<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-9620
AMAX GOLD INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1199974
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9100 EAST MINERAL CIRCLE 80112
ENGLEWOOD, COLORADO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 643-5500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
===============================================================================
Title of each class Name of each exchange on which registered
-------------------------------------------------------------------------------
<S> <C>
Common Stock, $0.01 par value + New York Stock Exchange, Inc.
(81,295,607 shares outstanding at + The Toronto Stock Exchange
March 24, 1995) +
$3.75 Series B Convertible Preferred + New York Stock Exchange, Inc.
Stock, $1.00 par value (1,840,000 +
shares outstanding at +
March 24, 1995) +
Warrants to Purchase Common Stock +
(4,066,649 outstanding at + American Stock Exchange
March 24, 1995) + The Toronto Stock Exchange
===============================================================================
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. _____
The aggregate market value of voting stock held by non-affiliates at the closing
price of $5 3/8 on March 24, 1995, was approximately $251,583,500.
Portions of the following document are incorporated by reference into this Form
10-K: registrant's definitive Proxy Statement for the 1995 annual meeting of
stockholders to be filed within 120 days of the end of the fiscal year.
<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Amax Gold Inc. and its subsidiaries and affiliates are engaged in the mining and
processing of gold and silver ore and in the exploration for, and acquisition
and development of, gold-bearing properties, principally in North, Central and
South America. The Company's share of production from its operating properties
in the United States and Chile totaled 240,885 ounces during 1994, and its
share of reserves as of December 31, 1994 in all its properties totaled
approximately 7.1 million contained ounces of gold.
The Company was incorporated in Delaware in 1987 and was a subsidiary of AMAX
Inc. ("Amax") until November 1993, when Amax was merged with and into Cyprus
Minerals Company, renamed Cyprus Amax Minerals Company ("Cyprus Amax"). Cyprus
Amax owns approximately 42.2 percent of the Company's outstanding Common Stock
and has the right to acquire additional shares under certain financing
arrangements.
The Company's operating properties consist of a 100 percent interest in the
Sleeper mine in Humboldt County, Nevada; a 100 percent interest in the Hayden
Hill mine in Lassen County, California; an indirect 90 percent interest in the
Guanaco mine in Chile and a 100 percent interest in the Wind Mountain mine in
Washoe County, Nevada. In addition, the Company owns a 100 percent interest in
the Fort Knox gold project near Fairbanks, Alaska; a 50 percent interest in the
Refugio gold project in Chile; and a 62.5 percent joint venture interest in the
Haile gold project in Lancaster County, South Carolina. The location of Amax
Gold's operations and properties is shown on the map on page 2, and a
description of operations and properties is set forth below.
Unless otherwise indicated, the term "reserves" when used herein refers to
proven and probable reserves, and all reserve information is given as of
December 31, 1994. Except as otherwise noted, references to "tons" and "ounces"
are to short tons of 2,000 pounds and to troy ounces of 1.097 ounces
avoirdupois, respectively. Production is defined as gold or silver produced in
the form of dore plus any inventory in mill carbon circuits. Tons mined include
removal of waste required to access ore. Cash production costs include all
operating costs at the minesite, including overhead, proceeds taxes and
royalties, and net of credits for silver by-product.
All of the Company's operating properties are open pit mines. Except for mining
equipment under the control of the contract miner at Guanaco, the Company owns
its mining and processing equipment, which is maintained in good operating
condition. Ore is processed by milling or heap leaching. Milling is the
traditional process for recovering gold from ore. After ore is crushed, the
gold and silver are concentrated and then smelted into dore which is shipped to
refiners for further processing. The milling process is typically used for
higher recovery oxide and sulfide ores.
Heap leaching is a lower cost processing method principally applied to oxidized
ores. The heap leach recovery rate is generally lower than for milling. In the
heap leaching process, crushed and/or run-of-mine ore is loaded onto impermeable
leach pads. The ore is sprinkled with a weak cyanide solution which penetrates
the ore, dissolving the gold and silver. The "pregnant" solution is collected
and pumped through activated carbon or a Merrill Crowe zinc precipitation plant
to remove the metals from the solution. After the gold and silver is stripped
from the carbon or processed from the zinc precipitate, it is smelted into dore
which is shipped to the refiner for final processing.
The terms Amax Gold and the Company when used herein may refer collectively to
the parent Amax Gold Inc. and its subsidiaries and affiliates, or to one or more
of them, depending on the context.
1
<PAGE>
APPENDIX
Graphic and Image Material
A map depicting the location of the Company's operating mines, development
properties, and exploration projects appears on page 2. The locations are
described in "Part I, Item 1 and 2. Business and Properties."
2
<PAGE>
SLEEPER MINE
The Sleeper mine, located in Humboldt County, Nevada approximately 28 air miles
north of Winnemucca, is 100 percent owned by Amax Gold. The operation includes
an open pit mine, mill, heap leach pads and tailings disposal facilities.
Current facilities occupy approximately 2,000 acres of unpatented mining claims.
Access to the mine is provided by a gravel road that connects to a paved public
highway. Power is purchased from the local rural electric association. Water
for mining and processing operations at Sleeper is provided by a well system
that dewaters the pits, and potable water is supplied by truck. No royalties
are payable on production from the Sleeper mine.
The property was discovered by an Amax geologist in 1982 and development of the
mine was completed in March 1986. Gold production in 1995 is expected to
decrease from 1994 levels. Mining is expected to be completed in 1996, with
production from residual leaching continuing into 1997.
The following table presents operating data for the Sleeper mine for the years
indicated.
Sleeper Mine
Operating Data
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Tons mined 18,639,300 18,608,500 18,466,900
Tons of ore milled 802,534 899,791 896,788
Average mill-head grade (oz. per ton) 0.110 0.078 0.106
Mill recovery rate (%) 80.60 72.70 82.6
Tons of ore to heap leach 5,012,600 6,327,600 8,610,600
Average grade to heap leach (oz. per ton) 0.016 0.019 0.020
Ounces of gold produced
Mill 70,750 51,257 82,962
Heap leach 36,162 48,761 61,611
---------- ---------- ----------
Total 106,912 100,018 144,573
========== ========== ==========
Ounces of silver produced 142,597 254,692 257,797
Cost per ounce of gold produced
Cash production costs* $273 $317 $223
Depreciation and depletion 92 132 99
---------- ---------- ----------
Total production costs $365 $449 $322
========== ========== ==========
</TABLE>
*During 1994, the Company changed its method of accounting for ore loaded on
heap leach pads, which increased 1994 cash production costs at the Sleeper mine
by $5 per ounce.
3
<PAGE>
The Sleeper deposit lies within volcanic rocks believed to have been erupted
from a volcanic field of nested calderas. Ore occurs as high-grade veins,
breccias, stockworks and as mineralized vein fragments within alluvium (mined
out). The veins are localized along steeply-dipping fractures and faults. The
following table sets forth the proven and probable reserves at the Sleeper mine.
Sleeper Mine
Proven and Probable Ore Reserves
As of December 31, 1994
<TABLE>
<CAPTION>
Gold Gold
Tons Avg. Grade Content
(000) (oz./ton) (000 oz.)
------ ---------- ---------
<S> <C> <C> <C>
Mill Ore 1,214 0.089 108
Heap Leach Ore 2,573 0.018 47
------ ---------- ---------
Total 3,787 0.041 155
====== ========== =========
</TABLE>
Reserve estimates were prepared by the Company and verified by Mineral Resources
Development, Inc. ("MRDI") in its report dated February 1995. Reserves are
based upon an assumed gold price of $400 per ounce and a variable cut-off grade.
The net reduction of the Sleeper reserves from year-end 1993 to year-end 1994 is
95,000 contained ounces. The reduction from mining and from processing
stockpiles was 149,300 ounces offset by a gain of 54,200 ounces resulting from
production experience and increased operating efficiencies. Based on production
experience, the Company estimates that processing of ore by heap leaching will
result in ultimate gold recovery of approximately 50 percent for crushed ore and
22 percent for run-of-mine uncrushed ore.
HAYDEN HILL MINE
The Company owns 100 percent of the Hayden Hill gold mine in Lassen County,
California, approximately 120 air miles northwest of Reno, Nevada. The Hayden
Hill operation is an open pit mine with three pits, heap leach pads and tailings
disposal facilities. The Company controls approximately 6,300 acres through
ownership of federal patented and unpatented mining claims and fee lands and a
long-term lease of federal unpatented mining claims. Access to the mine is
provided by a gravel road that connects to a state highway. Power for
operations is purchased from the local rural electric association. Water for
mining and processing operations is provided by two wells located in close
proximity to the mine. Potable water is supplied by truck. Approximately 75
percent of the current reserves are subject to a gross receipts net smelter
return royalty ranging from 2 percent to 5 percent.
The mine began production in June 1992. Milling operations were discontinued in
1993 due to the lack of an adequate supply of high-grade mill ore.
4
<PAGE>
The following table presents operating data for the Hayden Hill mine for the
years indicated.
Hayden Hill Mine
Operating Data
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Tons mined 12,922,500 11,262,609 12,104,800
Tons of ore milled - 423,884 563,248
Average mill-head grade (oz. per ton) - 0.032 0.036
Mill recovery (%) - 90.7 88.7
Tons of ore to heap leach 5,132,694 4,993,742 2,619,993
Average grade to heap leach (oz. per ton) 0.017 0.017 0.017
Ounces of gold produced:
Mill - 11,570 17,191
Heap leach 65,785 41,468 11,624
---------- ---------- ----------
Total 65,785 53,038 28,815
========== ========== ==========
Ounces of silver produced 137,570 144,438 79,696
Cost per ounce of gold produced:
Cash production costs* $406 $470 $432
Depreciation and depletion 105 149 152
---------- ---------- ----------
Total production costs $511 $619 $584
========== ========== ==========
</TABLE>
*During 1994, the Company changed its method of accounting for ore loaded on
heap leach pads, which increased 1994 cash production costs at the Hayden Hill
mine by $39 per ounce.
The Hayden Hill deposit occurs within a Miocene-aged volcaniclastic sequence,
comprised of dacitic tuffs and breccias, lahars and tuffaceous lake bed
sediments. At its base, this mine sequence has siltstones which are
intercalated with sandstones and some andesites. The dacite breccia overlies
the basal units and averages approximately 200 feet thick. The deposit is
dominantly hosted by the dacitic breccia and overlying units, which were
extensively hydrothermally altered during the mineralizing event. The following
table sets forth the proven and probable reserves at the Hayden Hill mine.
Hayden Hill Mine
Proven and Probable Ore Reserves
As of December 31, 1994
<TABLE>
<CAPTION>
Gold Gold
Tons Avg. Grade Content
(000) (oz./ton) (000 oz.)
------ ---------- ---------
<S> <C> <C> <C>
Heap Leach Ore 14,324 0.027 381
====== ========== =========
</TABLE>
Reserve estimates were prepared by the Company and verified by MRDI in its
report dated February 1995. Reserves are based upon an assumed gold price of
$400 per ounce and variable cut-off grades. The net reduction of the Hayden
Hill reserves from year-end 1993 to year-end 1994 is 69,600 contained ounces and
results from
5
<PAGE>
1994 production of 87,200 ounces partially offset by an increase of
17,600 ounces resulting from production experience and increased operating
efficiencies. The Company estimates an ultimate heap leach gold recovery rate
of approximately 69 percent.
GUANACO MINE
The Company owns a 90 percent interest in and operates the Guanaco mine, which
is located in the Guanaco Mining District in northern Chile approximately 145
miles southeast of Antofagasta, Chile. Under existing shareholder arrangements,
the Company receives 100 percent of production until certain conditions are met.
The operation consists of an open pit mine, heap leach facilities capable of
processing up to 2.2 million tons of ore per year and permanent camp facilities.
The facility includes three stages of crushing, permanent pad heap leaching and
Merrill Crowe zinc precipitation of gold. The Company has retained an
experienced mining contractor to drill, blast, load and transport all ore and
waste. The mining contractor provides its own equipment. Access to the mine
from Antofagasta is provided by the Pan American Highway (approximately 120
miles south) and a newly constructed gravel surface road (approximately 25 miles
east). Power is supplied by an on-site power plant. The water supply for mine
operations comes primarily from multiple wells adjacent to the minesite and from
nearby surface springs which also provide potable water.
The Guanaco property position is comprised of approximately 25,000 acres,
consisting of mineral claims leased from Empresa Nacional de Mineria ("ENAMI"),
an entity of the Chilean government, and certain other mineral rights. Nearly
all of the reserves are located on land covered by the ENAMI lease. The surface
area is owned by the Chilean government; however, the Company has filed
applications to purchase selected areas within the ENAMI lease, including the
area on which the operations are located. The ENAMI lease expires in 2006, and
may be extended by the Company for additional five-year terms thereafter. The
lease is subject to royalties varying with the level of production, with the
royalty on gold ranging from a 7 percent gross royalty to a 3 percent gross
royalty plus a 2 percent net profits royalty; there is a gross royalty of 2
percent for all other metals. In connection with the minority owner's sale of
its interest to a third party, the Company and the minority owner are
renegotiating certain terms of the original acquisition documents to eliminate
certain additional purchase price adjustments totaling approximately $1.4
million. The property remains subject to a 1.1 percent net smelter return
royalty to the minority owners for metals other than gold.
The Guanaco mine began production in April 1993. Production was hampered in
1993 by ordinary start-up delays and initial crusher throughput problems and in
1994 by process water shortages which were resolved in the fourth quarter. The
Company expects to operate at design capacity in 1995. Cash production costs
are expected to decrease as a result of higher production and operating
efficiencies.
6
<PAGE>
The following table presents operating data for the Guanaco mine for the period
from commencement of production in April 1993 through December 31, 1993 and the
year ended December 31, 1994.
Guanaco Mine
Operating Data
<TABLE>
<CAPTION>
1994 1993
---------- ---------
<S> <C> <C>
Tons mined 12,699,988 9,547,075
Tons of ore to heap leach 2,172,746 1,460,427
Average grade to heap leach (oz. per ton) 0.060 0.060
Ounces of gold produced 57,675 29,862
Ounces of silver produced 295,940 136,687
Cost per ounce of gold produced:
Cash production costs* $420 $664
Depreciation and depletion 147 142
---------- ---------
Total production costs $567 $806
========== =========
</TABLE>
*During 1994, the Company changed its method of accounting for ore loaded on
heap leach pads, which decreased 1994 cash production costs at the Guanaco mine
by $65 per ounce.
The Guanaco deposit contains gold mineralization in steeply dipping vein-like
zones within a silicified volcanic host rock. The following table sets forth
the proven and probable reserves at the Guanaco mine.
Guanaco Mine
Proven and Probable Ore Reserves
As of December 31, 1994
<TABLE>
<CAPTION>
Gold Content
(000 oz.)
Gold ----------------
Tons Avg. Grade AGI
(000) (oz./ton) Total 90% Share
------ ---------- ----- ---------
<S> <C> <C> <C> <C>
Heap Leach Ore 11,420 0.047 534 481
====== ========== ===== =========
</TABLE>
Reserves were calculated by the Company. The reserves are based upon an assumed
gold price of $375 per ounce and a cut-off grade of 0.013 ounce of gold per ton.
The Company has determined that calculating the reserves at $400 per ounce would
not materially change the results. No attempt has been made to quantify a
silver reserve, but the current operation is recovering about five times as much
silver as gold. Beneath the designed gold pit, there are drill intersections of
sulfide copper; however, the intersections are too widely spaced to quantify a
resource at this time. The 1994 year end reserve is based on the 1993 stated
reserves less 1994 production.
WAIHI
The Company retains a nominal but not an economic 33.53 percent joint venture
interest in the Waihi gold and silver mine located within the town of Waihi,
approximately 80 miles southeast of Auckland, on the North Island of New
Zealand. In April 1993, the Company completed a transaction with a subsidiary
of Poseidon Gold
7
<PAGE>
Limited, a publicly traded Australian company, through which the Company
realized all future economic benefit from its interest.
WIND MOUNTAIN
Mining operations at the Company's 100 percent owned Wind Mountain mine were
conducted from April 1989 to January 1992. The Wind Mountain mine is located
approximately 75 air miles northeast of Reno. Access to the mine is provided by
a seven-mile gravel road connecting to a state highway. The Company's holdings
at Wind Mountain encompass approximately 775 acres of unpatented mining claims,
all of which are leased from third parties under a lease that expires in 1999.
Production is subject to a 5 percent net smelter return royalty. Since
cessation of mining in January 1992, residual leaching has continued. The leach
pads have not been irrigated with cyanide solution since the second quarter of
1994, and residual leaching is expected to end in 1995. Loaded carbon is
shipped to the Sleeper mine for stripping and processing into dore. Power for
operations at the Wind Mountain mine is provided by the local public utility.
Water for processing operations is provided by two wells in close proximity to
the mine. Potable water is supplied by truck.
Reclamation of the mine site commenced immediately after mining ceased. A final
reclamation plan has been approved by the federal Bureau of Land Management.
Reclamation work outside the area of heap leach and processing operations is
substantially complete.
The following table presents operating data for the Wind Mountain mine for the
years indicated.
Wind Mountain Mine
Operating Data
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ ---------
<S> <C> <C> <C>
Tons mined - - 1,223,800
Tons to heap leach - - 1,169,200
Average grade (oz. per ton) - - 0.014
Ounces of gold produced 10, 513 19,296 54,690
Ounces of silver produced 72,609 86,515 297,403
Cost per ounce of gold produced:
Cash production costs $164 $167 $114
Depreciation and depletion - - 27
------- ------ ---------
Total production costs $164 $167 $141
======= ====== =========
</TABLE>
FORT KNOX PROJECT
The Company owns a 100 percent interest in the Fort Knox project, located in the
Fairbanks Mining District, 15 miles northeast of Fairbanks, Alaska. Access to
the property is provided by paved highway for 21 miles from the City of
Fairbanks and then for five miles by unpaved two-wheel drive road.
The Fort Knox project covers approximately 32,000 acres and consists of two
state mining leases, approximately 1,400 state mining claims and 45 patented
federal mining claims. The Fort Knox property is held by deeds, mining leases,
option agreements, and mining locations. The leases and option agreements have
expiration dates ranging from 1995 to 2014, with provisions for extension in
some cases. Most of the current reserve is located
8
<PAGE>
on approximately 1,150 acres of land held under a state mining lease and is
subject to a 3 percent royalty based on net income payable to the State of
Alaska. Claims surrounding the current reserve are subject to net smelter return
royalties ranging from 3 percent to 6 percent on the state mining claims, and
both a 1 percent net smelter return royalty and a 10 percent overriding net
profits interest on certain of the patented federal mining claims.
In the first quarter of 1994 the State of Alaska issued a millsite permit
covering approximately 7,500 acres, comprising all the lands expected to be
directly affected by the development of the Fort Knox project, and in May 1994
the U.S. Army Corps of Engineers issued a dredge and fill permit for the project
under Section 404 of the Clean Water Act. Construction and development plans
include an open pit mine, a conventional 36,000 tons per day (13.1 million tons
per year) process plant, a tailings storage facility and a water supply
reservoir. Process water will be supplied from a water reservoir constructed
downstream from the tailings pond. The process facilities are designed as a
"zero discharge system". Power will be supplied by the public utility serving
the area over a newly constructed distribution line, most of which will be paid
for by the Company.
The mine and plant are designed to operate year round and to produce
approximately 300,000 to 350,000 ounces of gold per year with the higher rates
expected during the early years. All permits for construction of Fort Knox have
been obtained. Capital required to construct the facilities and complete pre-
production stripping is estimated at $256 million. Financing efforts for the
project have commenced. Construction has begun with start-up expected in late
1996.
The Fort Knox gold deposit occurs as porphyry-style mineralization of the type
usually associated with copper and molybdenum ore bodies. The ore is hosted
within the upper margins of a granitic intrusion in a stockwork of small quartz
veins and shear zones. The veins and shears are fractions of an inch to 10
inches wide with erratic and widely spaced distribution. The gold occurs as
fine grains of free gold disseminated within and along the margins of the veins
and shears. In plan view, the deposit has a dimension of about 4,000 by 2,000
feet, elongated in an east-west direction and extending to depths of 1,000 feet.
Geology is relatively simple and the rocks are only weakly altered. Grade is
usually related to the degree of fracturing and veining of the rocks. Because
of the low grade and erratic distribution of gold, mining is planned to be done
on a bulk tonnage basis.
The following table sets forth the proven and probable reserves for the Fort
Knox project.
Fort Knox Project
Proven and Probable Ore Reserves
As of December 31, 1994
<TABLE>
<CAPTION>
Gold Avg. Gold
Tons Grade Content
(000) (oz./ton) (000 oz.)
------- --------- ---------
<S> <C> <C> <C>
Mill Ore 161,835 0.025 4,094
======= ========= =========
</TABLE>
The current reserve was calculated using the same data used by the Company in
its slightly higher tonnage reserve which was verified by MRDI in its report
dated December 14, 1992. In 1994, MRDI made an independent evaluation of the
current reserve using conditional simulation and found it to be a reasonable
estimate of run of mine resources. The gold price is $375 per ounce with a
variable cut-off grade. The Company has determined that calculating the
reserves at $400 per ounce would not materially change the results. The Company
estimates that mill recovery will be approximately 90 percent.
