------- --------
$ 12,727 $ 10,498
======== ========
(a)"DD&A" is an abbreviation for "depreciation, depletion
and amortization."
<PAGE> 1
[Hecla Logo] 99-13
Exhibit 13
HECLA MINING COMPANY REPORTS SECOND QUARTER PROFIT:
POSITIVE RESULTS FROM ALL BUSINESS SEGMENTS
For the Period Ended June 30, 1999
For release: August 3, 1999
COEUR D'ALENE, IDAHO Hecla Mining Company (HL & HL-PrB: NYSE) today
reported earnings applicable to common shareholders of 1 cent per share, or
$322,000, for the second quarter of 1999. Hecla's silver, gold and industrial
minerals divisions all showed a profit during the quarter, in spite of a
continued trend of lower metals prices. Positive results were highlighted by
outstanding performance from the company's silver segment, which reported gross
profit of $874,000 in the second quarter of 1999, compared to a loss of $334,000
in the same period last year. The second quarter was also positively impacted
by the sale of the company aircraft, which contributed $1.3 million in other
income. Second quarter earnings of 1 cent per share compare to 1998 second
quarter earnings of 2 cents per share, or $983,000. Last year's second quarter
profit included nonrecurring gains on the sale of Metaline Contact Mines stock
of $1.2 million and on the sale of property near the corporate headquarters of
$500,000.
For the first six months of 1999, Hecla lost $3.2 million, or 6 cents per
share, on revenue of $90.2 million, compared to earnings of $1.8 million, or 3
cents per share, on revenue of $89.7 million during the first six months of
1998. Overall gross profit from operations during the first half of the year
exceeded the first half of 1998 by 9%. Hecla's gold operations continue to
operate at low costs. However, lower gold prices and a decrease in production
negatively impacted gross profit from the gold segment compared to the same
period a year ago. This was partially offset by better performance from both
the silver and industrial minerals segments in 1999.
Arthur Brown, Hecla's chairman and chief executive officer said, "I'm happy
to report a profit in the second quarter, especially during this low cycle in
metals prices. There's no doubt that the precious metals market is struggling
with tremendous apathy from investors, which is reflected in our stock price.
But on a fundamental basis, Hecla's operations are performing well, particularly
given these difficult times. Our cash flow is well above budget and adequate to
operate our business, meet our obligations and provide for growth. In addition,
our balance sheet allows us to remain committed to the quarterly payment of our
preferred stock dividends. My recent purchase of a substantial number of Hecla
common shares is an indication of my personal confidence in the essential worth
of our company and its ability to weather the current vagaries of the market. I
believe the stock market must come back into balance and once again begin to
support producing precious metals companies." Brown also said that belt-
tightening measures continue to show results, noting that Hecla's general and
administrative costs decreased 11% in the first six months of 1999 compared to
the same period last year.
<PAGE> 2
FINANCIAL
Hecla's balance sheet is stronger now than at the end of 1998. The
improvement in the debt to equity ratio is a result of the company's successful
efforts earlier in the year to pay down debt and acquire the La Camorra gold
mine in Venezuela through a combination of equity issuance, nonrecourse project
financing and subordinated debt financing. Equity issuances included the sale
of 4.58 million shares of common stock in May 1999 to an investor group at an
average price of $2.625 per share, with Hecla realizing net proceeds of
approximately $11.3 million. At the end of the second quarter, Hecla's working
capital was about $39 million, including cash and cash equivalents of
$11.8 million. The company's operations generated approximately $21 million in
EBITDA (earnings before interest, income taxes, depreciation and amortization)
during the first six months of the year, compared to $18.7 million in the same
period a year ago. Gross profit for the second quarter increased 23% over the
same quarter last year.
Long-term debt under the company's $55 million revolving line of credit was
reduced to $34.8 million during the second quarter. Debt financing of $13.5
million, related to the acquisition of assets from Monarch Resources Limited,
was added during the quarter, of which $10.5 million is project financing which
is nonrecourse to Hecla.
OPERATIONS
Hecla's silver operations performed well, yielding 3,722,097 ounces of
silver during the first half of 1999, a 16% increase over the same period last
year. Silver was produced at an average total cash cost of $3.73 per ounce.
Gold production during the first six months was 54,991 ounces at a total cash
cost per ounce of $173.
GREENS CREEK The Greens Creek silver mine in Alaska, in which Hecla holds
a 29.73% interest, had an excellent quarter in terms of both ore grade and
production costs. The average silver grade mined at Greens Creek during the
second quarter was 25.36 ounces per ton. Total cash costs at the mine were
$2.04 per ounce of silver, and total production costs were $4.40, a 30% and 17%
decrease, respectively, from the second quarter of 1998.
LUCKY FRIDAY The Lucky Friday mine in North Idaho produced 1,137,420
ounces of silver in the second quarter of this year, a 16% increase over the
same period last year. However, a lower grade of ore encountered in the area
being mined during the second quarter reduced the average silver grade to 14.27
ounces per ton, compared to 17.85 ounces per ton during the same period last
year. The lower ore grades and lower by-product credits contributed to an
increased total cash cost per ounce at Lucky Friday of $4.93 in the second
quarter of 1999. Ore grade at Lucky Friday has since improved to 15 ounces per
ton and is expected to remain at or above that level for the remainder of the
year.
<PAGE> 3
ROSEBUD The Rosebud gold mine in northern Nevada, a 50/50 joint venture
with Newmont Mining Corp., performed above expectations for the quarter. The
average ore grade milled was 0.542 ounce of gold per ton compared to 0.379 ounce
of gold per ton during the second quarter of 1998. The high-grade pocket
currently being mined at Rosebud resulted in total cash costs of $164 per ounce
of gold, a decrease of 12% from the same quarter last year. Rosebud's
exploration program has drilled some promising, high-grade intercepts that are
expected to lead to new resource calculations. Two of the drill holes contained
a total of 20 narrow, ore-grade intercepts ranging from 0.25 ounce of gold per
ton to 5 ounces of gold per ton. The goal of the exploration program is to find
more gold reserves and extend the life of the mine beyond the current reserve
estimate.
INDUSTRIAL MINERALS The industrial minerals division performed
particularly well during the quarter, reporting a 39% increase in gross profit
compared to the second quarter of 1998. Hecla's industrial minerals division
contributed more than $9.3 million in EBITDA during the first six months of
1999, a 22% improvement over the same period last year.
PROJECTS
LA CAMORRA During the second quarter, Hecla closed the transaction to
acquire the La Camorra underground gold mine in Venezuela, a silver exploration
property in Mexico, and other properties from Monarch Resources Limited. The
purchase price was $25 million, comprised of $9 million in cash and 6.7 million
Hecla common shares, which are subject to certain trading restrictions. La
Camorra is a high-grade, underground gold mine that produced 51,000 ounces of
gold in 1998. Hecla is implementing a new mine plan that is expected to allow
sustainable production of 70,000-80,000 ounces annually at a total cash cost of
under $200 per ounce and a total production cost of $240-$250 per ounce. Mine
and mill improvements and an expansion of the tailings impoundment are taking
place during a three-month suspension of operations. Construction is on
schedule, and administrative improvements in purchasing and payroll procedures
are under way. Hecla is developing relationships with the various Venezuelan
agencies that impact operations at La Camorra and is receiving very favorable
responses. Resumption of mining is planned for October. La Camorra contains
more than 600,000 ounces of high-grade gold resource, and a deep drilling
exploration program is being planned to confirm and increase reserves.
NOCHE BUENA The Noche Buena gold development project, located in northern
Mexico, has been put on hold due to the depressed gold price. The deposit
contains more than 250,000 ounces of gold resource, and could be put into
production at a higher gold price. Hecla will reconsider the status of the
project when the gold price returns to a sufficient level.
<PAGE> 4
EXPLORATION
SALADILLO & DURANGO Hecla's purchase of the assets of Monarch Resources
includes the Saladillo silver/gold property in the Durango region of Mexico. It
is a highly prospective silver and gold project that currently contains a drill-
indicated resource of about 8 million ounces of silver at a grade of 14.6 ounces
per ton and 75,000 ounces of gold at a grade of 0.13 ounce per ton. In addition
to the core area with the identified resource, other veins near the Saladillo
deposit contain both drill intercepts and surface samples showing ore-grade
values of silver and gold. Hecla is embarking on a geological, geochemical and
geophysical review of all work done to date on the concessions, and a drilling
program is being planned. Hecla's total holdings consist of 400 square miles of
concessions in Durango. Because of the magnitude of the concessions, the
company is seeking joint-venture partners to help explore some of the targets
already identified.
NEVADA Hecla has dropped the Sunset gold exploration project in Mineral
County, Nevada, due to inadequate drilling results. However, the company
continues to evaluate other promising prospects in Nevada.