9
<PAGE>
REFUGIO PROJECT
In January 1993 the Company acquired a 50 percent interest in the Refugio
project, consisting of three gold deposits located in the Maricunga Mining
District in central Chile, approximately 75 miles east of Copiapo. The project
is situated at between 13,800 feet and 14,800 feet above sea level. The
property is held by Compania Minera Maricunga ("CMM"), a Chilean contractual
mining company, which is indirectly owned 50 percent by the Company and 50
percent by Bema Gold Corporation ("Bema"), a publicly traded company based in
Vancouver, British Columbia.
The Refugio property position comprises approximately 14,500 acres, consisting
of mineral rights, surface rights and water rights sufficient to allow
development of the project. The principal ore deposit is held by mining claims
which are owned by CMM. Essentially all of the mineral rights surrounding the
claims are held by a joint venture formed by Bema and the former owner of the
Refugio claims. CMM has agreements in place with this joint venture that will
allow CMM to mine any extensions of major ore deposits found on CMM property
that extend onto surrounding mineral rights and to use the surrounding areas for
project needs. Surface rights that cover the known mineralization and the
proposed facilities are owned or controlled by CMM under a lease or applications
to purchase from Chilean governmental entities. Water extraction rights
expected to be sufficient to supply the project are owned by CMM.
CMM has commenced development of the Verde gold deposit with construction of an
open pit mine, three stage crushing and heap leach operation capable of
processing 33,000 tons of ore per day (11.9 million tons per year). Carbon
adsorption, stripping and electrowinning will be used to recover gold from the
leach solutions. Electrowon cathodes would be smelted to dore bars for
shipment. Potential production from the Verde deposit is estimated to range
from 200,000 to 250,000 ounces of gold per year for approximately 9.5 years of
which the Company's share would be 50 percent. Facilities will include a
permanent camp. Access to the site from Copiapo is provided by existing roads.
Power is supplied by on-site diesel powered generators. The Company expects
construction to be completed in 1995.
Capital required to construct the facilities is estimated at $127 million, of
which one-half is the Company's share. In February 1995, CMM borrowed $85
million drawn in gold under a project financing arrangement with a group of
banks. The remaining funds were contributed by the Company and Bema in
accordance with their ownership percentages of CMM.
The Company, through its 50 percent ownership of CMM, is responsible for payment
of a net smelter return royalty to the former owner of the Refugio property that
is expected to average 2.5 percent of the Company's share of production from the
currently defined ore reserves. A sliding scale net smelter return royalty
related to net profits and ranging from 2.5 to 5 percent is payable on the
Company's share of any production in excess of current reserves.
The Refugio project encompasses the Verde, Pancho and Guanaco gold deposits,
which are disseminated gold porphyry deposits containing minor amounts of
copper. Gold mineralization is contained within a strong stockwork system
hosted by silicified intrusive rocks. The Verde deposit contains all the
current reserves and consists of oxide, mixed and unoxidized ore types. It is
open at depth and additional exploration potential exists in the Guanaco and
Pancho deposits. The Refugio property lies at the southern end of a 90 mile
long belt of late volcanic origin that contains a number of large disseminated
gold-silver deposits.
10
<PAGE>
The reserves in the Verde deposit at the Refugio project are set forth in the
following table.
Refugio Project
Proven and Probable Ore Reserves in the Verde Deposit
As of December, 1994
<TABLE>
<CAPTION>
Gold Content
(000 oz.)
Gold --------------
Tons Avg. Grade AGI 50%
(000) (oz./ton) Total Share
------- ---------- ----- -------
<S> <C> <C> <C> <C>
Heap Leach Ore 104,383 0.029 3,075 1,537
======= ========== ===== =======
</TABLE>
The reserves were prepared by the Company and verified by MRDI in its report for
CMM dated December 1992 based upon a gold price of $400 per ounce and variable
cut-off grades. The Company expects the ultimate recovery rate from the heap
leaching process to range from 49 percent to 81 percent depending upon the type
of ore, with overall average recovery estimated to be approximately 66 percent.
HAILE PROJECT
The Company owns a 62.5 percent joint venture interest in the Haile gold
property in Lancaster County, South Carolina. The remaining 37.5 percent
interest is owned by Piedmont Mining Company, Inc. ("Piedmont"). The Company is
currently considering the sale of its interest in Haile.
The Haile project covers approximately 3,600 acres and consists entirely of fee
property, which is either owned by the venture participants, leased from third
parties or controlled by purchase agreements. The known reserves are contained
partly on property that is jointly owned by the Company and Piedmont and partly
on property that is leased from a third party under a lease expiring in 1996,
with provisions for extension until 2001. The leased property is presently
burdened by a 4 percent net smelter return royalty; however, the lease and the
royalty would be extinguished upon consummation of the purchase agreement
covering the leased property at such time as all material permits for a new
surface gold mine at the site have been received.
The Haile project is located in the Carolina Slate Belt, a northeast-southwest
trending belt of deformed Precambrian to Paleozoic metavolcanic and
metasedimentary rocks that extends from Alabama to Virginia. Numerous historic
gold occurrences are located in the Slate belt. In recent times, four
properties, including Haile, have been developed to the production stage.
Piedmont operated a small-scale gold heap leach operation at the site of the
Haile project prior to the formation of the joint venture in July 1992.
Piedmont suspended active mining activities at the site in August 1991, and
leaching and recovery of gold ended in late 1992. Piedmont has agreed to
indemnify the Company and its affiliates from environmental liabilities arising
from matters occurring or existing on the Haile project property prior to March
15, 1991 (the date of the option agreement under which the Company acquired its
interest in the project).
On March 29, 1995 the Company was served by Piedmont with a complaint alleging
breaches by the Company and its subsidiaries under various agreements. Based on
the facts currently known to the Company's management, the Company does not
expect this action to have any material effect on the Company's financial
condition or results of operations.
Ore grade mineralization on the Haile property is generally hosted within
silicified and pyritized fine-grained metasedimentary rocks near the folded and
faulted contact with overlying volcaniclastic and metavolcanic rocks.
11
<PAGE>
Current reserves are contained in four separate deposits. The following table
sets forth the proven and probable reserves at the Haile project.
Haile Project
Proven and Probable Ore Reserves
As of December 31, 1994
<TABLE>
<CAPTION>
Gold Content
(000 oz.)
Gold ---------------
Tons Avg. Grade AGI 62.5%
(000) (oz./ton) Total Share
----- ---------- ----- ---------
<S> <C> <C> <C> <C>
Mill Ore 8,736 0.089 780 488
===== ========== ===== =========
</TABLE>
The reserves were prepared by the Company and verified by Derry, Michener, Booth
& Wahl in its audit of April 1, 1994 ore reserves. Reserves are based upon an
assumed gold price of $400 per ounce and a cut-off grade based on the economics
associated with variable mining and processing costs. The Company estimates
ultimate gold recoveries would range from 65 percent to 85 percent.
EXPLORATION
The Company entered into an Exploration Joint Venture Agreement with Cyprus Amax
(the "Exploration JV") effective January 1, 1994. Under the Exploration JV, the
Company and Cyprus Amax have agreed to pool their efforts for the principal
purpose of discovering and developing future gold prospects, with Cyprus Amax
providing 75 percent and the Company providing 25 percent of the initial
exploration funding for such prospects. The Company has the first right to
acquire the 75 percent interest of Cyprus Amax in any gold and silver properties
covered by the Exploration JV.
The Company's primary exploration objective continues to be the acquisition and
evaluation of near-surface gold deposits that can be mined by open pit methods.
During 1994 the Company's exploration efforts were focused on Cyprus Amax' Cerro
Quema property in Panama and the Company's Robertson property in Nevada,
together with continuing exploration near operating properties. Both properties
predate the Exploration JV, and the Company's exploration of Cerro Quema is
conducted pursuant to an option agreement with Cyprus Amax. Other exploration
activities have been conducted in British Columbia, China, Ghana and Australia.
Exploration expenditures were $6.2 million in 1994 compared to $5.2 million in
1993 and $6.7 million in 1992 (excluding 1992 exploration expenditures on the
Haile and Guanaco projects). Exploration expenditures for 1995 are anticipated
to be approximately $4 million.
GOLD MARKET AND PRICES
Gold has two principal uses: product fabrication and bullion investment.
Fabricated gold has a wide variety of end uses, including jewelry manufacture
(the largest fabrication component), electronics, dentistry, industrial and
decorative uses, medals, medallions and official coins. The Company sells all
of its refined gold to banks and other bullion dealers, utilizing a variety of
hedging techniques, and substantially all of the Company's 1994 sales were
export sales made in Europe.
The profitability of the Company's operations is significantly affected by the
market price of gold. The price of gold has fluctuated widely and is affected
by numerous factors, including international economic trends, currency exchange
fluctuations, expectations for inflation, consumption patterns (such as
purchases of gold jewelry and the
12
<PAGE>
development of gold coin programs), sales of gold bullion holdings by central
banks or other large gold bullion holders or dealers and political events in the
Middle East and major gold-producing countries such as South Africa and the CIS.
Gold prices are also affected by worldwide production levels, which have
increased in recent years. In addition, the price of gold has on occasion been
subject to rapid short-term changes because of market speculation.
The following table sets forth for the years indicated the high and low selling
prices of gold, first position, as provided by the Commodity Exchange, Inc.
("COMEX") in New York.
<TABLE>
<CAPTION>
High Low
Year (dollars per ounce)
---- -------------------
<S> <C> <C>
1990 $422.40 $346.80
1991 403.20 344.30
1992 359.30 329.70
1993 407.00 326.30
1994 398.00 370.60
</TABLE>
REFINING, SALES AND HEDGING ACTIVITIES
Refining arrangements are in place with third parties for the Sleeper, Wind
Mountain, Hayden Hill and Guanaco mine production. Because of the availability
of refiners other than those with whom such arrangements have been made, the
Company believes that no adverse effect would result if any of these
arrangements were terminated.
The Company employs a number of hedging techniques with the objective of
mitigating the impact of downturns in the gold market and providing adequate
cash flow for operations while maintaining significant upside potential in a
market upswing. During 1994 and 1993 the Company's hedging efforts resulted in
average realized prices of $401 an ounce and $392 an ounce, respectively. This
contrasts with an average COMEX price of approximately $384 an ounce for 1994
and $360 an ounce for 1993. See Note 8 to the Company's 1994 consolidated
financial statements for a description of hedging activities.
AGREEMENTS WITH CYPRUS AMAX
In connection with the change of ownership of the Company resulting from the
Cyprus Amax Merger, Amax Gold has entered into the following agreements with
Cyprus Amax.
Under credit arrangements Cyprus Amax agrees to make loans to the Company from
time to time until December 31, 2001 in an aggregate principal amount not to
exceed at any time outstanding $180 million, with $80 million subject to
approval of the Company's stockholders. The Company may elect to repay amounts
of outstanding indebtedness either by payment in cash or payment in shares of
convertible preferred stock.
Under the Exploration JV, the Company and Cyprus Amax have agreed to pool their
efforts for the principal purpose of discovering and developing future gold
prospects, with Cyprus Amax providing 75 percent and the Company providing 25
percent of the initial exploration funding for such prospects. Properties held
by the parties prior to January 1, 1994 are excluded from the joint venture. A
subsidiary of Cyprus Amax has been appointed as Manager to manage, direct and
control exploration activities, with active participation by Amax Gold. The
Exploration JV will terminate December 31, 1995 unless the Company and Cyprus
Amax mutually agree to extend the agreement. Either party may withdraw upon
giving 60 days notice to
13
<PAGE>
the other party. Amax Gold has the first right to acquire any gold property
covered by the Exploration JV and Cyprus Amax has the first right to acquire
properties containing deposits of minerals other than gold or silver.
Amax Gold and Cyprus Amax have entered into an agreement which gives the Company
the option to purchase the Cyprus Amax interest in the Cerro Quema advanced
stage gold exploration prospect in Panama. The purchase price is to be based on
estimated reserves to be established in a feasibility study funded by the
Company that has yet to be completed.
The Company and Cyprus Amax have agreed to provide a variety of managerial and
other services to each other on a full cost-reimbursement basis, terminable by
the Company or by Cyprus Amax on 180 days prior written notice.
The Company and Cyprus Amax are parties to a put and call agreement under which
Cyprus Amax may sell shares of Common Stock of Amax Gold to the Company upon
exercise of certain common stock purchase warrants issued in connection with the
acquisition of the Fort Knox Project in 1992. The warrants, which expire in
January 1996, have a current exercise price of $21.00.
EMPLOYEES
At December 31, 1994, the Company and its consolidated subsidiaries employed 602
persons in addition to 123 contract miners at its Guanaco mine. The hourly
employees at the Guanaco mine are represented by the Sociedad Contractual Minera
Guanaco labor union and are covered by a labor contract. None of the Company's
employees in the United States are organized and the Company considers its
employee relations to be good. The Company obtains certain administrative and
other services from Cyprus Amax.
COMPETITION
The Company competes with other companies in the acquisition of mineral
interests and the recruitment and retention of qualified employees. A number of
these companies are larger than the Company in terms of annual gold production
and total reserves and have been engaged in gold mining and exploration longer
than the Company. Management does not believe, however, that such competition
has had a material effect on the development of the Company's business or the
sale of its products.
FOREIGN OPERATIONS
Foreign operations and investments such as those which the Company has in Chile
may be adversely affected by exchange controls, currency fluctuations, taxation
and laws or policies of particular countries or by political events in those
countries as well as by laws and policies of the United States affecting foreign
trade, investment and taxation.
REGULATION AND ENVIRONMENTAL MATTERS
The Company's mining and processing operations and exploration activities in the
United States, Chile, Panama and other countries are subject to various laws and
regulations governing the protection of the environment, exploration,
development, production, exports, taxes, labor standards, occupational health,
waste disposal, toxic substances, mine safety and other matters. New laws and
regulations, amendments to existing laws and regulations, or more stringent
implementation of existing laws and regulations could have a material adverse
impact on the Company, increase costs, cause a reduction in levels of production
and/or delay or prevent the development of new mining properties. Amax Gold
expects to be able to comply with all existing environmental laws and
14
<PAGE>
regulations. Such compliance requires significant expenditures and increases the
Company's mine development and operating costs.
In May 1992, a notice of violation was issued to the Company by the Director,
Air and Toxics Division, Region IX of the United States Environmental Protection
Agency, alleging that the Company had commenced construction of the Hayden Hill
Mine, and of seven diesel powered generators which supplied temporary power at
the mine, without final permits and failed to comply with certain notification
requirements under federal new source performance standards regulations in
violation of regulations promulgated under the Clean Air Act. The settlement of
this matter has been effected by a consent decree entered into in December 1994
between EPA, the Company and the U.S. Department of Justice, which will expire
in December 1995.
In March 1994, the U.S. Forest Service notified the Company that it considers
the Company to be a Potentially Responsible Party (PRP) under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA), jointly and
severally liable with other PRPs, for damages attributable to alleged releases
of hazardous substances from the Siskon Mine, located in the Klamath National
Forest in Siskiyou County, California. The Company conducted a limited
exploration drilling program in the summer of 1991 on property at the Siskon
mine site which the Company believes is not involved in the alleged releases.
The Company has had no communication from the Forest Service since its response
to the Forest Service in July 1994. Based on facts currently known to
management, the Company does not anticipate that this matter will have any
material effect on the Company's financial condition or results of operations.
Executive Officers of the Registrant
As of March 24, 1995, the names, ages and offices of all executive officers of
the Company were as follows.
<TABLE>
<CAPTION>
Name Age Office
---- --- ------
<S> <C> <C>
Milton H. Ward 62 Chairman of the Board and Chief Executive Officer
Roger A. Kauffman 51 President and Chief Operating Officer
Richard B. Esser 48 Vice President
Deborah J. Friedman 42 Vice President, General Counsel and Secretary
Mark A. Lettes 45 Vice President and Chief Financial Officer
David L. Mueller 44 Vice President and Controller
Neil K. Muncaster 59 Vice President
Andrew F. Pooler 36 Vice President
</TABLE>
Mr. Ward was elected Chairman of the Board and Chief Executive Officer of the
Company in November 1993 and served as President from November 1993 until
February 1995. He has been Chairman of the Board, President and Chief Executive
Officer of Cyprus Amax since May 1992. Prior to joining Cyprus Amax, Mr. Ward
had been President and Chief Operating Officer of Freeport-McMoRan Inc. and
Chairman and Chief Executive Officer of Freeport McMoRan Copper & Gold Inc.
since 1984.
Mr. Kauffman was elected President of the Company in February 1995 and has
served as Chief Operating Officer since February 1994. He served as Senior Vice
President from February 1994 until February 1995. From 1986 to February 1994, he
was Vice President-Industrial Minerals for Hecla Mining Company.
15
<PAGE>
Mr. Esser has been Vice President of the Company responsible for human resources
matters since August 1989. Prior to August 1989, he held various management
positions in the Company's human resources department.
Ms. Friedman was elected Vice President, General Counsel and Secretary of the
Company in September 1994. From 1982 through 1993, she held various positions
in the law department of Cyprus Amax, including General Counsel and Associate
General Counsel. In 1994, she served as a legal consultant handling various
matters for Cyprus Amax.
Mr. Lettes was elected Chief Financial Officer of the Company in January 1994.
He has held various management positions in the Company's financial departments
since 1986, including Vice President since August 1989 and Treasurer from May
1988 to February 1991.
Mr. Mueller was elected Vice President and Controller in October 1994. He was
Director of Financial Reporting at Echo Bay Mines Ltd. from October 1990 until
1994. Prior to October 1990, he was a Senior Manager at Ernst & Young.
Mr. Muncaster was elected Vice President of the Company in February 1991 and is
responsible for exploration. He was Vice President, Exploration for Echo Bay
Mines from 1986 to 1991.
Mr. Pooler was elected Vice President of the Company in February 1992 and is
responsible for the Company's operations in the continental U.S. From May 1988
until February 1992 he was General Manager of the Wind Mountain mine.
Each executive officer holds office subject to removal at any time by the Board
of Directors of Amax Gold.
ITEM 3. LEGAL PROCEEDINGS
In June 1993, the Company, certain other affiliated corporations and several
unnamed corporations and individuals were sued in the Nevada State Court for
Washoe County by TMB Associates ("TMB"), a Nevada general partnership that is
the lessor under an April 2, 1987 lease of unpatented federal mining claims (as
amended, the "Lease") which comprise a substantial part of the Wind Mountain
mine property position. The lawsuit involves the formation and performance of,
and alleged breach of duties with respect to, the Lease pertaining to the
exploration, development and mining of the Wind Mountain ore deposit. In 1993,
the court granted the Company's motion to stay the litigation and to compel TMB
to proceed with arbitration, pursuant to an arbitration clause in the Lease
requiring any controversy to be settled by arbitration and imposing a one-year
limitation for commencing arbitration. TMB initiated arbitration in 1994 and
discovery is proceeding. At this time, the Company's management does not
anticipate any material adverse effect on the Company's financial condition or
results of operations from the results of arbitration.
Certain of the Company's New Zealand subsidiaries and certain subsidiaries of
Poseidon Gold Limited ("PosGold") are defendants in an action brought by Mineral
Resources (N.Z.) Limited and a subsidiary in the High Court of New Zealand,
Auckland Registry, Commercial List, claiming that a transaction between the
Company and a subsidiary of PosGold in June 1993 in which the Company realized
all future economic benefit from an interest in a mine in New Zealand created a
default under the joint venture agreement and seeking to obtain the Company's
venture interest. The Company believes that it is remote that this
litigation will result in any material effect on the Company's financial
condition or results of operations.
See "Item 1 and 2. Business and Properties-Haile Project" for a description of a
dispute between the Company and its joint venture partner in the Haile project.
16
<PAGE>
parties are awaiting final action on pre-trial motions and the Company believes
that it is remote that this litigation will result in any material adverse
effect on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York Stock Exchange (AU) and The
Toronto Stock Exchange (AXG). As of March 24, 1995, 81,295,607 shares of Common
Stock were outstanding with approximately 11,900 stockholders of record. Cyprus
Amax owns approximately 42.2 percent of the Company's outstanding Common Stock.
The Company's $3.75 Series B Convertible Preferred Stock is listed on the New
York Stock Exchange (AUPrB). As of March 17, 1995, 1,840,000 shares of Series B
Convertible Preferred Stock were outstanding with approximately 15 stockholders
of record.
The following table sets forth for the periods indicated the high and the low
sale prices per share of the Company's Common and Series B Convertible Preferred
Stock as reported on the New York Stock Exchange Composite Tape and the
dividends paid on such stock.