SILVER VALLEY A drilling program in North Idaho's Silver Valley is under
way in an effort to discover new orebodies in this traditionally rich silver
district. Hecla is conducting a diamond drilling exploration program using the
company's Lucky Friday mine as a base.
Hecla Mining Company, headquartered in Coeur d'Alene, Idaho, is one of the
United States' best-known silver producers. The company also produces gold and
is a major supplier of ball clay, kaolin and other industrial minerals. Hecla's
operations are principally in the U.S., Mexico and Venezuela.
Statements made which are not historical facts, such as anticipated
production, costs, prices or sales performance are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, and
involve a number of risks and uncertainties that could cause actual results to
differ materially from those projected, anticipated, expected or implied. These
risks and uncertainties include, but are not limited to, metals prices
volatility, volatility of metals production, industrial minerals market
conditions and project development risks. Refer to the company's Form 10-Q and
10-K reports for a more detailed discussion of factors that may impact expected
future results.
Hecla Mining Company news releases can be accessed on the
Internet at: http://www.hecla-mining.com
<PAGE> 5
HECLA MINING COMPANY
(dollars in thousands, except per share, per ounce and per pound amounts -
unaudited)
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
----------------------------- -----------------------------
HIGHLIGHTS June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------------------
FINANCIAL DATA
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 47,881 $ 47,058 $ 90,235 $ 89,721
Gross profit 5,085 4,120 9,345 8,596
Net income 2,335 2,996 836 5,843
Income (loss) applicable to
common shareholders 322 983 (3,189) 1,818
Basic and diluted income (loss)
per common share 0.01 0.02 (0.06) 0.03
Cash flow provided by
operating activities 5,808 9,075 6,430 1,398
- --------------------------------------------------------------------------------------------------------------
SALE OF PRODUCTS BY SEGMENT
- --------------------------------------------------------------------------------------------------------------
Gold operations $ 5,600 $ 8,375 $ 11,991 $ 17,630
Silver operations 11,790 9,914 24,359 20,036
Industrial minerals 28,668 27,366 51,366 48,118
--------- --------- --------- ---------
Total sales $ 46,058 $ 45,655 $ 87,716 $ 85,784
- -------------------------------------------------------- -----------------------------------------------------
GROSS PROFIT (LOSS) BY SEGMENT
- --------------------------------------------------------------------------------------------------------------
Gold operations $ 92 $ 1,483 $ 711 $ 3,488
Silver operations 874 (334) 1,769 (1)
Industrial minerals 4,119 2,971 6,865 5,109
--------- --------- --------- ---------
Total gross profit $ 5,085 $ 4,120 $ 9,345 $ 8,596
OTHER DATA
- --------------------------------------------------------------------------------------------------------------
EBITDA BY SEGMENT(1)
- --------------------------------------------------------------------------------------------------------------
Gold operations $ 2,054 $ 2,845 $ 4,754 $ 6,306
Silver operations 3,672 1,767 7,211 4,735
Industrial minerals 5,251 4,207 9,324 7,671
--------- --------- --------- ---------
Total EBITDA $ 10,977 $ 8,819 $ 21,289 $ 18,712
- --------------------------------------------------------------------------------------------------------------
PRODUCTION SUMMARY - TOTALS
- --------------------------------------------------------------------------------------------------------------
Gold - Ounces 26,272 31,402 54,991 66,956
Silver - Ounces 1,948,205 1,691,242 3,722,097 3,221,649
Lead - Tons 8,958 8,548 17,236 16,655
Zinc - Tons 5,984 4,607 12,116 8,862
Industrial minerals - Tons shipped 319,426 310,726 610,172 592,927
Average cost per ounce of gold produced:
Cash operating costs ($/oz.) 163 179 160 170
Total cash costs ($/oz.) 178 192 173 181
Total production costs ($/oz.) 277 253 273 239
Average cost per ounce of silver produced:
Cash operating costs ($/oz.) 3.75 3.70 3.73 4.06
Total cash costs ($/oz.) 3.75 3.70 3.73 4.06
Total production costs ($/oz.) 5.30 5.14 5.29 5.53
- --------------------------------------------------------------------------------------------------------------
AVERAGE METAL PRICES
- --------------------------------------------------------------------------------------------------------------
Gold - Realized ($/oz.) 288 307 294 303
Gold - London Final ($/oz.) 273 300 280 297
Silver - Handy & Harman ($/oz.) 5.16 5.71 5.23 5.97
Lead - LME Cash (cents/pound) 23.3 24.8 23.2 24.6
Zinc - LME Cash (cents/pound) 46.3 47.9 45.7 48.0
(1) EBITDA represents earnings before interest, income taxes, depreciation,
depletion, amortization and items classified as other operating expenses not
occurring at the operating site. The company believes EBITDA is helpful in
understanding cash flow generated from operations that is available for income
taxes, debt service, capital expenditures, and other nonsite operating
expenses.