Stock Prices and Dividends Per Share
<TABLE>
<CAPTION>
Common Stock Series B Convertible Preferred Stock
--------------------------- ------------------------------------
Quarter High Low Dividends High Low Dividends
------ ------- ------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1994
----
First $ 8 1/4 $6 1/4 $ - $ - $ - $ -
Second 8 1/4 6 5/8 - - - -
Third 7 7/8 6 1/8 - 55 5/8 50 -
Fourth 7 5/8 5 5/8 - 56 1/4 47 7/8 .9791
1993
----
First 9 3/8 7 3/4 .02 - - -
Second 9 1/2 6 7/8 .02 - - -
Third 10 1/2 6 3/4 .02 - - -
Fourth 8 6 .02 - - -
</TABLE>
On March 4, 1994, the Company's Board of Directors decided to eliminate the
quarterly dividend on the Company's Common Stock to reduce expenses. Although
the Company's loan agreements do not directly limit the payment of dividends,
the agreements require the Company to comply with certain financial convenants
that may be affected by dividend payments.
The Series B Convertible Preferred Stock was issued on August 11, 1994. The
dividend paid on November 15, 1994 included the 94 day period from date of
issuance. Regular quarterly dividends are $.9375.
As of March 24, 1995, 4,066,649 warrants to purchase Common Stock of the Company
were outstanding with approximately 80 holders of record. The warrants are
listed on the American Stock Exchange (AUWS) and the
17
<PAGE>
Toronto Stock Exchange (AXGWT). The warrants, issued in connection with the
acquisition of the Fort Knox project, expire in January 1996 and permit the
holder to purchase one share of Common Stock for $21.00.
18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
AMAX GOLD INC. AND SUBSIDIARIES
FINANCIAL AND OPERATING HIGHLIGHTS
(IN MILLIONS EXCEPT PER SHARE AMOUNTS, PERCENTAGES,
PRODUCTION AND SALES OUNCES AND AMOUNTS PER OUNCE)
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR:
Revenues $ 94.6 $ 81.9 $ 99.7 $ 128.2 $ 149.8
Gross operating margin (loss) (16.6) (31.9) 16.6 38.0 63.1
Asset write-downs/(1)/ 21.1 87.7 - - 12.6
Earnings (loss) from operations/(1)(2)/ (43.9) (116.0) 18.8 24.0 36.1
Earnings (loss) before cumulative effect of
accounting changes, net/(1)(2)/ (43.0) (89.0) 13.0 21.2 28.3
Net earnings (loss)/(1)(2)(3)/ (35.5) (104.2) 11.5 21.2 28.3
Per common share:
Earnings (loss) before cumulative effect of
accounting changes/(1)(2)(3)/ (.56) (1.14) .18 .35 .47
Net earnings (loss)/(1)(2)(3)/ (.47) (1.34) .16 .35 .47
Weighted average common shares outstanding/(4)/ 79.3 77.8 73.7 60.0 60.0
Capital and cash acquisition expenditures 23.0 23.4 113.7 60.0 39.9
Cash dividends to common stockholders - 2.0 2.8 4.8 4.8
Dividends declared per common share/(4)/ - .08 .08 .08 .08
Cash dividends to preferred stockholders 1.8 - - - -
Dividends declared per preferred share .9791 - - - -
AT YEAR-END:
Current assets 72.7 37.9 47.1 41.7 42.4
Total assets 403.2 381.0 477.6 198.3 157.2
Current liabilities 45.6 37.6 46.9 28.2 21.2
Long-term gold and currency financings 83.2 136.5 103.1 24.1 8.4
Stockholders' equity 245.5 173.3 257.2 136.3 120.7
Working capital 27.1 .3 .2 13.5 21.2
Book value per common share 3.10 2.23 3.49 2.27 2.01
Long-term debt to equity 34% 79% 40% 18% 7%
KEY OPERATING FACTORS FOR THE YEAR:
Total ounces of gold produced/(5)/ 240,885 210,880 253,603 300,233 354,859
Total ounces of gold sold 235,664 209,290 248,024 300,418 359,146
Average price per ounce sold $ 401 $ 392 $ 402 $ 427 $ 417
Average cost per ounce produced/(6)/:
Cash production cost/(7)/ $ 340 $ 388 $ 223 $ 195 $ 147
Depreciation and depletion 105 122 87 82 73
-------- -------- -------- -------- --------
Total production cost $ 445 $ 510 $ 310 $ 277 $ 220
======== ======== ======== ======== ========
</TABLE>
/(1)/ In 1994, the Company recorded a $18.6 million ($14.4 million after tax)
write-down of the Hayden Hill mill to its estimated salvage value and a
$2.5 million ($2.1 after-tax) write-down of other assets which increased
the net loss by $16.5 million or $.21 per share. In 1993, the Company
recognized a $64.1 million pre-tax ($41.9 million after tax) write-down of
Hayden Hill and a $23.6 million pre-tax ($15.6 million after tax) write-
down of Sleeper, which increased the 1993 net loss by $57.5 million, or
$.74 per common share. The earnings
19
<PAGE>
for 1990 include a $12.6 million write-down of Amax Gold's investment in
Canamax Resources Inc. recorded in the first half of 1990, which reduced
1990 net earnings per common share by $.21. The remaining Canamax
investment was sold to Amax during the second half of 1990 for $6.4
million in cash.
/(2)/ In 1994, the Company changed its method of accounting for the cost of ore
loaded on heap leach pads. The 1994 net loss is reduced by a $7.5 million
after tax benefit relating to the cumulative effect of this accounting
change. In September 1993, Amax Gold changed its exploration accounting
policy, effective January 1, 1993, such that prior period exploration
expenses would no longer be capitalized and restored to earnings when a
property became exploitable. The 1993 net loss includes a $13.4 million,
or $.17 per common share, after tax charge relating to the cumulative
effect of this accounting change. The 1992 net earnings include $8.9
million, or $.12 per common share, of after tax income related to prior
year exploration expenditures on the Haile and Guanaco projects that were
capitalized and restored to earnings.
/(3)/ The 1993 net loss includes a $1.8 million, or $.03 per common share, after
-tax cumulative effect of the January 1, 1993 adoption of Statement of
Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits". Net earnings for 1992 include a $1.5 million, or
$.02 per common share, after tax cumulative effect of the January 1, 1992
adoption of SFAS No. 106, "Postretirement Benefits Other Than Pensions".
/(4)/ Adjusted for three-for-two common stock split effected in the form of a
stock dividend which was distributed in 1988.
/(5)/ Gold production for the year ended December 31, 1992 reflects increased
production of 4,733 ounces at the Sleeper Mine and 542 ounces at the Waihi
Mine relating to the cumulative effect of a change in accounting to
include production in the mill carbon circuit, effective January 1, 1992.
/(6)/ Average costs weighted by ounces of gold produced at each mine.
/(7)/ Cash production costs include all operating costs at the mine site,
including overhead and, where applicable, Nevada net proceeds tax,
royalties and credits for silver by-products.
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
The Company recorded a net loss of $35.5 million in 1994, the first full year of
operations following the November 1993 merger of Amax Inc. with and into Cyprus
Minerals Company. During the period since the merger, the Company has made
management changes, significantly reduced staff, entered into exploration, non-
compete and service agreements with Cyprus Amax Minerals Company ("Cyprus Amax")
and successfully financed future growth. Gold production for 1994 was 240,885
ounces at an average cash production cost of $340 per ounce. The average price
of gold realized in 1994 was $401 per ounce compared to the average market price
of $384 per ounce.
RESULTS OF OPERATIONS
Amax Gold reported a net loss of $35.5 million in 1994 compared with a net loss
of $104.2 million in 1993 and net income of $11.5 million in 1992. The 1994
results include after-tax asset write-downs of $16.5 million partially offset by
the $7.5 million cumulative after-tax effect of a change in accounting for leach
pad inventory. The Company paid dividends of $1.8 million in 1994 on preferred
stock issued in August 1994. Results in 1993 include after-tax asset write-downs
of $57.5 million, a $15.2 million charge for the after-tax cumulative effect of
a change in accounting for exploration expenses and the adoption of a new
accounting standard for postemployment benefits, and an after-tax gain of $2.4
million from the realization of the future economic benefit from its 33.53
percent interest in the Waihi Mine in New Zealand. The 1992 results include
after-tax income of $8.9 million from exploration expenditures that were
capitalized and restored to earnings and an after-tax charge of $1.5 million for
the cumulative effect of the adoption of a new accounting standard for
postretirement benefits other than pensions.
Revenues increased to $94.6 million for 1994 compared to $81.9 million in 1993.
Revenues were $99.7 million in 1992. The increase in 1994 revenue from 1993 is
a result of higher production and sales volumes from the Guanaco, Hayden Hill
and Sleeper mines and higher realized prices in 1994. The decrease in revenues
in 1993 from 1992 is a result of declines in production and sales volumes from
the Sleeper, Wind Mountain and Waihi mines together with lower realized sales
prices in 1993. Somewhat offsetting these declines in 1993 was production from
Hayden Hill, which commenced operations in June 1992, and Guanaco, which
commenced operations in April 1993. The Company sold 235,664 ounces of gold in
1994 compared to 209,290 ounces in 1993 and 248,024 ounces in 1992. Total
production and sales volumes for 1995 are expected to increase slightly from
1994 levels as the Hayden Hill and Guanaco heap leach operations are scheduled
to process ore at design capacity, more than offsetting declines in production
at Sleeper which is nearing the end of its mine life and Wind Mountain where
residual leaching is expected to end in 1995.
The Company realized an average selling price of $401 per ounce of gold in 1994,
$392 per ounce in 1993 and $402 per gold ounce in 1992. The average realized
price for each year includes hedging benefits from closing forward sales
contracts and gold options at prices above market. The average COMEX gold price
was $384 per ounce in 1994, $360 per ounce in 1993 and $344 per ounce in 1992.
Gold production was 240,885 ounces in 1994 compared to 210,880 ounces in 1993
and 253,603 ounces in 1992. The increase in gold production in 1994 was due to
increased production at Guanaco, Hayden Hill and Sleeper. The increase in
production at Guanaco was a result of operating for a full year in 1994 compared
to operating for a portion of a year in 1993, when the mine commenced production
in April. Guanaco experienced ordinary start-up delays and crusher throughput
problems in 1993, and process water shortages in 1994 which were resolved in the
fourth quarter. The increase in production at Hayden Hill in 1994 is primarily
due to the successful conversion of the mine to a heap leach only operation
during the last half of 1993. Increased production at Sleeper in 1994 compared
to 1993 is a result of higher mill grade and mill recovery rates in 1994. These
increases were partially
21
<PAGE>
offset by expected lower residual heap leach production at Wind Mountain and the
elimination of the Company's share of production at Waihi in New Zealand. In a
transaction effective in April 1993, the Company realized the future benefit
from its 33.53 percent interest in the Waihi mine. Gold production declined in
1993 from 1992 primarily as a result of lower mill head grades and related
recovery rates at Sleeper, lower residual heap leach production at Wind Mountain
after completion of mining in January 1992 and four months of production at
Waihi in 1993 compared to a full year in 1992. These production decreases in
1993 compared to 1992 were partially offset by the commencement of operations at
Guanaco in April 1993 and by increased production at Hayden Hill during its
first full year of operations in 1993.
Cost of sales represent mining and processing costs for gold sold during the
year including labor, materials and supplies, repairs and maintenance, fuel and
utilities. The Company's operating costs also include estimated reclamation at
each of the Company's mines, which is accrued and charged over the expected mine
life using the units-of-production method. Reclamation costs are estimates
based on current federal, state and Chilean laws and regulations governing the
protection of the environment. Changes in these laws and regulations could
increase future reclamation costs.
Cash production costs decreased to $340 per ounce in 1994 from $388 per ounce in
1993. Cash production costs were $223 per ounce in 1992. The decrease in cash
production costs in 1994 compared to 1993 relates primarily to higher production
during a full year of operations at Guanaco and reduced operating costs and
higher production at Sleeper and Hayden Hill. Cash production costs per ounce
at Guanaco decreased to $420 in 1994 from $664 in 1993. The decrease in cash
costs at Guanaco is primarily a result of increased production due to a full
year of operations, although production was hampered by intermittent process
water shortages which were resolved in the fourth quarter. The decrease
includes a $65 per ounce benefit from the effect of changing the method of
accounting for inventory of ore loaded on heap leach pads in 1994. At Hayden
Hill, cash costs per ounce decreased substantially to $406 in 1994 from $470 in
1993, despite an additional $39 per ounce increase from the change in accounting
for heap leach inventory. Cash costs per ounce at Sleeper decreased to $273 in
1994 from $317 in 1993, despite a $5 increase in costs in 1994 relating to the
change in accounting for heap leach inventory. Cash production costs per ounce
in 1993 increased to $388 from $223 in 1992 primarily as a result of high costs
associated with start-up together with low crusher throughput at Guanaco, lower
expected grade and mill recovery rates in the first half of 1993 at Hayden Hill
and reduced production related to lower mill head grades at Sleeper. Cash
production costs are expected to be lower in 1995 than in 1994, due to higher
production levels from Guanaco and Hayden Hill, which are expected to operate at
design throughput in 1995. This increase in production is expected to be
partially offset by lower production at Sleeper, which is nearing the end of
expected mine life, and decreasing residual leach production from Wind Mountain.
Refugio is scheduled to commence production at the end of 1995 or early in 1996.
Depreciation and depletion decreased by $.4 million in 1994 compared to 1993.
The 1994 decrease was primarily a result of the write-downs of assets at Sleeper
in December 1993 and at Hayden Hill in June 1993, somewhat offset by a full year
of production at Guanaco in 1994. On a unit basis, depreciation and depletion
decreased to $105 per ounce in 1994 from $122 per ounce in 1993. Depreciation
and depletion has been favorably impacted by continuing residual heap leach
production at Wind Mountain after assets were fully depreciated in the first
quarter of 1992. For 1993 compared to 1992, total depreciation and depletion
increased by $3.9 million. On a per ounce basis, depreciation and depletion
increased to $122 per ounce in 1993 from $87 per ounce in 1992 as a result of
production at Guanaco starting in April 1993 and a reduction of recoverable
ounces at Sleeper which was partially offset by lower depreciation and depletion
at Hayden Hill following the asset write-down in June 1993.
General and administrative costs have been reduced over the last three years.
The primary reason for the decrease to $6.9 million in 1994 from $8.4 million in
1993 was a reduction of staff in 1994.
22
<PAGE>
Asset write-downs were $21.1 million in 1994 and $87.7 million in 1993. The
asset write-down in 1994 consisted of $18.6 million ($14.4 million after tax)
for the Hayden Hill mill and $2.5 million ($2.1 million after tax) for other
assets. In 1993, the Company wrote down the Hayden Hill mill by $64.1 million
($41.9 million after-tax) to its then estimated salvage value in anticipation
that sufficient mill grade ore would be encountered to justify a future milling
operation or possible use of the mill at another Company property. The
additional write-down of the Hayden Hill mill in 1994 is the result of the lack
of higher grade ore amenable to milling operations and the unlikely use of the
mill at another of the Company's properties. In 1993, the Company also wrote
down Sleeper assets by $23.6 million ($15.6 million after tax) as a result of
reducing proven and probable reserves based on mining experience and
reinterpretation of geologic data.
Exploration expense was $6.2 million in 1994 compared to $5.2 million in 1993,
primarily reflecting increased activity in North, Central and South America,
partially offset by savings related to the Company's agreement to pool efforts
with Cyprus Amax to discover and develop new gold properties. Effective January
1, 1993, the Company changed its exploration accounting policy to expense
exploration costs as incurred. Exploration expense in 1992 was $9.0 million
before the effect of capitalizing $11.2 million for exploration expenditures
under the Company's previous exploration accounting policy.
Interest expense rose to $8.9 million in 1994 compared to $8.5 million in 1993
and $2.3 million in 1992. These increases were primarily the result of higher
interest rates in 1994 and a higher average debt balance in 1993. Interest in
1992 was partially offset by the capitalization of a portion of interest expense
while the Hayden Hill and Guanaco mines were in the construction and development
phase.
Interest income was $2.1 million in 1994 compared to $.7 million in 1993 and
$1.6 million in 1992. The change in interest income relates to cash from the
preferred share offering held prior to investing in capital projects.
In addition to the effects of changes in accounting for inventory in 1994 and
changes in exploration accounting in 1993 noted above, accounting changes as a
result of new accounting standards were made in 1993 and 1992. The cumulative
effect of the 1993 accounting change for postemployment benefits was a decrease
in net income of $1.8 million (net of a deferred tax benefit of $1 million).
The cumulative effect of the 1992 accounting change for postretirement benefits
was a decrease in net income of $1.5 million (net of a deferred tax benefit of
$.9 million).
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $27.1 million at December 31, 1994 compared to
$.3 million at December 31, 1993. During 1994, the Company's operating
activities used $3.1 million of cash and cash used in investing activities was
$24 million. Cash spent for property, plant and equipment at operating
properties in 1994 included $6.6 million at Guanaco, $4.6 million at Hayden Hill
and $1.1 million at Sleeper. In addition, 1994 capital expenditures at
development properties included $5.4 million at Fort Knox, $4.2 million at
Refugio and $1.1 million at Haile. Expenditures at Haile in 1995 will be
expensed as incurred as a result of the Company's interest in selling its 62.5
percent of the property.
Net financing activities generated cash of $56.3 million. In August of 1994,
the Company received net proceeds of $88.3 million from the sale of convertible
preferred stock. The preferred stock was sold under a universal shelf
registration filed by the Company in June 1994 covering $200 million of equity
and/or subordinated debt securities. Currently $108 million is available under
the shelf registration. The Company sold three million shares of common stock
to Cyprus Amax and used the proceeds to repay $20.7 million outstanding under a
promissory note. Other financing activities in 1994 included financing costs of
$3.4 million, net debt repayments of $3.1 million and preferred stock dividends
of $1.8 million.
23
<PAGE>
Capital expenditures for 1995 are expected to be approximately $193 million
including $133 million at Fort Knox, $54 million for the Company's share at
Refugio and $6 million at operating properties. Financing for Refugio has been
various financing alternatives for Fort Knox are under consideration. At
December 31, 1994, the Company had total outstanding debt obligations of $107.1
million, representing $40.9 million under the Hayden Hill loan facility, $35
million under the Guanaco loan, $6.1 million under Chilean assumed debt, $23.5
million under gold leases and $1.6 million (or 4,000 gold ounces) under the
Sleeper gold bullion loan agreement. Principal repayment obligations for 1995
aggregate $23.9 million.
During 1994, Cyprus Amax provided the Company with a $100 million line of credit
at favorable interest rates available until April 30, 1997, with certain equity
features. See Note 7 to the Company's 1994 consolidated financial statements.
A substantial portion of this credit line has been designated by the Company as
support for its other credit arrangements. In early 1995, availability was
extended until December 31, 2001, subject to approval by the stockholders of the
Company.
In February 1995, Cyprus Amax agreed, subject to approval by the stockholders of
the Company, to provide the Company with an additional $80 million line of
credit at favorable interest rates available until December 31, 2001, with
certain equity features. See Note 7 to the Company's 1994 consolidated
financial statements.
In February 1995, the joint venture company developing the Refugio project
borrowed $85 million drawn in gold under a project financing arrangement with a
group of banks. The Company's 50 percent share is $42.5 million. The remaining
funds expected to be required to construct Refugio have been contributed to the
joint venture company by the Company and its joint venture partner.
In March 1995, the Company arranged to borrow up to $40 million of the $80
million line of credit during the period prior to receipt of stockholder
approval, primarily to fund capital expenditures at Fort Knox. Under this
temporary arrangement, the equity features of the credit line are suspended and
the loan is secured by a 20 percent interest in the Company's Fort Knox project.
If stockholder approval is not received, the Company will have until October 15,
1995 to repay the loan. As of March 24, 1995, the Company has borrowed $5
million under this temporary arrangement.
Cash flows from operations for 1995 are expected to be sufficient to fund
operating and administrative expenses, exploration expenditures and interest
payments on outstanding debt. In order to meet all scheduled debt payments and
to fund capital development requirements, the Company will be required to borrow
money from Cyprus Amax under the lines of credit and obtain external debt or
equity financing.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Amax Gold Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Amax Gold
Inc. and its subsidiaries at December 31, 1994, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
As discussed in Note 5 to the consolidated financial statements, the Company
adopted a new method of accounting for heap leach ore costs, effective January
1, 1994.
Price Waterhouse LLP
Denver, Colorado
February 17, 1995
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Amax Gold Inc.:
We have audited the accompanying consolidated balance sheet of Amax Gold Inc.
and Subsidiaries (the Company) as of December 31, 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the two years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Amax
Gold Inc. and Subsidiaries as of December 31, 1993, and the consolidated results
of their operations and their cash flows for each of the two years in the
period ended December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, during 1993 the
Company changed its method of accounting for exploration expenditures and
postemployment benefits. As also discussed in Note 1 to the consolidated
financial statements, during 1992 the Company changed its method of accounting
for precious metals inventory, postretirement benefits and income taxes.
Coopers & Lybrand
Denver, Colorado
February 4, 1994 except for
note 8 for which the date
is March 18, 1994
26
<PAGE>
REPORT OF MANAGEMENT
The management of Amax Gold Inc. is responsible for the integrity and
objectivity of the financial statements and other financial information
contained in this Annual Report. The financial statements were prepared in
accordance with generally accepted accounting principles and include estimates
that are based on management's best judgment.
Amax Gold maintains an internal control system which includes formal policies
and procedures designed to provide reasonable assurance that assets are
safeguarded and transactions are properly recorded and executed in accordance
with management's authorization. Amax Gold's internal audit function audits
compliance with the internal control system and issues reports to Amax Gold's
management and the Audit Committee of the Board of Directors.
Amax Gold's financial statements have been audited by independent accountants,
whose appointment is ratified yearly by the shareholders at the annual
shareholders' meeting. The independent accountants conducted their audits in
accordance with generally accepted auditing standards. These standards include
an evaluation of the internal accounting controls in establishing the scope of
audit testing necessary to allow them to render an independent professional
opinion on the fairness of Amax Gold's financial statements.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with representatives of management and the
independent accountants to review their work and ensure that they are properly
discharging their responsibilities.
Milton H. Ward
Chairman, Chief Executive Officer
Roger A. Kauffman
President and Chief Operating Officer
Mark A. Lettes
Vice President and Chief Financial Officer
27
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
Year Ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992
-------- --------- -------
<S> <C> <C> <C>
Revenues $ 94,600 $ 81,900 $99,700
Costs and operating expenses:
Costs of sales 79,000 79,700 52,800
Depreciation and depletion 25,300 25,700 21,800
General and administrative 6,900 8,400 8,500
-------- --------- -------
Total costs and operating expenses 111,200 113,800 83,100
-------- --------- -------
Gross operating margin (loss) (16,600) (31,900) 16,600
Asset write-downs (21,100) (87,700) -
Exploration (6,200) (5,200) 2,200
Gain on Waihi transaction - 8,800 -
-------- --------- -------
Earnings (loss) from operations (43,900) (116,000) 18,800
Interest expense (8,900) (8,500) (2,300)
Interest income 2,100 700 1,600
Minority interest 1,100 1,100 -
Other - (100) (100)
-------- --------- -------
Earnings (loss) before income taxes and
cumulative effect of accounting changes (49,600) (122,800) 18,000
Income tax (provision) benefit 6,600 33,800 (5,000)
-------- --------- -------
Earnings (loss) before cumulative
effect of accounting changes (43,000) (89,000) 13,000
Cumulative effect of accounting changes,
net of income tax (provision) benefit
of $(2,000) in 1994, $5,500 in 1993
and $900 in 1992 7,500 (15,200) (1,500)
-------- --------- -------
Net earnings (loss) (35,500) (104,200) 11,500
Preferred stock dividends (1,800) - -
-------- --------- -------
Earnings (loss) attributable to
common shares $(37,300) $(104,200) $11,500
======== ========= =======
Per common share:
Earnings (loss) before cumulative
effect of accounting changes $ (.56) $ (1.14) $ .18
Cumulative effect of accounting changes .09 (.20) (.02)
-------- --------- -------
Net earnings (loss) $ (.47) $ (1.34) $ .16
======== ========= =======
Dividends declared per common share $ - $ .08 $ .08
======== ========= =======
Weighted average common shares outstanding 79,272 77,758 73,695
======== ========= =======
</TABLE>
The accompanying notes are an integral part of these statements.
28
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31,
(Dollars in thousands except par value of stock)
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
ASSETS
Cash and equivalents $ 36,700 $ 7,500
Inventories 28,600 16,600
Other 7,000 9,800
Receivables on open sales contracts 400 4,100
--------- ---------
Total current assets 72,700 38,000
Property, plant and equipment, net 313,300 333,500
Other 17,200 9,600
--------- ---------
Total assets $403,200 $381,100
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade $ 4,000 $ 4,100
Accounts payable, affiliates 600 100
Accrued and other current liabilities 15,100 16,400
Reclamation reserve, current portion 2,000 2,000
Current maturities of gold and currency financings 23,900 15,100
--------- ---------
Total current liabilities 45,600 37,700
Long-term portion of gold and currency financings 83,200 111,800
Payable to Cyprus Amax - 24,700
Reclamation reserve, noncurrent portion 11,100 8,600
Deferred income taxes 10,000 16,900
Other 7,800 8,100
--------- ---------
Total liabilities 157,700 207,800
Commitments and contingencies (Notes 8 and 13) - -
Shareholders' equity:
Preferred stock, par value $1.00 per share,
authorized 10,000,000 shares,
of which 2,000,000 shares have been designated as
Series A
Convertible Preferred Stock, no shares issued and
outstanding and
1,840,000 shares have been designated as Series B
Convertible Preferred
Stock, issued and outstanding 1,840,000 shares in
1994 and none in 1993 1,800 -
Common stock, par value $.01 per share, authorized
200,000,000 shares,
issued and outstanding 81,267,708 shares in 1994 and
78,185,057
shares in 1993 800 800
Paid-in capital 258,400 150,700
Retained earnings (deficit) (15,500) 21,800
Common stock in treasury, at cost (1,991 shares in
1994 and 1993) - -
--------- ---------
Total shareholders' equity 245,500 173,300
--------- ---------
Total liabilities and shareholders' equity $403,200 $381,100
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
-------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) $(35,500) $(104,200) $ 11,500
Adjustments to reconcile net earnings
(loss)
to net cash (used in) provided by
operating activities:
Depreciation and depletion 25,300 25,700 21,800
Asset write-downs 21,100 87,700 -
Increase in reclamation reserve 2,500 3,700 1,600
Cumulative effect of accounting
changes (7,500) 15,200 1,500
Increase (decrease) in deferred taxes (6,600) (34,100) 4,700
Deferred hedging costs (3,900) 1,100 (1,700)
Minority interest (1,100) (1,100) -
Other, net (600) (600) 900
Gain on Waihi transaction - (8,800) -
Capitalization of prior period
exploration costs - - (8,900)
Decrease (increase) in working capital:
Receivables on open sales contracts 3,700 (3,500) 700
Accounts payable, affiliates 500 (900) (700)
Accrued and other current liabilities 400 2,700 2,000
Inventories (800) (2,300) (5,200)
Other assets (400) (1,900) 1,300
Accounts payable, trade (200) (1,900) (3,600)
-------- --------- ---------
Net cash (used in) provided by
operating activities (3,100) (23,200) 25,900
-------- --------- ---------
Investing Activities
Capital expenditures (23,000) (24,600) (113,400)
Other (1,000) (200) (200)
Net cash received on Waihi transaction - 7,800 -
Repayments from Amax under notes
receivable - - 15,400
-------- --------- ---------
Net cash used in investing activities (24,000) (17,000) (98,200)
-------- --------- ---------
Financing Activities
Net proceeds from sale of convertible
preferred stock 88,300 - -
Proceeds from financings 72,900 34,500 86,700
Advances from Cyprus Amax 9,300 24,700 -
Repayments of financings (72,000) (31,600) -
Repayments to Cyprus Amax (34,000) - -
Deferred financing costs (3,400) - -
Other (3,000) (1,700) 2,800
Cash dividends paid:
Preferred (1,800) - -
Common - (2,000) (2,800)
-------- --------- ---------
Net cash provided by financing
activities 56,300 23,900 86,700
-------- --------- ---------
Effect of exchange rate changes on cash
and equivalents - 100 (200)
-------- --------- ---------
Net increase (decrease) in cash and
equivalents 29,200 (16,200) 14,200
Cash and equivalents at January 1 7,500 23,700 9,500
-------- --------- ---------
Cash and equivalents at December 31 $ 36,700 $ 7,500 $ 23,700
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Retained Common
Preferred Stock Common Stock Paid-In Earnings Stock in
Shares Amount Shares Amount Capital (Deficit) Treasury
---------- ------- ---------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1991 - $ - 59,999,982 $600 $ 9,900 $ 126,600 $(100)
Net earnings - - - - - 11,500 -
Issuance of common shares:
Acquisitions - - 14,173,253 100 112,500 - -
Dividend reinvestment
plan - - 330,584 - 3,100 (3,100) -
Cash dividends on
common stock - - - - - (2,800) -
--------- ------- ---------- ------ -------- --------- --------
Balance at December
31, 1992 - - 74,503,819 700 125,500 132,200 (100)
Net loss - - - - - (104,200) -
Issuance of common shares:
Acquisitions - - 3,150,000 100 21,000 - -
Dividend reinvestment
plan - - 523,989 - 4,200 (4,200) -
Non-employee directors - - 4,740 - - - -
Issuance of treasury
shares to non-employee
directors - - 2,509 - - - 100
Cash dividends on
common stock - - - - - (2,000) -
--------- ------- ---------- ------ -------- --------- --------
Balance at December
31, 1993 - - 78,185,057 800 150,700 21,800 -
Net loss - - - - - (35,500) -
Issuance of common shares:
Employee thrift plan - - 75,151 - 500 - -
Repayment of Cyprus
Amax debt - - 3,000,000 - 20,700 - -
Non-employee directors - - 7,500 - - - -
Issuance of preferred
stock 1,840,000 1,800 - - 86,500 - -
Preferred stock
dividends - - - - - (1,800) -
--------- ------- ---------- ------ -------- --------- --------
Balance at December
31, 1994 1,840,000 $1,800 81,267,708 $800 $258,400 $ (15,500) $ -
========= ======= ========== ====== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Consolidated financial statements include the accounts of Amax Gold Inc. and its
more than 50 percent owned subsidiaries (hereinafter referred to as the
Company). Investments in 20 percent to 50 percent owned companies are accounted
for by the equity method. Investments in ventures where the Company can take
its production in-kind and is responsible for its pro rata share of assets and
liabilities are included on a proportionate consolidation basis. All material
intercompany balances and transactions have been eliminated. Certain 1993 and
1992 amounts have been reclassified to conform to the 1994 presentation.
CASH AND EQUIVALENTS
Cash and equivalents include cash and highly liquid investments with an original
maturity of three months or less. The Company invests cash in time deposits
maintained in high credit quality financial institutions. Revenues resulting
from the sale of hedged production of gold are included in cash flows from
operating activities.
INVENTORIES
Gold inventory is valued at the lower of aggregate cost, computed on a last-in,
first-out (LIFO) basis, or market. Materials and supplies are valued at average
cost less reserves for obsolescence. During the fourth quarter of 1994 the
Company changed its method of accounting for the costs of ore loaded on heap
leach pads to recognize such costs as work-in-process inventory. Previously,
the Company expensed these costs as incurred. The change, made retroactive to
January 1, 1994, results in a better matching of revenues and cost of sales and
conforms with predominant mining industry practice.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, including development
expenditures and capitalized interest. Expenditures for major improvements are
capitalized. Gains and losses on retirements are included in earnings.
Depreciation and depletion are computed using the units-of-production method
based on the estimated ounces of gold to be recovered and estimated salvage
values. Mobile equipment and assets which have a useful life shorter than the
mine life are depreciated on a straight-line basis over estimated useful lives
of one to five years. Impairment is provided when the net book value of mining
assets exceeds the related estimated undiscounted future cash flows.
GOLD AND CURRENCY FINANCINGS
The Company uses various gold and currency financings to fund its mining
activities.
To finance investments with gold loans the Company borrows gold from banks and
sells the gold on the open market. Gold loans are recorded on the balance sheet
at the price received when the borrowed gold is sold. The banks are repaid from
future gold production at which time revenues are recorded. Gold loans bear
relatively low interest rates and result in a hedge against future gold price
fluctuations but can limit realized prices to the amounts received when the
borrowed gold is sold. To offset any limit on realized prices, the Company may
enter into offsetting hedging agreements.
32
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
The Company also borrows gold from banks and sells the gold on the open market
under gold leases. Gold leases bear interest at a relatively low gold rate but
also require the Company to buy gold from the lender at a specified future price
and date. The combined interest cost of a gold lease is the gold interest rate
and the difference between the price of gold at the gold lease inception and the
price of gold when the gold lease is repaid. Gold leases do not provide hedging
benefits for the Company or limit upside participation in rising prices.
Currency financings represent borrowings in hard currency, typically U.S.
dollars. The terms, including interest rates, are negotiated with the lenders
based on market conditions at the time of the loan.
HEDGING ACTIVITIES
Advance payments for the future delivery of mineral production are deferred
until the designated delivery date. Upon delivery, sales are included in the
Company's statements of operations based on the per ounce ratable share of
payments received and expenses are included based on production costs.
Forward sale contracts and put and call option contracts are entered into from
time to time to hedge the effect of price changes on the Company's precious
metals that are produced and sold. The results of gold hedging activities are
included in sales at the time the hedged production is sold. Silver hedging
results are reflected in the by-product credit.
Interest rate swaps, options and caps are entered into as a hedge against
interest rate exposure on the Company's financing facilities. The differences
to be paid or received on swaps, options and caps are included in interest
expense as incurred or realized.
POSTRETIREMENT BENEFITS
Postretirement benefits other than pensions are calculated in accordance with
the provisions set forth in Statement of Financial Accounting Standards (SFAS)
No. 106, which the Company adopted effective January 1, 1992. SFAS No. 106
requires the expected cost of postretirement benefits other than pensions to be
accrued during the years the employee renders service.
POSTEMPLOYMENT BENEFITS
Postemployment benefits are calculated in accordance with the provisions set
forth in SFAS No. 112, which the Company adopted effective January 1, 1993.
SFAS No. 112 requires the Company to expense postemployment benefits as they are
earned by the employee for services rendered, rather than as they are paid.
EXPLORATION
Exploration expenditures are charged against earnings in the period incurred.
During the second quarter of 1993, the Company changed its accounting policy,
effective as of January 1, 1993, to discontinue the practice of subsequently
capitalizing and restoring to earnings prior period exploration expenses when a
property becomes exploitable. The Company believes the change better presents
income from mining activities and follows the predominant mining industry
practice.
RECLAMATION
Reclamation, site restoration and closure costs for each producing mine are
estimated based primarily upon environmental and regulatory requirements and are
accrued and charged over the expected life of each of the
33
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
Company's mines using the units-of-production method. Ongoing environmental
and reclamation expenditures are expensed as incurred.
INCOME TAXES
Income taxes are calculated in accordance with the provisions set forth in SFAS
No. 109, which the Company adopted effective January 1, 1992. Under SFAS No.
109, deferred income taxes are determined using an asset and liability approach.
This method gives consideration to the future tax consequences associated with
differences between the financial accounting and tax bases of assets and
liabilities and gives immediate effect to changes in income tax laws upon
enactment. The income statement effect is derived from changes in deferred
income taxes on the balance sheet.
2. TRANSACTIONS WITH AFFILIATES
In November 1993, AMAX Inc. (Amax), a New York corporation which owned
approximately 68 percent of the Company's outstanding common stock, was merged
with and into Cyprus Minerals Company, a Delaware corporation. Immediately
prior to the merger, Amax distributed to Amax shareholders from the shares then
held by Amax approximately 28 percent of the Company's outstanding common stock.
As of December 31, 1994, the merged company, called Cyprus Amax Minerals Company
(Cyprus Amax), owned approximately 34 million common shares, or approximately 42
percent, of the Company's outstanding common stock.
The Company has entered into several agreements with Cyprus Amax. Under an
exploration joint venture agreement the two companies pool efforts to discover
and develop new gold properties, with Cyprus Amax providing 75 percent and the
Company providing 25 percent of initial funding. A non-compete agreement in
process clarifies terms under which either company would generally provide
opportunity for the other to develop minerals in its own interests but could
also develop and produce minerals which would be in competition with the other
party. A services agreement provides for general administrative services
between Cyprus Amax and the Company.
For the years ended December 31, 1994, 1993 and 1992, management services and
insurance were supplied to the Company on a full cost reimbursement basis. For
the years ended December 31, 1993 and 1992, employee benefit plans (medical and
life insurance benefits) and employee pension and thrift plan benefits were also
provided. In October 1993, the Company established separate medical and life
insurance coverage for its employees. Additionally, on November 15, 1993, a
separate defined benefit pension plan and thrift plan for Company employees
became effective. For the period from January 1, 1993 through November 14,
1993, and for the year ended December 31, 1992, Amax charged the Company
approximately $.4 million and $1.3 million, respectively, for pension costs.
For the years ended December 31, 1994, 1993, and 1992, the Company was charged
$4.8 million, $4.8 million and $4.2 million, respectively, for reimbursable
costs.
Interest income on advances to Amax under a demand promissory note receivable
was $.2 million and $.5 million for the years ended December 31, 1993 and 1992,
respectively.
Amax made loans to the Company during the year ended December 31, 1993 under a
demand promissory note payable. See Note 7 for a further discussion.
34
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
3. EMPLOYEE BENEFITS
PENSION PLAN
Substantially all employees are covered by a non-contributory defined benefit
pension plan. The plan provides retirement benefits for employees based
generally on years of service and compensation levels. Funding of the plan
will be made in accordance with the requirements of ERISA. Effective July 1,
1994, the Company amended its plan to a career average plan from a final pay
plan. The change has the effect of reducing the projected benefit obligation
and annual pension expense.
Net annual pension cost includes the following components:
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Service cost $ .8 $ 1.0
Interest cost .4 .4
Return on assets (.1) (.1)
Deferred gain (loss) (.2) -
Net amortization of prior service cost and losses .2 .3
----- -----
Net periodic expense $ 1.1 $ 1.6
===== =====
</TABLE>
For the year ended December 31, 1992, the Company was charged $1.3 million for
pension costs by Amax.
The following table summarizes the funded status of the plan and the related
amounts recognized in the Company's financial statements at December 31:
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $2.7 million in 1994 and $2.2 million
in 1993 $ 3.6 $ 3.3
===== =====
Projected benefit obligation $(3.6) $(7.0)
Estimated plan assets at fair value 2.1 2.1
----- -----
Estimated plan assets less than projected benefit
obligation (1.5) (4.9)
Unrecognized prior service cost (.9) 1.6
Unrecognized net loss .9 2.1
----- -----
Accrued pension cost $(1.5) $(1.2)
===== =====
</TABLE>
The following assumptions were used in calculating the funded status of the plan
at December 31 and the pension cost for the subsequent year:
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Expected long-term rate of return on assets 9.0% 10.0%
Discount rate 8.75% 7.5%
Rate of increase in compensation levels 5.25% 5.25%
</TABLE>
35
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company also provides certain health care and life insurance benefits for
retired employees in the United States. Effective January 1, 1992, the Company
adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions". As of January 1, 1992, the Company recognized the full amount
of its estimated accumulated postretirement benefit obligation as a cumulative
effect of an accounting change. This cumulative amount represented the present
value of the estimated future benefits payable to current retirees and a pro
rata portion of estimated benefits payable to currently active employees after
their retirement. The pre-tax charge to 1992 earnings for the cumulative effect
of the accounting change was $2.4 million, with a net earnings effect of $1.5
million.
Net periodic postretirement benefit costs for the years ended December 31, 1994,
1993 and 1992 were insignificant.
The following table sets forth the status of the plan and the related amounts
recognized in the Company's financial statements at December 31:
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ .4 $ .4
Fully eligible active plan participants .1 .1
Other active plan participants .9 1.0
----- -----
Total accumulated postretirement benefit obligation 1.4 1.5
Plan assets at fair value - -
----- -----
Accumulated postretirement benefit obligation
in excess of plan assets (1.4) (1.5)
Unrecognized prior service cost (1.7) (1.8)
Unrecognized net loss .3 .5
----- -----
Accrued postretirement benefit cost $(2.8) $(2.8)
===== =====
</TABLE>
The accumulated postretirement benefit obligation was determined using a
weighted average annual discount rate of 8.75 percent in 1994 and 7.5 percent in
1993. The assumed health care cost trend rate used in 1994 was 12 percent
declining gradually to 6 percent for 2007 and thereafter.
A one percent increase each year in the health care cost trend rate used would
have resulted in an insignificant increase in the 1994 postretirement benefit
cost and the accumulated postretirement benefit obligation at December 31, 1994.
POSTEMPLOYMENT BENEFITS
The Company also has a number of postemployment plans covering severance,
disability income and continuation of health and life insurance for disabled
employees. Effective January 1, 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". The pre-tax charge to 1993
earnings for the cumulative effect of this accounting change was $2.8 million,
with a net earnings effect of $1.8 million.