</TABLE>
<PAGE> 6
HECLA MINING COMPANY
Consolidated Statements of Operations and Comprehensive Income (Loss)
(dollars and shares in thousands, except per share amounts - unaudited)
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales of products $ 46,058 $ 45,655 $ 87,716 $ 85,784
------------- ------------- ------------- -------------
Cost of sales and other direct
production costs 35,081 36,487 66,427 67,014
Depreciation, depletion and
amortization 5,892 5,048 11,944 10,174
------------- ------------- ------------- -------------
40,973 41,535 78,371 77,188
------------- ------------- ------------- -------------
Gross profit 5,085 4,120 9,345 8,596
------------- ------------- ------------- -------------
Other operating expenses:
General and administrative 1,802 2,136 3,813 4,277
Exploration 1,018 1,136 2,180 1,952
Depreciation and amortization 81 99 173 193
Provision for closed operations
and environmental matters 343 72 610 131
------------- ------------- ------------- -------------
3,244 3,443 6,776 6,553
------------- ------------- ------------- -------------
Income from operations 1,841 677 2,569 2,043
------------- ------------- ------------- -------------
Other income (expense):
Interest and other income 1,823 1,403 2,519 3,937
Miscellaneous expense (282) (94) (831) (651)
Gain on investments - - 1,155 - - 1,241
Interest expense:
Total interest cost (958) (865) (1,882) (1,605)
Less amount capitalized - - 317 - - 588
------------- ------------- ------------- -------------
583 1,916 (194) 3,510
------------- ------------- ------------- -------------
Income before income taxes
and cumulative effect of change in
accounting principle 2,424 2,593 2,375 5,553
Income tax benefit (provision) (89) 403 (154) 290
------------- ------------- ------------- -------------
Income before cumulative effect
of change in accounting principle 2,335 2,996 2,221 5,843
Cumulative effect of change
in accounting principle - - - - (1,385) - -
------------- ------------- ------------- -------------
Net income 2,335 2,996 836 5,843
Preferred stock dividends (2,013) (2,013) (4,025) (4,025)
------------- ------------- ------------- -------------
Income (loss) applicable to common
shareholders 322 983 (3,189) 1,818
------------- ------------- ------------- -------------
Other comprehensive income, net of tax:
Unrealized holding gains on securities 23 61 40 42
------------- ------------- ------------- -------------
Other comprehensive income 23 61 40 42
------------- ------------- ------------- -------------
Comprehensive income (loss) $ 345 $ 1,044 $ (3,149) $ 1,860
============= ============= ============= =============
Basic and diluted income (loss)
per common share before cumulative
effect of change in accounting principle $ 0.01 $ 0.02 $ (0.04) $ 0.03
Cumulative effect of change in
accounting principle - - - - (0.02) - -
------------- ------------- ------------- -------------
Basic and diluted income (loss) per
common share $ 0.01 $ 0.02 $ (0.06) $ 0.03
============= ============= ============= =============
Weighted average number of common
shares outstanding 60,687 55,102 57,944 55,098
============= ============= ============= =============
</TABLE>
<PAGE> 7
HECLA MINING COMPANY
Consolidated Balance Sheets
(dollars and shares in thousands - unaudited)
<TABLE>
<CAPTION>
June 30, 1999 Dec. 31, 1998
- -----------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,831 $ 2,480
Accounts and notes receivable 36,117 25,919
Income tax refund receivable 16 1,087
Inventories 20,640 22,757
Other current assets 1,163 1,251
----------- -----------
Total current assets 69,767 53,494
Investments 2,173 3,406
Restricted investments 5,914 6,331
Properties, plants and equipment, net 197,604 178,168
Other noncurrent assets 11,178 10,663
----------- -----------
Total assets $ 286,636 $ 252,062
=========== ===========
- -----------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 17,021 $ 12,172
Accrued payroll and related benefits 3,501 2,852
Preferred stock dividends payable 2,013 2,012
Accrued taxes 941 772
Accrued reclamation and closure costs 6,912 6,537
----------- -----------
Total current liabilities 30,388 24,345
Deferred income taxes 300 300
Revolving bank debt 34,800 42,800
Project financing debt 10,500 - -
Subordinated bank debt and other long-term debt 3,203 123
Accrued reclamation and closure costs 20,407 23,216
Other noncurrent liabilities 10,107 9,542
----------- -----------
Total liabilities 109,705 100,326
----------- -----------
- -----------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------
Preferred stock 575 575
Common stock 16,687 13,792
Capital surplus 399,966 374,017
Accumulated deficit (233,682) (230,493)
Accumulated other comprehensive loss (5,229) (5,269)
Stock held by grantor trust (500) - -
Treasury stock (886) (886)
----------- -----------
Total shareholders' equity 176,931 151,736
----------- -----------
Total liabilities and shareholders' equity $ 286,636 $ 252,062
=========== ===========
Common shares outstanding at end of period 66,684 55,105
=========== ===========
</TABLE>
<PAGE> 8
HECLA MINING COMPANY
Consolidated Statements of Cash Flows
(dollars in thousands - unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 836 $ 5,843
Noncash elements included in net income:
Depreciation, depletion and amortization 12,117 10,367
Cumulative effect of change in accounting principle 1,385 - -
Gain on disposition of properties, plants and equipment (1,347) (2,326)
Gain on investments - - (1,241)
Provision for reclamation and closure costs 463 287
Change in assets and liabilities net of effects from purchase of
Monarch Resources Investments Limited:
Accounts and notes receivable (9,214) (10,252)
Income tax refund receivable 1,071 (294)
Inventories 3,075 3,027
Other current and noncurrent assets (394) (1,605)
Accounts payable and accrued expenses 41 671
Accrued payroll and related benefits 649 907
Accrued taxes 169 163
Accrued reclamation and other noncurrent liabilities (2,421) (4,149)
----------- -----------
Net cash provided by operating activities 6,430 1,398
----------- -----------
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
- --------------------------------------------------------------------------------------------------
Purchase of Monarch Resources Investments Limited,
net of cash acquired (9,183) - -
Additions to properties, plants and equipment (4,617) (10,437)
Proceeds from disposition of properties, plants and equipment 1,687 3,506
Proceeds from sale of investments 311 1,241
Decrease in restricted investments 417 719
Purchase of investments and change in cash surrender
value of life insurance 37 (641)
Other, net (43) 2
----------- -----------
Net cash used by investing activities (11,391) (5,610)
----------- -----------
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
- --------------------------------------------------------------------------------------------------
Common stock issued under stock and stock option plans 20 54
Issuance of common stock, net of offering costs 11,860 - -
Dividends on preferred stock (4,025) (4,025)
Borrowings, net of repayments, against cash surrender
value of life insurance 925 - -
Borrowings on long-term debt 38,040 26,500
Repayment on long-term debt (32,508) (16,003)
----------- -----------
Net cash provided by financing activities 14,312 6,526
----------- -----------
Net increase in cash and cash equivalents 9,351 2,314
Cash and cash equivalents at beginning of period 2,480 3,794
----------- -----------
Cash and cash equivalents at end of period $ 11,831 $ 6,108
=========== ===========
</TABLE>
<PAGE> 9
HECLA MINING COMPANY
Production Data
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
---------------------------- ----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
- ---------------------------------------------------------------------------------------------------------
LUCKY FRIDAY UNIT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tons of ore milled 85,522 57,754 157,132 114,976
Days of operation 77 64 153 127
Mining cost per ton $39.13 $47.88 $41.58 $44.64
Milling cost per ton $6.56 $8.37 $6.93 $8.38
Ore grade milled - Silver (oz./ton) 14.27 17.85 14.70 16.60
Silver produced (oz.) 1,137,420 981,281 2,158,697 1,817,411
Lead produced (tons) 7,061 6,881 13,298 13,576
Zinc produced (tons) 848 622 1,525 1,303
Average cost per ounce of silver produced:
Cash operating costs $4.93 $4.23 $4.94 $4.65
Total cash costs $4.93 $4.23 $4.94 $4.65
Total production costs $5.92 $5.05 $5.92 $5.53