36
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
4. INCOME TAXES
Income (loss) before income taxes consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------- -----
<S> <C> <C> <C>
Domestic $(32.9) $(108.8) $13.3
Foreign (16.7) (14.0) 4.7
------ ------- -----
$(49.6) $(122.8) $18.0
====== ======= =====
</TABLE>
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
----- ------ -----
<S> <C> <C> <C>
Current:
Federal $ - $ - $ .1
State - - -
Foreign - .3 .2
----- ------ -----
- .3 .3
Deferred:
Federal (5.3) (36.9) 3.0
State .7 (2.3) .4
Foreign - (.4) .4
----- ------ -----
(4.6) (39.6) 3.8
----- ------ -----
$(4.6) $(39.3) $ 4.1
===== ====== =====
</TABLE>
The total income tax provision (benefit) is included in the financial statements
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ------ -----
<S> <C> <C> <C>
Income tax provision (benefit) $(6.6) $(33.8) $ 5.0
Cumulative effect of accounting changes 2.0 (5.5) (.9)
----- ------ -----
$(4.6) $(39.3) $ 4.1
===== ====== =====
</TABLE>
The components of the deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Inventory $ (.3) $ 1.3
Property, plant and equipment (39.5) (35.0)
Postretirement benefits .9 1.0
Reserves, reclamation and other
liabilities 5.7 (4.5)
Net operating loss carryforwards 29.9 22.4
Minimum tax credits 2.8 2.8
Valuation allowance (9.5) (2.6)
------ ------
$(10.0) $(14.6)
====== ======
</TABLE>
37
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
Net deferred tax liabilities are included in the balance sheet at December 31 as
follows:
<TABLE>
<CAPTION>
1994 1993
----- ------
<S> <C> <C>
Assets:
Deferred income taxes:
Current $ - $ 2.3
Liabilities:
Deferred income taxes:
Noncurrent (10.0) (16.9)
------ ------
$(10.0) $(14.6)
====== ======
</TABLE>
The following is a reconciliation between the amount determined by applying the
federal statutory rate of 34% to income (loss) before taxes and the income tax
provision (benefit):
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Income taxes at statutory rate $(16.9) $(41.7) $ 6.1
Increases (decreases) resulting from:
Foreign losses with no expected tax benefit 3.2 5.1 -
State income taxes, net of federal benefit (.4) (1.4) .8
Percentage depletion (.2) (.5) (2.7)
Waihi transaction gain - 3.7 -
Foreign exploration - - (.8)
Other .8 1.0 1.6
Change in valuation allowance 6.9 - -
------ ------ -----
Income tax provision (benefit) (6.6) (33.8) 5.0
------ ------ -----
Income tax provision (benefit) of cumulative
effect of accounting changes at statutory rate 3.2 (7.0) (.8)
State income taxes, net of federal benefit - (.2) (.1)
Foreign losses with no expected tax benefit (1.2) 1.7 -
Income tax provision (benefit) of cumulative
effect of accounting changes 2.0 (5.5) (.9)
------ ------ -----
$ (4.6) $(39.3) $ 4.1
====== ====== ======
</TABLE>
The valuation allowance increased $6.9 million due to uncertainties of realizing
loss carryforwards in the future.
At December 31, 1994, the Company had federal tax net operating loss
carryforwards of $73 million and alternative minimum tax net operating loss
carryforwards of $43 million expiring in the years 2002-2009 and minimum tax
credit carryforwards of $3 million which do not expire. At December 31, 1994,
the Company also had Chilean tax net operating loss carryforwards of $67 million
with no expiration.
38
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
5. INVENTORIES
Inventories at December 31, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Gold:
Finished goods $ 10.3 $ 9.0
Work-in-process 11.5 -
Materials and supplies 6.8 7.6
------ ------
$ 28.6 $ 16.6
====== =======
</TABLE>
The market value of the finished goods inventory at December 31, 1994 was $14.4
million, with an excess replacement cost (at market value) over the LIFO basis
of $4.1 million.
During the fourth quarter of 1994, the Company changed its method of accounting
for the costs of ore loaded on heap leach pads, retroactive to January 1, 1994,
to record such costs as work-in-process inventory. Previously, the Company had
expensed these costs as incurred. The cumulative after-tax effect of the change
in accounting for inventory for periods prior to 1994 was a decrease in the net
loss of $7.5 million or $.09 per common share. The effect of the accounting
change in 1994 is a reduction in costs of sales of $.3 million. Assuming the
inventory accounting change had been applied retroactively, the unaudited pro
forma effect would be a reduction of net loss of $2.3 million ($.03 per share)
in 1993 and an increase in net earnings of $5.2 million ($.07 per share) in
1992.
6. PROPERTY, PLANT AND EQUIPMENT AND WRITE-DOWNS
The components of property, plant and equipment at December 31, 1994 and 1993
were as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Mining plants and equipment $166.7 $163.2
Mining properties 168.8 159.9
Development properties and construction-in-progress 224.1 215.6
------ -----
559.6 538.7
Less accumulated depreciation, depletion
and write-downs (246.3) (205.2)
------ -----
$313.3 $333.5
====== ======
</TABLE>
ASSET WRITE-DOWNS
The Hayden Hill mine, which began commercial production in June 1992,
experienced unacceptably high unit operating costs due to lower than anticipated
mill head grades. A re-evaluation of the operation completed in July 1993
resulted in the downward revision of proven and probable ore reserves of
approximately 400,000 contained gold ounces. During the last half of 1993, the
mine was reconfigured to operate as a heap leach operation only, with the mill
being maintained on stand-by status. As a result of the downward revision of
the Hayden Hill ore reserves and the stand-by status of the mill, the Company
recorded a $64.1 million pre-tax ($41.9 million after-tax) write-down of the
Hayden Hill assets. At December 31, 1993, the net book value assigned to the
Hayden Hill mill was approximately $24 million. During the 1993 analysis, the
mill was not fully written down in anticipation that
39
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
sufficient mill grade ore would be encountered to justify a future milling
operation or possible use of the mill at another property.
After a successful year of full-scale heap leach only operation at Hayden Hill
in 1994, the Company has determined that a mill operation as originally designed
would not be economical. Given the favorable heap leach recoveries, lower heap
leach operating costs and the lack of higher grade ore amenable to future
milling operations, management no longer views milling as a viable option. As a
result, the Company recognized an additional $18.6 million pre-tax ($14.1
million after tax) write-down of Hayden Hill during the fourth quarter of 1994.
The Company also wrote down $2.5 million ($2.1 million after-tax) of other
assets in 1994.
Mining experience and a reinterpretation of geologic data at the Sleeper Mine
during the fourth quarter of 1993 also led to a reduction in proven and probable
ore reserves of approximately 300,000 contained gold ounces. As a result, the
Company recorded a $23.6 million pre-tax ($15.6 million after-tax) write-down of
its Sleeper assets as of December 31, 1993.
WAIHI TRANSACTION
During 1993, the Company realized an $8.8 million gain from the future economic
benefit of the Company's 33.53 percent interest in the Waihi Mine in New
Zealand. The Company received gross proceeds of $15.4 million and a receivable
of 15,500 ounces of gold to be paid over a 5-year period. Following the
transaction, the Company sold forward, on a spot deferred forward basis (which
allows the Company to defer the delivery of the gold ounces to a later date at a
renegotiated gold price) the 15,500 gold ounces at an average price of $365 per
ounce. The Company has renegotiated the spot-deferred forward price of the
remaining 10,850 ounces of gold receivable to $385 per ounce at December 31,
1994.
The Company's statement of cash flows for the year ended December 31, 1993
reflects the net cash received from the transaction of $7.8 million, net of cash
previously reflected in the Company's balance sheet and transaction costs.
EXPLORATION EXPENDITURES
During 1993, the Company changed its method of accounting for exploration
expenditures. Previously, the Company capitalized and restored to earnings
prior period exploration expense when a property became exploitable. For the
year ended December 31, 1993, the Company recognized a $13.4 million ($.17 per
common share) after-tax charge (net of a deferred income tax benefit of $4.5
million) relating to the cumulative effect for periods prior to 1993. The
effect of the accounting change was to reduce the 1993 net loss by $4.3 million.
Assuming this accounting change had been applied retroactively, unaudited
proforma earnings before cumulative effect of accounting changes, net earnings
and net earnings per share for 1992 would have been $6.4 million, $4.9 million
and $.07 per share, respectively.
7. GOLD AND CURRENCY FINANCINGS
The following tables summarize outstanding gold loan facilities and bank loans
and related principal repayments.
40
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
---------------------------- -----------------------------
Current Noncurrent Total Current Noncurrent Total
-------- ---------- ------ ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Gold Financings:
Nevada Gold Mining, Inc. $ 1.6 $ - $ 1.6 $ - $ 1.6 $ 1.6
Amax Gold Inc. - 23.5 23.5 - 30.0 30.0
Currency Financings:
Lassen Gold Mining, Inc. 11.3 29.6 40.9 11.1 40.8 51.9
Compania Minera Amax
Guanaco 3.0 3.1 6.1 4.0 39.4 43.4
AGI Chile Credit Corp., Inc. 8.0 27.0 35.0 - - -
------- ------- ------ ------- -------- ------
23.9 83.2 107.1 15.1 111.8 126.9
------- ------- ------ ------- -------- ------
Payable to Cyprus Amax - - - - 24.7 24.7
------- ------- ------ ------- -------- ------
$23.9 $83.2 $107.1 $15.1 $136.5 $151.6
Principal
Repayments
----------
1995 $ 23.9
1996 53.5
1997 29.7
------
$107.1
======
</TABLE>
Other than the Company, the above named obligors are wholly owned subsidiaries
of the Company except for Compania Minera Amax Guanaco, which is a 90 percent
owned subsidiary.
The market value of the total outstanding gold and currency financings as of
December 31, 1994 was $.2 million lower than the carrying value of $107 million.
NEVADA GOLD MINING, INC.
As of December 31, 1994, 4,000 ounces of gold were outstanding under a gold
bullion loan agreement for Nevada Gold Mining, Inc. (Nevada Gold). The Company
has agreed to repay the outstanding balance in March 1995. Collateral consists
of Nevada Gold's Sleeper mine assets and capital stock. Interest, payable
quarterly, is based on the lender's cost of borrowing gold plus commitment and
agency fees. During the years ended December 31, 1994, 1993 and 1992, the
annualized interest rate was .2 percent, .7 percent and 1.8 percent,
respectively. During the years ended December 31, 1994, 1993 and 1992, the
Company paid $.1 million, $.1 million and $.2 million, respectively, in interest
expense and fees.
AMAX GOLD INC.
At December 31, 1994, the Company had outstanding gold leases of 60,951 gold
ounces which were sold for $23.5 million and were originally scheduled to be
repaid during 1995. Due to the availability of the line of credit with Cyprus
Amax and the Company's intention to refinance the gold leases they have been
classified as long-term.
While the December 31, 1994 market value of the total outstanding ounces
borrowed is $.2 million lower than the $23.5 million carrying value (using the
spot market price for gold), the Company has contractual agreements with
41
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
the lenders which set the gold price upon repayment equal to the carrying
value plus a 5.6 percent average annualized effective rate of interest.
LASSEN GOLD MINING, INC.
The final maturity date for the facility is December 31, 1997. Interest,
payable quarterly, is currently based on the London Interbank Offered Rate
(LIBOR) plus 0.6 percent. The annualized interest rate for the years ended
December 31, 1994, 1993 and 1992 was 5.4 percent, 5.3 percent, and 5.5 percent,
respectively. During the years ended December 31, 1994, 1993 and 1992, the
Company paid $2.7 million, $3.5 million and $3.1 million, respectively, in
interest expense and fees on the loan. Collateral consists of a mortgage on the
Hayden Hill Mine assets, a pledge of the Lassen Gold Mining, Inc. stock and a
guarantee by the Company.
COMPANIA MINERA AMAX GUANACO
Compania Minera Amax Guanaco (Amax Guanaco) outstanding debt of $6.1 million is
owed to a Chilean governmental development agency. The final maturity date is
August 31, 1996. The Chilean debt is collateralized by a stand-by letter of
credit guaranteed by the Company. For the years ended December 31, 1994, 1993
and 1992, the annualized interest rate was 8.3 percent, 9.4 percent and 8.4
percent, respectively. During the years ended December 31, 1994, 1993 and 1992,
interest expense and fees paid totaled $1.6 million, $5 million and $1.4
million, respectively. During the years ended December 31, 1993 and 1992, $.5
million and $2.8 million, respectively, of interest expense and fees on these
financings were capitalized. The capitalized interest and fees are being
amortized over the life of the project.
AGI CHILE CREDIT CORP., INC.
In March 1994, AGI Chile Credit Corp., Inc. refinanced $34.2 million of
outstanding Chilean short-term bridge loans with a $36 million term loan
agreement. The final maturity date is October 1997. The loan is collateralized
by guarantees from the Company and, initially, Cyprus Amax. Amounts outstanding
bear interest at LIBOR plus 1.25 percent. For the year ended December 31, 1994,
the annualized interest rate was 7.7 percent. Interest expense and fees paid
totaled $3.6 million during 1994.
LINE OF CREDIT FROM CYPRUS AMAX
On April 15, 1994, the Company and Cyprus Amax signed an agreement, subsequently
approved by the Company's stockholders in July 1994, in which Cyprus Amax agreed
to provide the Company with a $100 million convertible line of credit.
Outstanding amounts under the credit line bear interest at LIBOR plus 0.3
percent and may be repaid by the Company issuing up to two million shares of
$2.25 Series A Convertible Preferred Stock. The Company will have the right to
redeem the convertible preferred stock by issuing up to 12,099,213 shares of
common stock at a maximum price of $8.265 per share and a minimum price of
$5.854 per share. To effect a full redemption at prices below $8.265, the
Company may be required to redeem a portion of any outstanding convertible
preferred stock with cash up to a maximum of $29.2 million. Cyprus Amax will
have the right to replace the line of credit and any outstanding indebtedness
and/or convertible preferred stock with the purchase of up to 12,099,213 shares
of the Company's common stock at a purchase price of $8.265 per share, an
aggregate of $100 million.
A portion of the credit line is designated as support for indebtedness relating
to the Hayden Hill, Guanaco and Refugio projects and for general corporate
purposes.
42
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
In June 1994, the Company borrowed $8 million from Cyprus Amax under the $100
million credit line. In August 1994, the Company repaid Cyprus Amax a total of
$34 million outstanding under a demand promissory note payable and the line of
credit agreement. The repayment was made with $13.3 million in cash and $20.7
million proceeds from the sale to Cyprus Amax of three million shares of common
stock under a stock purchase agreement approved in July 1994.
On February 16, 1995, the Company and Cyprus Amax agreed to an additional $80
million line of credit, subject to approval by the Company's shareholders.
Outstanding amounts under the new credit line bear interest at LIBOR plus 0.3
percent and may be repaid by the Company issuing up to 1.6 million shares of
$2.25 Series C Convertible Preferred Stock. The Company will have the right to
redeem the convertible preferred stock by issuing up to 14,919,806 shares of
common stock at a maximum price of $5.362 per share and a minimum price of
$4.916 per share.
If the entire $180 million lines of credit were drawn and converted into the
Company's common stock and the outstanding Series B Convertible Preferred Stock
were converted, Cyprus Amax ownership would increase to approximately
51.4 percent.
REFUGIO FINANCING
In February 1995, Compania Minera Maricunga (CMM), a 50 percent-owned subsidiary
of the Company, received $85 million in financing for the Refugio project in
Chile. The loan was drawn in 223,684 ounces of gold which were sold for $380
per ounce. The loan is a five year amortizing term loan that can be transferred
between gold and U.S. dollars. The Company and the other 50 percent owner are
guarantors on a proportionate basis until after completion tests are passed, at
which time the loan becomes non-recourse to the Company. Interest on the
Company's share will be calculated at LIBOR for any U.S. dollar portion and at
the bank's gold base rate for any gold portion, plus 1.75 percent during the
construction phase or plus 2.5 percent after completion tests are passed.
8. HEDGE CONTRACTS
Precious metal hedge contracts include forward sales contracts, spot deferred
forward sales and put and call options. Realization under these contracts is
dependent upon the counterparties performing in accordance with the terms of the
contracts. The Company does not anticipate nonperformance by the
counterparties.
Forward sales contracts require the future delivery of gold at a specified
price. Forward sales contracts that are made on a spot deferred basis allow the
Company to defer the delivery of gold under a forward sales contract to a later
date at a renegotiated market price, as long as certain conditions are
satisfied. Various factors influence the decision to close a spot deferred
forward sales contract or to roll the contract forward to a later date. A put
option gives the put buyer the right, but not the obligation, to sell gold to
the put seller at a predetermined price on or before a predetermined date. A
call option gives the call buyer the right, but not the obligation, to buy gold
from the call seller at a predetermined price on or before a predetermined date.
43
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otehrwise indicated and
except per share amounts and amounts per ounce)
As of December 31, 1994, the Company's outstanding hedge contracts were as
follows:
<TABLE>
<CAPTION>
Average Price
Gold Ounces Per Ounce Period
----------- ------------- -------------------
<S> <C> <C> <C>
Forward sales contracts/(1)/ 172,400 $441 Jan. 1995-Mar. 1995
Option contracts:
Purchased put options 329,000 396 Jan. 1995-Dec. 1999
Sold put options 39,000 381 Jan. 1995-Nov. 1995
Purchased call options 37,500 433 Jan. 1995-Dec. 1995
Sold call options 249,900 449 Jan. 1995-Dec. 1995
</TABLE>
/(1)/ Represents the net forward sales position which was made primarily on a
spot deferred forward basis which allows the Company to defer the delivery
of gold ounces to a later date at a renegotiated gold price.
The Company also has outstanding compound put options for 274,000 ounces at $432
per ounce and compound call options for 12,000 ounces at $420 per ounce. If
exercised, these options expire through December 1999.
The market value of the Company's forward contracts, put and call option
contracts and compound options at December 31, 1994 was approximately $13
million. Future market valuations for these contracts are dependent on gold
market prices, option volatility and interest rates, which can vary
significantly. These contracts will be utilized in the future to hedge against
declines in gold market prices for the Company's future gold production while
maintaining benefits in the event of higher gold market prices.
Interest rate hedge contracts entered into by the Company consist of interest
rate swap, option and cap agreements to reduce the impact of changes in interest
rates on its financing facilities. At December 31, 1994, the Company's
outstanding interest rate swap was not significant.
9. PREFERRED STOCK
In August 1994, the Company sold publicly 1,840,000 shares of $3.75 Series B
Convertible Preferred Stock (Preferred Stock) for net proceeds of $88.3 million.
Outstanding Preferred Stock is convertible at the option of the holder at any
time, at an initial conversion price of $8.25 per share (equivalent to a
conversion rate of 6.061 shares of common stock for each share of Preferred
Stock), subject to adjustment in certain events. If all of the Preferred Stock
were to be converted, an additional 11,151,515 common shares would be issued.
The Preferred Stock is redeemable at the option of the Company at any time on or
after August 15, 1997, in whole or in part, for cash, initially at a redemption
price of $52.625 per share declining ratably annually to $50.00 per share on or
after August 15, 2004, plus accrued and unpaid dividends.
Annual cumulative dividends of $3.75 per share will accrue from the date of
issuance and are payable quarterly on each November 15, February 15, May 15 and
August 15, as and if declared by the Board of Directors.
44
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
10. COMMON STOCK
In February 1992, the Company's Board of Directors approved a Dividend
Reinvestment Plan whereby shareholders of the Company may elect to reinvest any
future dividend payments in additional shares of the Company's common stock.
Three million shares of the Company's common stock are reserved for issuance
pursuant to this plan.
The Company issued warrants to purchase 4,066,649 shares of common stock in
connection with the acquisition of the Fort Knox property. Each warrant permits
the holder to purchase one share of common stock at a price of $21.00 per share,
subject to adjustment upon the occurrence of certain events. The warrants are
currently exercisable and will expire on January 8, 1996.
In March 1994, the Company's Board of Directors eliminated the $0.02 quarterly
dividend on common stock.
In March 1994, the Company adopted a plan to grant common shares to non-employee
directors. The plan was approved by shareholders in May 1994. The Company
reserved 100,000 shares of common stock for issuance pursuant to this plan. In
August 1994, 7,500 shares were issued.
Earnings per common share have been calculated on the basis of the average
common shares outstanding. For the year ended December 31, 1994, outstanding
Company warrants were not considered in the earnings per share calculation as
these were anti-dilutive.
11. STOCK OPTION PLAN
The Company maintains a stock option plan (the "Plan") for officers and salaried
employees to purchase common shares. Options are exercisable at prices equal to
the market value on the date of grant. Options vest in two years and are
exercisable over a period of ten years from date of grant.
The following table summarizes activity under the Plan.
<TABLE>
<CAPTION>
Number Average Price
of Options Per Share
---------- -------------
<S> <C> <C>
Options outstanding December 31, 1993 315,825 $8.75
Options granted in 1994 624,350 6.82
Options canceled in 1994 163,750 8.63
Options outstanding December 31, 1994 776,425 7.22
Options exercisable 167,475 8.75
---------- -------------
</TABLE>
No options were exercised during 1994, 1993 or 1992. At December 31, 1994, 2.2
million common shares are reserved for future grants.
45
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
12. DOMESTIC AND FOREIGN OPERATIONS
The Company's foreign operations consist of the Guanaco Mine and Refugio
development project in Chile. Effective April 30, 1993, the Company realized
the future economic benefit from its interest in the Waihi Mine in New Zealand.
The components of the Company's domestic and foreign operations were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Sales:
United States $ 74.9 $ 69.2 $ 90.2
Foreign 19.7 12.7 9.5
------ ------- -------
$ 94.6 $ 81.9 $ 99.7
====== ======= =======
Earnings (loss) from operations:
United States $(31.4) $(104.7) $ 14.5
Foreign (12.5) (11.3) 4.3
------ ------- -------
$(43.9) $(116.0) $ 18.8
====== ======= ======
Net earnings (loss):
United States $(25.1) $ (84.0) $ 7.5
Foreign (12.2) (20.2) 4.0
------ ------- -------
$(37.3) $(104.2) $ 11.5
====== ======= ======
Assets:
United States $308.3 $ 294.6 $401.1
Foreign 94.9 86.4 76.5
------- ------- -------
$403.2 $ 381.0 $477.6
====== ======= ======
</TABLE>
Substantially all of the Company's 1994, 1993 and 1992 sales were made in
Europe, through a wholly owned subsidiary of the Company. The Company's sales
to major customers which exceeded 10 percent of total sales were $65 million to
four customers in 1994, $38 million to two customers during 1993 and $46 million
to three customers during 1992. The Company believes that the loss of any of
these customers would have no material adverse impact on the Company because of
the active worldwide market for gold.
46
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
13. COMMITMENTS AND CONTINGENCIES
The Company is currently accruing reclamation liabilities for the following
operations:
<TABLE>
<CAPTION>
Reclamation Costs Accrued
Total Anticipated -------------------------
Reclamation Cost Current Non-Current
---------------- ---------- -------------
<S> <C> <C> <C>
Sleeper Mine $10.4 $ - $ 7.8
Hayden Hill Mine 5.9 - 3.3
Wind Mountain Mine 2.0 2.0 -
----- ---- -----
Total $18.3 $2.0 $11.1
===== ==== =====
</TABLE>
The anticipated reclamation costs for the Sleeper, Hayden Hill and Wind Mountain
mines are estimates based on current federal and state laws and regulations
governing the protection of the environment. The reclamation accrual for the
Wind Mountain mine is shown as current due to the expectation that residual heap
leach production will subside in 1995, which is expected to result in the
commencement of the final reclamation activities. The anticipated costs of
reclamation for the Guanaco mine, given current Chilean laws and regulations
governing the protection of the environment, are not expected to be significant.
Changes in the federal, state and Chilean laws and regulations could impact
these anticipated reclamation costs.
The Company's mining and exploration activities are subject to various federal,
state and Chilean laws and regulations governing the protection of the
environment which are continually changing and generally becoming more
restrictive. The Company conducts its operations so as to protect the public
health and environment. The Company has made, and expects to make in the
future, significant expenditures to comply with such laws and regulations.
47
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
14. QUARTERLY DATA (UNAUDITED)
Quarterly earnings data for the years ended December 31, 1994 and 1993 follow:
<TABLE>
<CAPTION>
1994 Quarters/(1)/ First Second Third Fourth
------------------ ------- ------- ------- --------
<S> <C> <C> <C> <C>
Sales $23.8 $27.9 $23.7 $ 19.2
Costs and operating expenses 28.2 28.7 28.6 25.7
----- ----- ----- ------
Gross operating loss (4.4) (.8) (4.9) (6.5)
Asset write-downs - - - (21.1)
Exploration expenses (.3) (1.1) (2.2) (2.6)
----- ----- ----- ------
Loss from operations (4.7) (1.9) (7.1) (30.2)
----- ----- ----- ------
Loss before income taxes and
cumulative effect of accounting
change (6.7) (3.5) (8.2) (31.2)
----- ----- ----- ------
Loss before cumulative
effect of accounting change (5.2) (3.5) (6.9) (27.4)
Cumulative effect of accounting
change, net of income tax benefit 7.5 - - -
----- ----- ----- ------
Net earnings (loss) 2.3 (3.5) (6.9) (27.4)
Preferred stock dividends - - - (1.8)
----- ----- ----- ------
Earnings (loss) attributable to
common shares $ 2.3 $(3.5) $(6.9) $(29.2)
===== ===== ===== ======
Per common share:
Earnings (loss) before cumulative
effect of accounting change $(.07) $(.05) $(.09) $ (.36)
Cumulative effect of accounting
change .09 - - -
----- ----- ----- ------
Net earnings (loss) $ .02 $(.05) $(.09) $ (.36)
----- ----- ----- ------
Dividends declared per common share $ - $ - $ - $ -
===== ===== ===== ======
</TABLE>
/(1)/ Restated for the fourth quarter change in inventory accounting policy,
retroactive to January 1, 1994, which resulted in a net earnings increase
of $8.1 million for the first quarter, $.2 million for the second quarter
and $.7 million for the third quarter.
48
<PAGE>
AMAX GOLD INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
<TABLE>
<CAPTION>
1993 Quarters First Second Third Fourth
------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales $ 18.4 $ 23.1 $ 20.6 $ 19.8
Costs and operating expenses 24.9 32.1 29.2 27.6
------ ------ ------ ------
Gross operating loss (6.5) (9.0) (8.6) (7.8)
Gain on Waihi transaction - 8.8 - -
Asset write-downs - (64.1) - (23.6)
Exploration expenses (.5) (1.1) (1.5) (2.1)
------ ------ ------ ------
Loss from operations (7.0) (65.4) (10.1) (33.5)
------ ------ ------ ------
Loss before income taxes and cumulative
effect of accounting changes (8.5) (67.6) (11.7) (35.0)
------ ------ ------ ------
Loss before cumulative effect of
accounting changes (6.0) (49.1) (7.4) (26.5)
Cumulative effect of accounting
changes, net of income tax benefit (15.2) - - -
------ ------ ------ ------
Net loss $(21.2) $(49.1) $ (7.4) $(26.5)
====== ====== ====== ======
Per common share:
Loss before cumulative effect of
accounting changes $ (.07) $ (.63) $ (.10) $ (.34)
Cumulative effect of accounting changes (.20) - - -
------ ------ ------ ------
Net loss $ (.27) $ (.63) $ (.10) $ (.34)
====== ====== ====== ======
Dividends declared per common share $ .02 $ .02 $ .02 $ .02
====== ====== ====== ======
</TABLE>
49
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
A change in the Registrant's certifying accountant was reported on Form 8-K
dated March 7, 1994.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item appears in the Company's Proxy Statement
for the 1995 Annual Meeting to be filed within 120 days after the end of the
fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the Company's Proxy Statement
for the 1995 Annual Meeting to be filed within 120 days after the end of the
fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears in the Company's Proxy Statement
for the 1995 Annual Meeting to be filed within 120 days after the end of the
fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the Company's Proxy Statement
for the 1995 Annual Meeting to be filed within 120 days after the end of the
fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
10-K Page
---------
<S> <C>
1. FINANCIAL STATEMENTS
Reports of Independent Accountants 24
Report of Management 26
Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1994 27
Consolidated Balance Sheet at December 31, 1994 and 1993 28
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31,1994 29
Consolidated Statements of Shareholder's Equity for each
of the three years in the period ended December 31, 1994 30
Notes to Consolidated Financial Statements 31
2. FINANCIAL STATEMENT SCHEDULES
Financial statement schedules are not included in this Form 10-K
because they are not applicable.
3. EXHIBITS
Exhibit
Number Exhibit
------- -------
<S> <C>
3.1 Restated Certificate of Incorporation, dated May 21, 1987, as amended
up to and including June 24, 1992, filed as Exhibit 1 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992 (File
No. 1-9620) and incorporated herein by reference.
3.2 By-laws adopted on April 2, 1987, as amended up to and including July
30, 1991, filed as Exhibit 3(b) to Registrant's Registration Statement
No. 33-43383 and incorporated herein by reference.
4.1 Certificate of Designations for the $2.25 Series A Convertible
Preferred Stock, filed as Appendix D to the Registrant's definitive
Proxy Statement for the Special Meeting of Stockholders held July 26,
1994 and incorporated herein by reference.
4.2 Certificate of Designations for the $3.75 Series B Convertible
Preferred Stock, filed as Exhibit 4.3 to the Registrant's Report on
Form 8-K, dated August 4, 1994 and incorporated herein by reference.
10.1 Put and Call Agreement dated as of January 2, 1992, between Registrant
and AMAX Inc., filed as Exhibit 28(c) to Registrant's Registration
Statement No. 33-43383 and incorporated herein by reference.
10.2 Directors' Deferred Compensation Plan, filed as Exhibit 10.14.2 to
Registrant's Registration Statement No. 33-22645 and incorporated
herein by reference.
10.3 Excess Benefit Plan, effective as of November 15, 1993, filed as
Exhibit EX-10(g) to Registrant's Form 10-K for the year ended December
31, 1993 and incorporated herein by reference.
Exhibit
Number Exhibit
------- -------
<S> <C>
10.4 Deferred Compensation Plan, effective as of November 15, 1993, filed
as Exhibit EX-10(h) to Registrant's Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.
10.5 1992 Stock Option Plan, filed as Exhibit A to Registrant's definitive
Proxy Statement for the 1993 Annual Meeting of Stockholders (File No.
1-9620), and incorporated herein by reference.
10.6 Performance Share Plan, filed as Exhibit B to Registrant's definitive
Proxy Statement for the 1993 Annual Meeting of Stockholders (File No.
1-9620) and incorporated herein by reference.
10.7 Mining Lease, dated as of April 2, 1987, between Amax Exploration,
Inc. and TMB Associates, relating to the Wind Mountain mine, including
Assignment to the Company and related documents, filed as Exhibit
10.25 to Registration Statement No. 33-22645 and Amendment to Mining
Lease, dated August 4, 1988, between TMB Associates and Registrant,
amending the Mining Lease filed as Exhibit 46 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990 (File No. 1-
9620), each incorporated herein by reference.
10.8 Bullion Loan Agreement, dated as of March 21, 1991, between Lassen
Gold Mining, Inc., Registrant, and various banks relating to the
financing of the Hayden Hill mine, filed as Exhibit 1 and Guarantee
and Pledge Agreement, dated as of March 21, 1991, between Registrant
and The Chase Manhattan Bank, N.A., as Agent for various banks, filed
as Exhibit 4, both to Registrant's Form 10-Q for the quarter ended
March 31, 1991 (File No. 1-9620) and incorporated herein by reference.
10.9 Term Loan Agreement among AGI Chile Credit Corp., Inc., N.M.
Rothschild & Sons Limited and Citibank, N.A., including continuing
Corporate Guaranty of Amax Gold Inc. and continuing Corporate Guaranty
of Cyprus Amax Minerals Company, filed as Exhibit 10(c) to Form 10-Q
for the quarter ended March 31, 1994 and incorporated herein by
reference.
10.10 Exploration Joint Venture Agreement, effective January 1, 1994,
between the Registrant and Cyprus Amax, filed as Exhibit 10.1 to the
Registrant's Registration Statement No. 33-53963 and incorporated
herein by reference.
10.11 Revolving Credit Agreement, dated as of April 15, 1994, between the
Registrant and Cyprus Amax, filed as Appendix A to the Registrant's
definitive Proxy Statement for the Special Meeting of Stockholders
held July 26, 1994, and incorporated herein by reference; and
Amendment to Revolving Credit Agreement, dated as of March 10, 1994,
between the Registrant and Cyprus Amax.
10.12 Revolving Credit Agreement, dated as of March 10, 1995, between the
Registrant and Cyprus Amax.
10.13 Loan Agreement, dated as of November 23, 1994, among Compania Minera
Maricunga, as borrower, Amax Gold Inc. and Bema Gold Corporation, as
guarantors, and certain banks; and related documents.
18 Letter dated February 17, 1995, from the Company's independent
accountants regarding their concurrence that a newly adopted method of
accounting for the costs of ore loaded on heap leach pads to recognize
such costs as work-in-process inventory, is prefereable to the method
previously applied.
21 Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Mineral Resources Development, Inc.
23.4 Consent of Derry, Michener, Booth & Wahl.
27 Financial Data Schedule.
</TABLE>
50
<PAGE>
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of 1994.
51
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
AMAX GOLD INC.
By /s/ MARK A. LETTES
-------------------------------------
Mark A. Lettes, Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March , 1995.
Signature Title
--------- -----
/s/ MILTON H. WARD Chairman of the Board, Chief Executive
------------------ Officer (principal executive officer) and
Milton H. Ward Director
/s/ MARK A. LETTES Vice President and Chief Financial Officer
------------------ (principal financial officer)
Mark A. Lettes
/s/ DAVID L. MUELLER Vice President and Controller (principal
-------------------- accounting officer)
David L. Mueller
/s/ ALLEN BORN Director
--------------
Allen Born
/s/ GERALD J. MALYS Director
-------------------
Gerald J. Malys
/s/ ROCKWELL A. SCHNABEL Director
------------------------
Rockwell A. Schnabel
/s/ VERNON F. TAYLOR, JR. Director
-------------------------
Vernon F. Taylor, Jr.
/s/ RUSSELL L. WOOD Director
-------------------
Russell L. Wood
52
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
<S> <C>
3.1 Restated Certificate of Incorporation, dated May 21, 1987, as amended
up to and including June 24, 1992, filed as Exhibit 1 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992 (File
No. 1-9620) and incorporated herein by reference.
3.2 By-laws adopted on April 2, 1987, as amended up to and including July
30, 1991, filed as Exhibit 3(b) to Registrant's Registration Statement
No. 33-43383 and incorporated herein by reference.
4.1 Certificate of Designations for the $2.25 Series A Convertible
Preferred Stock, filed as Appendix D to the Registrant's definitive
Proxy Statement for the Special Meeting of Stockholders held July 26,
1994 and incorporated herein by reference.
4.2 Certificate of Designations for the $3.75 Series B Convertible
Preferred Stock, filed as Exhibit 4.3 to the Registrant's Report on
Form 8-K, dated August 4, 1994 and incorporated herein by reference.
10.1 Put and Call Agreement dated as of January 2, 1992, between Registrant
and AMAX Inc., filed as Exhibit 28(c) to Registrant's Registration
Statement No. 33-43383 and incorporated herein by reference.
10.2 Directors' Deferred Compensation Plan, filed as Exhibit 10.14.2 to
Registrant's Registration Statement No. 33-22645 and incorporated
herein by reference.
10.3 Excess Benefit Plan, effective as of November 15, 1993, filed as
Exhibit EX-10(g) to Registrant's Form 10-K for the year ended December
31, 1993 and incorporated herein by reference.
10.4 Deferred Compensation Plan, effective as of November 15, 1993, filed
as Exhibit EX-10(h) to Registrant's Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.
10.5 1992 Stock Option Plan, filed as Exhibit A to Registrant's definitive
Proxy Statement for the 1993 Annual Meeting of Stockholders (File No.
1-9620), and incorporated herein by reference.
10.6 Performance Share Plan, filed as Exhibit B to Registrant's definitive
Proxy Statement for the 1993 Annual Meeting of Stockholders (File No.
1-9620) and incorporated herein by reference.
10.7 Mining Lease, dated as of April 2, 1987, between Amax Exploration,
Inc. and TMB Associates, relating to the Wind Mountain mine, including
Assignment to the Company and related documents, filed as Exhibit
10.25 to Registration Statement No. 33-22645 and Amendment to Mining
Lease, dated August 4, 1988, between TMB Associates and Registrant,
amending the Mining Lease filed as Exhibit 46 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990 (File No. 1-
9620), each incorporated herein by reference.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
<S> <C>
10.8 Bullion Loan Agreement, dated as of March 21, 1991, between Lassen
Gold Mining, Inc., Registrant, and various banks relating to the
financing of the Hayden Hill mine, filed as Exhibit 1 and Guarantee
and Pledge Agreement, dated as of March 21, 1991, between Registrant
and The Chase Manhattan Bank, N.A., as Agent for various banks, filed
as Exhibit 4, both to Registrant's Form 10-Q for the quarter ended
March 31, 1991 (File No. 1-9620) and incorporated herein by reference.
10.9 Term Loan Agreement among AGI Chile Credit Corp., Inc., N.M.
Rothschild & Sons Limited and Citibank, N.A., including continuing
Corporate Guaranty of Amax Gold Inc. and continuing Corporate Guaranty
of Cyprus Amax Minerals Company, filed as Exhibit 10(c) to Form 10-Q
for the quarter ended March 31, 1994 and incorporated herein by
reference.
10.10 Exploration Joint Venture Agreement, effective January 1, 1994,
between the Registrant and Cyprus Amax, filed as Exhibit 10.1 to the
Registrant's Registration Statement No. 33-53963 and incorporated
herein by reference.
10.11 Revolving Credit Agreement, dated as of April 15, 1994, between the
Registrant and Cyprus Amax, filed as Appendix A to the Registrant's
definitive Proxy Statement for the Special Meeting of Stockholders
held July 26, 1994, and incorporated herein by reference; and
Amendment to Revolving Credit Agreement, dated as of March 10, 1994,
between the Registrant and Cyprus Amax.
10.12 Revolving Credit Agreement, dated as of March 10, 1995, between the
Registrant and Cyprus Amax.
10.13 Loan Agreement, dated as of November 23, 1994, among Compania Minera
Maricunga, as borrower, Amax Gold Inc. and Bema Gold Corporation, as
guarantors, and certain banks; and related documents.
18 Letter dated February 17, 1995, from the Company's independent
accountants regarding their concurrence that a newly adopted method of
accounting for the costs of ore loaded on heap leach pads to recognize
such costs as work-in-process inventory, is prefereable to the method
previously applied.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
<S> <C>
21 Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Mineral Resources Development, Inc.
23.4 Consent of Derry, Michener, Booth & Wahl.
27 Financial Data Schedule.
</TABLE>
55
<PAGE>
EXHIBIT 10.11
AMENDMENT TO REVOLVING CREDIT AGREEMENT
---------------------------------------
This amendment, dated as of March 10, 1995, to Revolving Credit
Agreement, dated as of April 15, 1994 (the "DOCLOC Agreement"), by and between
Amax Gold Inc., a Delaware corporation (the "Borrower"), and Cyprus Amax
Minerals Company, a Delaware corporation (the "Lender"). Terms not expressly
defined herein have the meanings ascribed to them in the DOCLOC Agreement.
WHEREAS, the Borrower and the Lender desire to extend the term of the
DOCLOC Agreement,
WHEREAS, the Borrower and the Lender each have had the amendment
approved by its Board of Directors (and the Borrower having had such
transactions, among others, approved separately by the Audit Committee of the
Board of Directors, which consists solely of those Directors who are not
affiliated with the Lender); and
WHEREAS, this Agreement is subject to the approval of the stockholders
of the Borrower at the Annual Meeting of Stockholders to be held on May 23,
1995.
NOW, THEREFORE, the parties hereby agree to the following terms and
conditions:
1. Subject to Section 4, Section 1.01 of the DOCLOC Agreement hereby
is amended to delete the words "April 30, 1997" and to substitute therefor the
words "December 31, 2001."
2. Subject to Section 4, Section 1.06 of the DOCLOC Agreement hereby
is amended to delete the words "June 30, 1997" from the fourth line thereof and
substitute therefor the words "March 31, 2002."
3. All of the other terms and provisions of the DOCLOC Agreement
shall remain unchanged.
4. This Agreement shall not be effective unless and until the
Borrower has obtained the approval of its stockholders of this Agreement.
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
AMAX GOLD INC.
By: /s/ MARK A. LETTES
_______________________________
Title: Vice President and
Chief Financial Officer
___________________________
ATTEST:
/s/ DEBORAH J. FRIEDMAN
__________________________________
CYPRUS AMAX MINERALS COMPANY
By: /s/ FRANCIS J. KANE
_______________________________
Title: Vice President, Investor
Relations and Treasurer
____________________________
ATTEST:
/s/ KATHLEEN J. GORMLEY
__________________________________
2
<PAGE>
EXHIBIT 10.12
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement, dated as of March 10, 1995 ("Agreement"),
by and between Amax Gold Inc., a Delaware corporation (the "Borrower"), and
Cyprus Amax Minerals Company, a Delaware corporation (the "Lender");
WITNESSETH:
WHEREAS, the parties previously have entered into that certain letter
agreement dated February 16, 1995 (the "Commitment Letter") providing for, among
other things, agreed upon share purchase prices and the preparation of
definitive documents to implement the terms thereof;
WHEREAS, this Revolving Credit Agreement is one of the definitive documents
contemplated in the Commitment Letter;
WHEREAS, on the date of this Agreement the Lender indirectly owns
approximately 34,313,709 shares of the Borrower's common stock, par value $0.01
per share ("Common Stock");
WHEREAS, the Borrower needs financial support from the Lender to support
the planned development of the Fort Knox mine construction and development
project in Alaska and other growth opportunities and for general corporate
purposes, and the Lender is willing to provide to the Borrower up to $80,000,000
of financing for such needs, on the terms of this Agreement;
WHEREAS, the Borrower owns interests in several promising gold prospects,
including 100% of the Fort Knox Project near Fairbanks, Alaska, as well as
certain other advanced stage projects (collectively the "Projects"), each of
which is expected to require substantial additional development capital;
WHEREAS, the Borrower is developing one or more of its Projects and is
otherwise taking steps to increase its cash flow from operations to enable the
Borrower to fund its ongoing working capital requirements and required
development capital from operating cash flow or establish third party sources of
financing without reliance on guarantees or other financial support from the
Lender;
WHEREAS, each party has determined, after consulting with an independent
investment banking firm, that it is in the best interest of such party's
stockholders (in the case of the Borrower, without regard to the Lender) that
such financing from the Lender be provided on the terms and conditions set forth
in this Agreement;
WHEREAS, the Borrower and the Lender each have had the transactions
contemplated by this Agreement approved by its Board of Directors (and the
Borrower having had such transactions approved separately by the Audit Committee
of the Borrower's Board of Directors, which consists solely of those Directors
who are unaffiliated with the Lender), and having received a fairness opinion
from an independent investment bank, establishing that the transactions
contemplated herein are, on the whole, fair from a financial point of view to
the shareholders of the Borrower and the Lender respectively;
NOW THEREFORE, the parties hereby agree to the following terms and
conditions:
1
<PAGE>
ARTICLE I
AMOUNTS AND TERMS OF THE LOAN
SECTION 1.01 Revolving Credit Commitment. Subject to the terms and
conditions hereof, the Lender agrees to make one or more loans (individually a
"Loan" and collectively the "Loans") to the Borrower from time to time during
the period that commences on the date hereof and ends on the earlier of (i)
December 31, 2001 or (ii) the date on which the Commitment is terminated
pursuant to this Agreement (the expiration date determined by (i) or (ii) is
herein called the "Revolver Expiration Date"), in an aggregate principal amount
up to but not exceeding at any one time outstanding the sum of $80,000,000 (the
"Commitment"). During such period the Borrower may use the Commitment by
borrowing, paying and prepaying in whole or in any part and reborrowing, on a
revolving basis, all in accordance with the terms and conditions hereof. To the
extent that the Borrower repays (including any prepayment) any principal amount
of Loans in the Borrower's $2.25 Series C Convertible Preferred Stock, par value
$1.00 per share (the "Preferred Stock") pursuant to and as defined in Section
1.08 hereof prior to the Revolver Expiration Date, the amount of the Commitment
shall automatically be reduced by the amount of any Preferred Stock so issued,
based upon the value of such Preferred Stock at the time of issuance as
determined in accordance with Section 1.08. Each borrowing and cash prepayment
of principal, if any, shall be in an amount equal to an integral multiple of
$1,000,000.00. Notwithstanding the foregoing, the Commitment shall terminate if
the conditions for making the initial Loan under Section 2.01 shall not have
been satisfied on or prior to June 16, 1995, unless extended by the parties.