- ---------------------------------------------------------------------------------------------------------
GREENS CREEK (Reflects Hecla's 29.73% share)
- ---------------------------------------------------------------------------------------------------------
Tons of ore milled 42,643 39,921 84,692 76,318
Days of operation 91 91 181 181
Mining cost per ton $30.59 $29.10 $30.76 $30.77
Milling cost per ton $20.84 $19.67 $20.94 $21.04
Ore grade milled - Silver (oz./ton) 25.36 21.34 23.53 21.86
Silver produced (oz.) 781,693 648,008 1,480,957 1,278,518
Gold produced (oz.) 5,733 4,385 12,721 8,378
Lead produced (tons) 1,897 1,667 3,938 3,079
Zinc produced (tons) 5,136 3,985 10,591 7,559
Average cost per ounce of silver produced:
Cash operating costs $2.04 $2.91 $1.96 $3.23
Total cash costs $2.04 $2.91 $1.96 $3.23
Total production costs $4.40 $5.28 $4.37 $5.55
- ---------------------------------------------------------------------------------------------------------
ROSEBUD UNIT (Reflects Hecla's 50% share)
- ---------------------------------------------------------------------------------------------------------
Tons of ore mined 35,529 44,381 71,128 83,876
Tons of ore milled 34,953 42,844 70,713 81,411
Days of operation 91 91 181 181
Mining cost per ton $35.31 $24.97 $33.63 $26.66
Milling cost per ton $16.56 $14.00 $16.48 $12.42
Ore grade milled - Gold (oz./ton) 0.542 0.379 0.506 0.412
Ore grade milled - Silver (oz./ton) 1.23 2.81 1.93 3.06
Gold produced (oz.) 17,463 15,702 33,280 32,291
Silver produced (oz.) 28,692 60,053 81,420 121,990
Average cost per ounce of gold produced:
Cash operating costs $147 $166 $146 $153
Total cash costs $164 $186 $163 $172
Total production costs $261 $284 $261 $271
</TABLE>
(cont.)
<PAGE> 10
HECLA MINING COMPANY
Production Data (cont.)
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
---------------------------- ----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
- ---------------------------------------------------------------------------------------------------------
LA CHOYA UNIT (1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tons of ore processed - - 101,903 - - 834,146
Days of operation - - 91 - - 181
Mining cost per ton - - $2.63 - - $1.69
Ore grade crushed - Gold (oz./ton) - - 0.014 - - 0.018
Gold produced (oz.) 2,898 9,953 8,461 23,360
Silver produced (oz.) 398 1,114 989 2,622
Average cost per ounce of gold produced:
Cash operating costs $260 $200 $213 $194
Total cash costs $260 $201 $213 $195
Total production costs $370 $203 $321 $195
- ---------------------------------------------------------------------------------------------------------
OTHER
- ---------------------------------------------------------------------------------------------------------
Gold produced (oz.) 178 1,362 529 2,927
Silver produced (oz.) 2 786 34 1,108
(1) The La Choya mine completed mining in December 1998.
</TABLE>
CAPITAL EXPENDITURES
(dollars in thousands)
Six Months Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
Lucky Friday $ 262 $ 4,375
Greens Creek (29.73%*) 1,301 1,349
Rosebud (50%*) 50 46
La Choya 3 1,986
Noche Buena 2,197 - -
Industrial minerals 771 2,069
Capitalized interest - - 588
Other 33 24
---------- ----------
Total Capitalized $ 4,617 $ 10,437
========== ==========
*Hecla's share
HEDGED POSITIONS
As of June 30, 1999
Silver: 1,200,000 ounces hedged @ average price of $5.51
Gold: 306,045 ounces hedged @ average price of $288.25
Lead: 6,000 tonnes hedged @ average price of $0.245 per pound
Zinc: 3,000 tonnes hedged @ average price of $0.495 per pound
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 11,831
<SECURITIES> 0
<RECEIVABLES> 36,117
<ALLOWANCES> 0
<INVENTORY> 20,640
<CURRENT-ASSETS> 69,797
<PP&E> 408,684
<DEPRECIATION> (211,080)
<TOTAL-ASSETS> 286,636
<CURRENT-LIABILITIES> 30,388
<BONDS> 9,800
0
575
<COMMON> 16,687
<OTHER-SE> 159,669
<TOTAL-LIABILITY-AND-EQUITY> 286,636
<SALES> 87,716
<TOTAL-REVENUES> 90,235
<CGS> 66,427
<TOTAL-COSTS> 78,371
<OTHER-EXPENSES> 6,776
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,882
<INCOME-PRETAX> 2,375
<INCOME-TAX> 154
<INCOME-CONTINUING> 2,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,385)
<NET-INCOME> 836
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