SECTION 1.02 Making the Loans. The Borrower shall give the Lender notice of
each borrowing hereunder not later than 11:00 a.m. Denver, Colorado, time at
least two (2) Business Days prior to the date a Loan is requested to be made,
specifying the inception date, the amount thereof and the initial Interest
Period for such Loan. The Lender will arrange the loan and confirm the details
in writing to the Borrower. On the inception date of the borrowing, the Lender
will make the proceeds of the Loan available to the Borrower in immediately
available funds at the Borrower's account with Chemical Bank, New York, or as
the Borrower may otherwise direct in such notice.
The Loans to the Borrower shall be evidenced by a grid Note of the Borrower
substantially in the form of Exhibit A hereto (the "Note"). The Note will
evidence the obligation of the Borrower to pay the aggregate unpaid principal
amount of all Loans made by the Lender pursuant to Section 1.01 of this
Agreement, together with all accrued interest on such Loans. Entries made on the
grid schedules of the Note by the Lender reflecting borrowings, payments and
interest rate calculations under this Agreement shall constitute, absent proven
error, prima facie evidence of the transactions represented by such entries. The
Note shall (i) be dated the date of the initial Loan hereunder, (ii) be payable
in accordance with its terms and the terms of this Agreement and (iii) evidence
the obligation of the Borrower to pay interest on each Loan made hereunder from
the date of such Loan on the unpaid principal amount thereof outstanding from
time to time, calculated in accordance with the provisions of Section 1.03 and
the outstanding principal amount of such Loan in accordance with Section 1.06 or
Section 1.08 of this Agreement pursuant to the repayment notice given by the
Borrower under the applicable section of this Agreement. Except for the payment
referenced in Section 1.08 hereof, the Borrower shall make each payment
(including any cash prepayment) hereunder and under the Note, not later than the
close of business of the day when due by wire transfer, in lawful money of the
United States of America to the Lender, at its address referred to in Section
7.02 or as otherwise directed by the Lender, in immediately available funds.
SECTION 1.03 Payment of Interest. Each Loan made by the Lender pursuant to
this Agreement shall bear interest on the principal balance thereof from time to
time unpaid at an annual rate equal to the LIBOR Rate (as defined herein) for
the interest period selected by the Borrower at its option for a period of one,
three or six months, or such other periods as are agreed between the Borrower
and the Lender (each, an "Interest Period"), and as set forth in the notice of
borrowing referred to in Section 1.02 hereof or the notice of Interest Period
selection referred to in Section 1.05 hereof, as the case may be, plus 0.30%
except as otherwise provided in this Section. Interest on each Loan shall be due
and payable in full on the last day of the Interest Period applicable
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to such Loan and, in the case of any Interest Period in excess of three months,
at the end of each calendar quarter occurring during the term thereof. The term
"LIBOR Rate" shall mean the rate of interest per annum at which U.S. dollar
deposits, in an amount equal to the aggregate principal balance of the Loan are
offered (as reasonably determined by the Lender) at or about 11:00 a.m. Denver
time on the date that is two Business Days immediately prior to the beginning of
such Interest Period in the London Interbank Eurodollar Market for delivery on
the first day of such Interest Period for approximately the number of days
contained therein (as appearing on page "LIBOR" on the Reuters Monitor Money
Rates Service or such other page as may replace the LIBOR page on that service
for the purpose of displaying London Interbank Offered Rates for dollar deposits
of major banks); provided, however, that if at least two such offered rates
appear on the LIBOR page in respect of such Interest Period, the arithmetic mean
of all such rates (as determined by the Lender and rounded upwards to the
nearest 1/16th of 1%) will be the rate used; and provided further that if
Reuters Monitor Money Rates Service ceases to provide LIBOR quotations, such
rate shall be the average rate of interest (as determined by the Lender) and
rounded upwards to the nearest 1/16th of 1%) at which U.S. dollar deposits are
offered for the relevant Interest Period by three of the leading banks selected
by the Lender in the London interbank market as of 11:00 a.m. Denver time on the
date which is two (2) Business Days prior to the first day of such Interest
Period, or as reasonably determined by the Lender by reference to the LIBOR rate
for an equivalent interest period in the most recent edition of the Wall Street
Journal under the section headed "Money Rates", or otherwise as the Lender and
the Borrower may mutually agree. If the Borrower fails to make any payment to
the Lender of the principal of or interest on any Loan when such payment becomes
due, such Loan shall accrue interest at a rate that is 1.0% per annum higher
than the rate otherwise payable with respect to such Loan and such higher rate
shall continue until such default in payment by the Borrower is cured. All
computations of interest under the Note shall be made by the Lender on the basis
of a year of 360 days, consisting of twelve 30-day months, for the actual number
of days (including the first day but excluding the last day) elapsed.
SECTION 1.04 Prepayments in Cash. On any interest payment date, or as
otherwise agreed by the Lender, the Borrower may make cash prepayments of
principal (which, unless the Commitment is earlier terminated pursuant to
Section 6.02, may be reborrowed on or prior to the Revolver Expiration Date but
not thereafter) of one or more Loans (which Loans shall be designated by the
Borrower) in an amount equal to an integral multiple of $1,000,000, and shall be
made without premium or penalty, but together with interest accrued, if any, on
the amount of each prepaid Loan (at the interest rate applicable to such Loan)
to the date of prepayment and shall be applied to the Loans in the inverse order
of maturity. The Borrower shall give Lender at least two Business Days notice of
any such prepayment. All such cash payments shall be made by wire transfer in
immediately available funds to an account designated by the Lender.
SECTION 1.05 Interest Period Selection. The Borrower shall have the option
to select a new Interest Period for each Loan, which period shall take effect at
the end of the then current Interest Period with respect to such Loan. The
Borrower shall give the Lender notice of such Interest Period selection pursuant
to this Section 1.05 not later than 11:00 a.m. Denver, Colorado, time at least
two (2) Business Days prior to the last day of the applicable Interest Period,
specifying the new Interest Period for such Loan. If the Borrower does not
deliver such notice of Interest Period selection to the Lender as set forth
herein, the Interest Period for such Loan shall be the same number of months as
the immediately preceding Interest Period for such Loan. The selection of a
subsequent Interest Period shall not be deemed to constitute a reborrowing or a
new Loan for purposes of this Agreement.
SECTION 1.06 Amortization of Principal. On the Revolver Expiration Date all
accrued interest shall be paid and the aggregate principal balance of all Loans
outstanding shall become due and payable in twenty equal quarterly installments
on March 31, June 30, September 30, and December 31 of each of the following
five years with the first installment due on March 31, 2002; provided, however,
that the last such installment shall be in the amount necessary to repay in full
the unpaid principal amount thereof. The outstanding principal balance of the
Note shall bear interest in accordance with Section 1.03 until the Note is paid
in full. Accrued interest on the Note shall be added to and paid with each such
quarterly amortization payment.
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SECTION 1.07 Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a date which is a
Saturday, Sunday or a public holiday or the equivalent for Lender or for banks
generally under the laws of the State of Colorado (any other day being a
"Business Day"), such payment may be made on the next succeeding Business Day
and such extension of time shall in such case be included in the computation of
interest due.
SECTION 1.08 Payment in Preferred Stock. At the Borrower's election, which
may be exercised by its giving written notice to the Lender at least 20 Business
Days prior to the date such repayment or prepayment of the Note or a required
amortization payment due under the Note is to be made, the Borrower may (i)
repay the entire principal balance of the Note, (ii) pay the required
amortization payment due under the Note, (iii) upon the Lender's prior consent
given not later than two Business Days prior to the payment date, pay the
required interest payment due under the Note, and/or (iv) prepay increments of
at least $5,000,000 of principal of Loans outstanding under the Note (which
Loans shall be designated by the Borrower), in each case by issuing to the
Lender the Preferred Stock, which shall have the powers, preferences and
relative participating, optional or other special rights and qualifications,
limitations or restrictions thereof as are set forth in Exhibit B to this
Agreement and otherwise as the Board of Directors of the Borrower may determine
(consistent with the provisions of such Exhibit B) by resolution or resolutions
adopted by the Board of Directors of the Borrower providing for the issue of
such Preferred Stock. The amount of such Preferred Stock issued to the Lender
shall (w) in the event the payment is to be made pursuant to clause (i) above,
be equal in value to the outstanding principal amount of all Loans outstanding
at the time of such payment, plus accrued interest thereon to the date of such
payment; (x) in the event the payment is to be made pursuant to clause (ii)
above, be equal in value to the amount of such required amortization payment to
be made plus accrued interest thereon to the date of such payment; (y) in the
event the payment is to be made pursuant to clause (iii) above, be equal in
value to the amount of such required interest payment to be made on the date of
such payment; or (z) in the event the payment is to be made pursuant to clause
(iv) above, be equal in value to the incremental amount of such Loans that the
Borrower elects to prepay, plus accrued interest thereon to the date of such
payment, in each case as specified in the notice given to the Lender pursuant to
this Section 1.08, except that no fractional shares of Preferred Stock shall be
issued. In lieu of a fraction of a share of Preferred Stock, the Borrower shall
pay the Lender in cash an amount equivalent to such fraction of a share. The
value of the Preferred Stock shall be determined by multiplying the number of
shares of Preferred Stock to be issued to the Lender by $50.00 per share. The
number of shares of Preferred Stock to be issued to the Lender pursuant to this
Section 1.08 (which shall not exceed the number authorized in the Borrower's
Restated Certificate of Incorporation, as amended) will be determined by the
Borrower based on the amount of the Loans to be repaid or prepaid with such
Preferred Stock, subject to adjustment for arithmetic errors.
SECTION 1.09 Regulatory Approvals. As a condition precedent to issuing any
Preferred Stock to the Lender pursuant to Section 1.08 hereof, the Borrower
shall have obtained all authorizations and approvals of, and all other actions
required to be taken by, any applicable governmental authority or regulatory
body or stock exchange and shall have given all notices to, and made all filings
with, any such governmental authority or regulatory body or stock exchange, that
may be required in connection with such issuance of such Preferred Stock.
SECTION 1.10 Failure to Obtain Regulatory Approvals. In the event the
Borrower is unable to obtain all authorizations and approvals required for the
issuance of any Preferred Stock pursuant to Section 1.09 hereof, such failure
shall not constitute a default but the written notice given by the Borrower to
the Lender with respect to making such repayment or prepayment by issuing
Preferred Stock shall be null and void, without prejudice to the rights of the
Borrower to exercise its option under Section 1.08 on any other occasion. If the
Preferred Stock was to be issued to pay an interest payment or required
amortization due under the Note, such payment shall be made by the Borrower in
immediately available funds on the date such payment is due in accordance with
Section 1.03 or 1.06 of this Agreement, as the case may be, and the Note.
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SECTION 1.11 Restrictions on Transfer of Preferred Stock.
(i) Notice of Intended Dispositions. Except for dispositions
pursuant to this Section 1.11, if at any time the Lender desires to sell,
assign, transfer, pledge, encumber or otherwise dispose of any shares of
Preferred Stock held by it, then the Lender shall deliver written notice (a
"Disposition Notice") to the Borrower under Section 7.02, of its intention
to sell, setting forth the Lender's desire to make such sale, the identity
of the prospective purchaser, the number of shares of Preferred Stock
proposed to be sold (the "Offered Shares") the price ("Offer Price") at
which the Lender proposes to dispose of the Offered Shares and the other
material terms of such disposition. Such proposed sale, transfer, etc.,
shall be for cash only.
(ii) Borrower's First Refusal Option. Upon the receipt of the
Disposition Notice, the Borrower shall then have the right to purchase at
the Offer Price all, but not less than all, of the Offered Shares. In order
to exercise its first refusal option, the Borrower must give written notice
(a "First Refusal Exercise Notice") under Section 7.02, of such exercise to
the Lender, not more than 45 calendar days from the date of its receipt of
the Disposition Notice. In the event that the Borrower exercises its first
refusal option with respect to the Offered Shares, then the Lender shall
sell to the Borrower and the Borrower shall purchase the Offered Shares
within 30 calendar days after the date of receipt by the Lender of the
First Refusal Exercise Notice. Upon the consummation of any purchase by the
Borrower of Offered Shares, the Lender shall deliver certificates
evidencing the Offered Shares sold duly endorsed, or accompanied by written
instruments of transfer, free and clear of any liens and encumbrances,
against delivery of the Offer Price. From and after the time at which cash
necessary to pay the Offer Price for shares of Preferred Stock pursuant to
the exercise of the first refusal option irrevocably shall have been
deposited or set aside, then, notwithstanding that the certificates
representing the Offered Shares shall not have been surrendered, all rights
(other than the right to receive payment of the Offer Price with respect to
such shares of Preferred Stock) of the Lender with respect to the shares of
Preferred Stock for which tender has been made, including without
limitation all conversion, voting and dividend rights, permanently shall
cease and terminate, except only the right to receive payment for such
shares of Preferred Stock, and the Lender shall no longer be considered the
owner of such shares of Preferred Stock.
(iii) Permitted Dispositions. If the Disposition Notice has been duly
given and the Borrower shall not have timely given the First Refusal Notice
to exercise its first refusal option, then the Lender shall have the right,
for a period of 30 calendar days after expiration of the 45 day period
referred to in the second sentence of subsection (ii) of this Section 1.11,
to sell to the prospective purchaser referred to in such notice the Offered
Shares at no less than the Offer Price and on the other terms and
provisions set forth in the Disposition Notice.
ARTICLE II
CONDITIONS OF LENDING
SECTION 2.01 Conditions Precedent to Making the Initial Loan. The
obligation of the Lender to make the initial Loan is subject to the following
conditions precedent:
(a) The Lender shall have received on or before the day the initial
Loan is made all of the following, in form and substance reasonably
satisfactory to the Lender:
(i) The Note duly executed by the Borrower;
(ii) Copies of the borrowing resolutions of the Board of
Directors of the Borrower authorizing the execution and delivery of
this Agreement and the Note as well as the
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Borrower's performance of all of the covenants, obligations and other
undertakings of the Borrower contemplated by this Agreement and the
Note, (including the specific authorization of the Preferred Stock to
be issued pursuant to Section 1.08 of this Agreement on the terms of
Exhibit B to this Agreement) and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to this Agreement and the Note, certified by the Secretary or
an Assistant Secretary of the Borrower;
(iii) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the
Note and any other documents to be delivered hereunder;
(iv) A favorable opinion of counsel of the Borrower, as to
matters referred to in Section 3.01 (except subsection (e) thereof) of
this Agreement;
(v) A Notice of Borrowing under Section 1.02; and
(vi) Evidence reasonably satisfactory to the Lender that the
New York Stock Exchange shall have accepted a listing application for
the Common Stock to be issued pursuant to this Agreement or upon
conversion of the Preferred Stock and if so required as a condition to
listing, that the majority of the shareholders of the Borrower have
approved the issuance of such Common Stock.
(b) On the date of such Loan the following statements shall be true:
(i) The representations and warranties of the Borrower
contained in Section 3.01 are true and correct in all material
respects and the covenants of the Borrower made in Article IV hereof
shall be deemed to have been made on and as of the date of such Loan
(or of a subsequent Loan for the purposes of Section 2.02);
(ii) No event has occurred and is continuing, or would result
from such Loan (or from a subsequent Loan for the purposes of Section
2.02), which constitutes an Event of Default (as defined in Article V)
or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both; and
(c) The Borrower shall deliver to the Lender a certificate of the
Borrower's Chief Financial Officer stating the purpose of the borrowing,
which shall be consistent with Section 7.05 and the other terms and
conditions of this Agreement and, if required by Section 7.05, resolutions
of the Borrower's Board of Directors, which resolutions shall be certified
to Lender by the Secretary or an Assistant Secretary of the Borrower.
SECTION 2.02 Conditions Precedent to Subsequent Loans. The obligation of
the Lender to make each subsequent Loan is subject to the conditions precedent
that (i) on the date of any such subsequent Loan the statements made in Section
2.01(b)(i) and (ii) shall be true; and (ii) the condition set forth in Section
2.01(c), shall be satisfied with respect to such subsequent Loan.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power to execute, deliver and perform its obligations
under this Agreement and the Note.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Note have been, or in the case of the issuance of Common
Stock will be on or prior to the date of issuance, duly authorized by all
necessary corporate action (including authorization of the Board of
Directors of the Borrower to issue the Preferred Stock in the event the
Borrower elects to pay or prepay in Preferred Stock pursuant to Section
1.08 of this Agreement and to issue the Common Stock required to be issued
upon conversion of the Preferred Stock or pursuant to Articles of this
Agreement) and do not (and the issuance of such Preferred Stock on the
terms of Exhibit B or, in the case of the Common Stock, such Common Stock
will not at the time the same is to be issued):
(i) violate any provision of the Restated Certificate of
Incorporation, as amended, or By-Laws of the Borrower or any law,
order, writ, judgment, decree, determination or award, in each case as
presently in effect and having applicability to the Borrower; or
(ii) result in a breach of or constitute a default under any
material indenture, bank loan agreement, credit agreement, bullion
loan or other material agreement to which the Borrower is a party or
by which any of its properties or the properties of any of its
Subsidiaries, are presently bound. As used in this Agreement, the term
"Subsidiary" shall mean, as to the Borrower, any corporation of which
at least a majority of the outstanding shares of stock, having by the
terms thereof ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether or not at
the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency), is at the time directly or indirectly owned or
controlled by the Borrower or one of more of its Subsidiaries.
(c) No authorization or approval of, or other action by, and no notice
to or filing with, any governmental authority or regulatory body, other
than the Securities and Exchange Commission ("SEC"), is required for the
due execution, delivery and performance by the Borrower of this Agreement
(except for such notices, any necessary shareholder approvals,
registrations, stock exchange listings or filings as may be required in
connection with issuing the Preferred Stock and the Common Stock) or the
Note.
(d) This Agreement is, and the Note when executed and delivered will
be, legal, valid and binding obligations of the Borrower enforceable
against it in accordance with their respective terms (subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles).
(e) The consolidated statements of financial position of the Borrower
and its consolidated Subsidiaries as at December 31, 1993, and the related
consolidated statements of operations, cash flows and changes in Common
Stock, paid-in capital and retained earnings of the Borrower and such
Subsidiaries for the period then ended (copies of which have been furnished
to the Lender) fairly present the financial condition of the Borrower and
such Subsidiaries as at such date and the results of
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the operations of the Borrower and its Subsidiaries for the period ended on
such date, all in accordance with generally accepted accounting principles.
(f) Except as disclosed in the Borrower's most recent Annual Report on
Form 10-K filed with the SEC for the fiscal year then ended, the most
recent Quarterly Reports on Form 10-Q, or as otherwise disclosed in writing
to the Lender, there is not to the actual knowledge of the executive
officers of the Borrower any pending or threatened action or proceeding
against or affecting the Borrower before any court, governmental agency or
arbitrator that reasonably could be expected to materially and adversely
affect the ability of the Borrower to perform its obligations under the
Agreement or the Note.
(g) The Preferred Stock and the Common Stock, when issued in
accordance with the terms of this Agreement (and any Common Stock when
issued on conversion of or pursuant to the terms of the Preferred Stock),
will be validly issued, fully paid and nonassessable.
ARTICLE IV
COVENANTS OF THE BORROWER
SECTION 4.01 Payment of Principal, Premium and Interest. The Borrower duly
and punctually will pay or cause to be paid the principal of and interest on the
Loans evidenced by the Note according to the terms thereof.
SECTION 4.02 Reports, etc. The Borrower will furnish to the Lender the
following reports, information and documents:
(i) within 15 days after the Borrower is required to file the same
with the SEC, copies of the annual reports on Form 10-K, proxy statements,
quarterly reports on Form 10-Q, and of such reports, notices, documents and
other information (or copies of such portions of any of the foregoing as
the SEC may from time to time by rules and regulations prescribe) that the
Borrower may be required to file with the SEC pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, or with
the principal securities exchange (or successor thereto) in the United
States on which securities of the Borrower are listed and, upon
distribution thereof, a copy of each report, proxy statement, notice,
document or other information sent by the Borrower to all of its
stockholders; and
(ii) promptly upon demand, such other information respecting the
financial condition, operations and properties of the Borrower and its
consolidated Subsidiaries as the Lender reasonably may request; provided
that the Lender shall maintain the confidentiality thereof in the same
manner as the Lender maintains the confidentiality of its own information
of like nature.
SECTION 4.03 Inspection. So long as the Lender is obligated to make Loans
under this Agreement or so long as the Note is outstanding, the Borrower will
permit the Lender or any of its authorized representatives, at the Lender's
expense, to inspect at all reasonable times all properties, books and records of
the Borrower or any of its consolidated Subsidiaries reasonably related to the
overall financial and business condition of the Borrower and its consolidated
Subsidiaries or to the observance and performance by the Borrower of its
obligations hereunder and under the Note, and to discuss the business and
affairs of the Borrower and its consolidated Subsidiaries with its officers and
independent accountants (and by this provision the Borrower authorizes said
accountants to discuss with the Lender or such authorized representatives, the
finances and affairs of the Borrower and its consolidated Subsidiaries), all as
often as reasonably may be requested, subject to appropriate obligations of
confidentiality.
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SECTION 4.04 Payment of Taxes. The Borrower will pay and discharge, or
cause to be paid and discharged, all taxes, assessments and governmental charges
levied on it or against any of its properties or assets prior to the date on
which penalties are attached thereto, unless and to the extent only that the
same shall be contested in good faith and by appropriate proceedings by the
Borrower, or except to the extent that the failure to so pay or to so discharge
would not have a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement or the Note.
SECTION 4.05 Officers' Certificate. The Borrower will deliver a certificate
to the Lender on or before April 30 in each year (beginning with 1995), signed
by the Chairman of the Board or the President, the Chief Financial Officer, any
Senior Vice President or any Vice President (the foregoing being hereafter
referred to as "Senior Officers") and by the Secretary or any Assistant
Secretary of the Borrower, stating that in the course of the performance by the
signers of their duties as officers of the Borrower they normally would have
knowledge of any condition or event that constitutes or which, after the giving
of notice or lapse of time or both, would constitute, an Event of Default under
this Agreement or under the Note, stating whether or not they have knowledge of
any such condition or event and, if so, specifying each such condition or event
of which the signers have knowledge and the nature thereof, and the steps taken
by the Borrower to correct the same.
SECTION 4.06 Compliance With Laws. The Borrower shall comply, in all
material respects, with all applicable laws, rules, regulations and orders,
except where the failure would not have a material adverse effect on the
Borrower's ability to perform under this Agreement and the Note.
SECTION 4.07 Mergers and Consolidations. Without the Lender's prior consent
which will not be unreasonably withheld, the Borrower will not enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution). The Borrower will
not convey, sell, lease, transfer or otherwise dispose of, in one transaction or
a series of transactions, all or substantially all of its business or assets.
Notwithstanding the foregoing provisions of this Section 4.07:
(a) Any Subsidiary of the Borrower may be merged or consolidated with
or into (x) the Borrower if the Borrower shall be the continuing or
surviving corporation, or (y) any such other Subsidiary;
(b) Any Subsidiary of the Borrower may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to the Borrower or to a Subsidiary of the Borrower; and
(c) The Borrower or any of its Subsidiaries may merge or consolidate
with any other Person if (x) in the case of a merger or consolidation of
the Borrower, the Borrower is the surviving corporation and, in any other
case, the surviving corporation is a Subsidiary of the Borrower, and (y)
after giving effect thereto, no Event of Default would exist hereunder, and
there will be no material adverse impact on the ability of the Borrower to
perform any of its obligations hereunder or under the Note in accordance
with the respective terms thereof.
SECTION 4.08 Listing Approval. The Borrower promptly shall use all
reasonable efforts to obtain the acceptance of the New York Stock Exchange of a
listing application for the Common Stock to be issued pursuant to the terms of
this Agreement and, if so required as a condition to such listing, to obtain the
approval of a majority of its shareholders for the issuance for such Common
Stock.
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ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01 Events of Default. If any of the following events (each, an
"Event of Default") shall occur and be continuing:
(a) The Borrower shall (i) fail to pay the principal of or any
interest on the Note when due, or (ii) fail to perform or observe any other
term, covenant or condition contained in this Agreement or in the Note on
its part to be performed or observed and any such failure shall remain
unremedied for five (5) Business Days in the case of clause (i) and thirty
(30) days in the case of clause (ii) after the same is discovered by any
Senior Officer of the Borrower; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in any certificate or other document
delivered pursuant to this Agreement shall prove to have been incorrect in
any material respect when made and such incorrect representation or
warranty shall not have been corrected within ten (10) days after the same
is discovered by any Senior Officer of the Borrower; or
(c) The Borrower shall admit in writing its inability to pay its
debts, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Borrower or seeking to
adjudicate it a bankrupt or insolvent or seeking reorganization,
arrangement, adjustment, or composition of it or its debts under the law of
any jurisdiction relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and,
with respect to any involuntary proceeding instituted against the Borrower,
such proceeding shall not be dismissed within sixty (60) days;
then, and in any such event, the Lender, by notice to the Borrower, may take
either or both of the following actions: (i) terminate the Commitment, whereupon
the same shall terminate forthwith; or (ii) declare the principal balance
outstanding under the Note and all interest accrued and unpaid thereon, and all
other sums due hereunder, to be due and payable without presentment, demand,
protest, or further notice of any kind, all of which are hereby expressly waived
by the Borrower; provided, however, that upon the occurrence of an Event of
Default specified in subparagraph (c) above, (x) the Commitment automatically
shall be terminated and (y) the Note, all such principal and interest and all
such other sums due hereunder automatically shall become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VI
LENDER'S STOCK PURCHASE OPTION
SECTION 6.01 Description of Lender's Option. At any time after the
acceptance by the New York Stock Exchange of a listing application for the
issuance of the shares of Common Stock described herein, and prior to the later
of (i) the Revolver Expiration Date or (ii) payment in full of the Note and all
other amounts, if any, due to the Lender under this Agreement, the Lender shall
have the option from time to time (the "Lender's Purchase Option") to purchase
an amount not to exceed 14,919,806 shares of the Borrower's Common Stock at a
purchase price per share (the "Purchase Price") of $5.362, subject to adjustment
in accordance with Section 6.03 hereof, and, in connection with the consummation
of such purchase (the "Closing"), to terminate such portion of the Commitment as
is equal to the product of (i) the number of shares so purchased multiplied by
(ii) the Purchase Price (as adjusted under Section 6.03); provided if less than
14,919,806 shares are purchased (taking into account all shares previously
purchased under this provision), the number of shares shall be an
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integral multiple of one million shares. The Lender may exercise any Lender's
Purchase Option under this Article VI by giving written notice to the Borrower,
if at all, at least 20 Business Days prior to the date stated in such notice for
the Closing of such stock purchase. If there are no amounts outstanding under
the Note at the time such notice is given, the Lender shall give such notice to
the Borrower at least 20 Business Days prior to the Revolver Expiration Date.
Such notice shall state the Lender's decision to exercise its option hereunder
and the date for Closing of such stock purchase. Upon receipt of such notice,
the Borrower and the Lender shall select a time and place for the Closing and if
the Borrower and the Lender are unable to agree, the Closing shall take place at
the Borrower's offices at 9:00 a.m., local time, on the date specified for
Closing in the Lender's notice.
SECTION 6.02 Transactions at Closing. At the Closing, the Purchase Price
for the shares of the Borrower's Common Stock to be purchased by the Lender
shall be paid and applied by the Lender in the following order:
(i) First, to all accrued interest to the date of Closing and then
to such portion of and such portion of the principal amount of the
outstanding balance under the Note in stated order of maturity, as is
determined by (y) the product of (i) the number of shares so purchased
multiplied by (ii) the Purchase Price (as adjusted under Section 6.03);
less (z) the amount of accrued interest to the date of Closing; (which
amount shall be deemed repaid by the Borrower, irrespective of whether such
amounts are then due and payable, by the issuance of a credit against the
Purchase Price payable by the Lender for such Common Stock and the Lender
shall deliver a receipt to the Borrower for the amount of such payment).
Amounts of principal paid pursuant hereto may not be reborrowed.
(ii) Secondly, in the event the aggregate amount of the Purchase
Price shall exceed the amount in Section 6.02(i), the Lender shall deliver
to the Borrower the number of shares of Preferred Stock previously issued
to the Lender pursuant to Section 1.08, to the extent that such shares have
not been converted into or redeemed for shares of the Borrower's Common
Stock pursuant to the terms of such Preferred Stock as are equal in value
to the aggregate Purchase Price in excess of the amount applied in clause
6.02 (i) above. To the extent that shares of Preferred Stock have been
converted into or redeemed for shares of the Borrower's Common Stock and to
the extent that any shares of Common Stock have been issued in lieu of cash
dividend payments on the Preferred Stock, the amount of Common Stock to be
purchased by the Lender pursuant to this Article VI first shall be reduced
by an amount equal to the number of such shares of Common Stock which have
been issued by the Borrower (x) on conversion or redemption of such shares
of Preferred Stock, or (y) in lieu of cash dividend payments on Preferred
Stock.
(iii) Thirdly, the amount of the excess of the aggregate Purchase
Price over the amounts applied in Section 6.02 (i) and (ii) above, if any,
shall next be applied by the Lender paying to the Borrower by wire
transfer, certified or official bank check payable in United States
currency in immediately available funds, to the account of the Borrower, or
as the Borrower shall direct by written notice given at least two Business
Days prior to Closing, an amount up to the remainder of the Commitment less
the amount of the outstanding principal balance of the Note.
Upon payment of the Purchase Price in the manner described above, the
Borrower shall deliver to the Lender a Certificate for the number of shares of
the Borrower's Common Stock purchased at Closing, together with a legal opinion
from the Borrower's General Counsel, or such other counsel as the Borrower may
choose, which other counsel shall be reasonably acceptable to the Lender, to the
effect that such shares of Common Stock purchased by the Lender have been duly
authorized, validly issued, and are fully paid and non-assessable. Upon delivery
of the certificate for the Common Stock and the legal opinion described herein,
such portion of the Commitment as is equal to the product described in Section
6.01 above, shall terminate.
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SECTION 6.03 Adjustment of Purchase Price and Number of Shares Purchasable.
The Purchase Price and the number of shares of Common Stock purchasable upon the
exercise of any Lender's Purchase Option shall be subject to adjustment from
time to time by the Borrower as follows:
(i) In case the Borrower shall (A) pay a dividend or make a
distribution on its Common Stock in shares of Common Stock (other than
pursuant to a dividend reinvestment or similar plan), (B) subdivide its
outstanding shares of Common Stock into a greater number of shares, (C)
combine its outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification of its Common Stock any shares of
capital stock of the Borrower, then in each such case the number of shares
of Common Stock purchasable upon the exercise of the Lender's Purchase
Option immediately prior thereto shall be adjusted so that the Lender shall
be entitled to receive the kind and number of shares of Common Stock or
other securities of the Borrower which the Lender would have owned or have
been entitled to receive immediately following such action had such shares
of Common Stock been purchased immediately prior to the occurrence of such
event. An adjustment made pursuant to this subsection (i) shall become
effective immediately after the record date, in the case of a dividend or
distribution, or immediately after the effective date, in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subsection (i), the Lender shall become
entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Borrower, the Audit
Committee of the Board of Directors of the Borrower (whose reasonable
determination shall be conclusive except for arithmetic errors and shall be
described in a statement filed by the Borrower with the Lender) shall
determine the equitable allocation of the adjusted Purchase Price between
or among shares of such classes of capital stock or shares of Common Stock
and other capital stock.
(ii) In case the Borrower shall issue rights, options or warrants to
all holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less
than the current market price per share (as determined pursuant to
subsection (iv) of this Section 6.03) of the Common Stock (other than
pursuant to any stock option, restricted stock or other incentive or
benefit plan or stock ownership or purchase plan for the benefit of
employees, directors or officers or any dividend reinvestment plan of the
Borrower in effect at the time hereof or any other similar plan adopted or
implemented hereafter), to the extent that the same have not expired by
their terms prior to the exercise of the Lender's Purchase Option, then the
number of shares of Common Stock thereafter purchasable upon the exercise
of the Lender's Purchase Option shall be determined by multiplying the
number of shares of Common Stock theretofore purchasable upon exercise of
the Lender's Purchase Option immediately prior to the date of issuance of
such rights, options or warrants by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on the date of issuance
of such rights, options or warrants (immediately prior to such issuance)
plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall be the number
of shares of Common Stock outstanding on the date of issuance of such
rights, options or warrants (immediately prior to such issuance) plus the
number of shares which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at such current market
price. Such adjustment successively shall be made whenever any such rights,
options or warrants are issued, and immediately shall become effective on
the date of issuance retroactive to the record date for the determination
of stockholders entitled to receive such rights, options or warrants;
provided, however, in the event that all the shares of Common Stock offered
for subscription or purchase are not delivered upon the exercise of such
rights, options or warrants, upon the expiration of such rights, options or
warrants the Purchase Price shall be readjusted to the Purchase Price that
would have been in effect had the numerator and the denominator of the
foregoing fraction and the resulting adjustment been made based upon the
number of shares of Common Stock actually delivered upon the exercise of
such rights, options or warrants rather than upon the number of shares of
Common Stock offered for subscription or purchase. In no event, however,
shall there be any adjustment made with respect any shares previously
issued pursuant to the exercise of the Lender's Purchase Option. In
determining whether any rights, options or warrants entitle the
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holders to subscribe for or purchase shares of Common Stock at less than
such current market price and in determining the aggregate offering price
of such shares of Common Stock, there shall be taken into account any
consideration received by the Borrower for such rights, options or
warrants. The value of such consideration, if other than cash, shall be
determined by the Audit Committee of the Borrower's Board of Directors
(whose reasonable determination shall be conclusive, except for arithmetic
errors, and shall be described in a statement filed by the Borrower with
the Lender).
(iii) In case the Borrower shall, by dividend or otherwise,
distribute to all holders of its outstanding Common Stock, evidences of its
indebtedness or assets (including securities and cash, but excluding any
cash dividend of the Borrower paid out of retained earnings and dividends
or distributions payable in stock pursuant to a dividend reinvestment or
similar plan or for which adjustment is made pursuant to subsection (i) of
this Section 6.03) or rights, options or warrants to subscribe for or
purchase securities of the Borrower (excluding those referred to in
subsection (ii) of this Section 6.03), then in each such case the number of
shares of Common Stock thereafter purchasable upon the exercise of the
Lender's Purchase Option shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon the exercise of the
Lender's Purchase Option by a fraction of which the numerator shall be the
current market price per share of the Common Stock as determined pursuant
to subsection (iv) of this Section 6.03, and of which the denominator shall
be such current market price per share of Common Stock less the fair market
value on such record date (as determined by the Audit Committee of its
Board of Directors of the Borrower, whose reasonable determination shall be
conclusive except for arithmetic errors and shall be described in a
statement filed by the Borrower with the Lender) of the portion of the
capital stock or assets or the evidences of indebtedness or assets so
distributed to the holder of one share of Common Stock or of such
subscription rights, options or warrants applicable to one share of Common
Stock. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(iv) For the purpose of any computation under subsections (ii) and
(iii) of this Section 6.03, the current market price per share of Common
Stock on any date shall be deemed to be the average of the "Closing Price",
as defined below, for the shorter of (A) 30 consecutive trading days ending
on the last full trading day prior to the Time of Determination or (B) the
period commencing on the date next succeeding the first public announcement
of the issuance of such rights, options or warrants or such distribution
through such last full trading day prior to the Time of Determination. The
term "Closing Price" for any day in question shall be the last reported
sale price regular way or, in case no such reported sales take place on
such day, the average of the closing bid and asked prices regular way for
such day, in each case on the New York Stock Exchange Composite Tape or, if
not listed on the New York Stock Exchange, on the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading on a national
securities exchange, the last sale price regular way for the Common Stock
as published by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if such last sale price is not so published
by NASDAQ or if no such sale takes place on such day, the average between
the closing bid and asked prices for the Common Stock as published by
NASDAQ. The term "trading day" shall mean a day on which the market used
for calculating the Closing Price is open for the transaction of business
or, if the shares of such securities are not so listed or admitted to
trading, a business day. The term "Time of Determination" shall mean the
time and date of the earlier of (I) the record date for determining
stockholders entitled to receive the rights, options, warrants or
distributions referred to in Section 6.03 (ii) and (iii) or (II) the
commencement of "ex-dividend" trading on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading or, if not listed or admitted to trading on a national securities
exchange, the NASDAQ.
(v) In any case in which this Section 6.03 shall require that an
adjustment be made immediately following a record date or an effective
date, the Borrower may elect to defer (but only until the delivery by the
Borrower of the notice required by subsection (viii) of this Section 6.03)
issuing to the Lender the shares of Common Stock issuable upon exercise of
the Lender's Purchase
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Option over and above the shares of Common Stock issuable upon exercise of
the Lender's Purchase Option on the basis of the number of shares of Common
Stock purchasable upon exercise of the Lender's Purchase Option prior to
adjustment, and paying to the Lender any amount of cash in lieu of a
fractional share.
(vi) Whenever the number of shares of Common Stock purchasable upon
the exercise of the Lender's Purchase Option is adjusted as herein
provided, the Purchase Price payable upon exercise of the Lender's Purchase
Option shall be adjusted by multiplying such Purchase Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of shares of Common Stock purchasable upon the exercise of the
Lender's Purchase Option immediately prior to such adjustment, and of which
the denominator shall be the number of shares of Common Stock so
purchasable immediately thereafter.
(vii) No adjustment in the number of shares of Common Stock
purchasable upon exercise of the Lender's Purchase Option shall be required
to be made unless such adjustment would require an increase or decrease of
at least 1.0% of the number of shares of Common Stock purchasable upon
exercise of the Lender's Purchase Option; provided, however, that any
adjustments which by reason of this subsection (vii) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 6.03 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
Anything in this Section 6.03 to the contrary notwithstanding, the Borrower
shall be entitled to make such reduction in the Purchase Price, in addition
to the adjustments required by this Section 6.03, as it in its discretion
shall determine to be advisable in order that any stock dividend,
subdivision of shares, distribution of rights to purchase stock or
securities, or distribution of securities convertible into or exchangeable
for stock hereafter made by the Borrower to its stockholders shall not be
taxable to the recipients. Except as set forth in subsections (i), (ii) and
(iii) above, the Purchase Price shall not be adjusted for any such event
including, without limitation, the issuance of Common Stock, or any
securities convertible into or exchangeable for Common Stock or carrying
the right to purchase any of the foregoing, in exchange for cash, property
or services.
(viii) Whenever the Purchase Price is adjusted as herein provided, the
Borrower shall promptly deliver or mail, or cause to be delivered or mailed
by first class mail, postage prepaid, as soon as practicable to the Lender
a notice under Section 7.02 setting forth the Purchase Price and number of
shares of Common Stock purchasable upon the exercise of the Lender's
Purchase Option after such adjustment and a brief statement of the facts
requiring such adjustment and the manner of computing the same, which
certificate shall be conclusive evidence of the correctness of such
adjustment.
(ix) In the event that at any time, as a result of an adjustment
made pursuant to subsection (i) of this Section 6.03, the Lender shall
become entitled to receive any shares of the Borrower other than shares of
Common Stock, thereafter the Purchase Price of such other shares that the
Lender shall be entitled to purchase shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to Common Stock contained in this Section.
(x) The Borrower from time to time may decrease the Purchase Price
by any amount for any period of time if the period is at least 20 days and
if the decrease is irrevocable during the period. Whenever the Purchase
Price is so decreased, the Borrower shall deliver or mail to the Lender a
notice of the decrease at least 15 days before the date the decreased
Purchase Price takes effect, and such notice shall state the decreased
Purchase Price and the period it will be in effect.
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Notwithstanding the foregoing provisions of this Section 6.03, no such
adjustments shall be made if the adjustment effectively duplicates the effect of
an adjustment made in connection with Section (5)(d) of the Certificate of
Designation relating to the Convertible Preferred Stock.
SECTION 6.04 Reservation of Shares of Common Stock. The Borrower covenants
that it will, at all times prior to the expiration of the Lender's Purchase
Option, reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued shares of Common Stock for the purpose
of enabling it to satisfy any obligation to issue shares of Common Stock upon
the exercise of the Lender's Purchase Option, the full number of shares of
Common Stock deliverable upon the exercise of the Lender's Purchase Option not
theretofore purchased and on or before (and as a condition of) taking any action
that would cause an adjustment of the Purchase Price resulting in an increase in
the number of shares of Common Stock deliverable upon the exercise of the
Lender's Purchase Option above the number thereof previously reserved and
available therefor, the Borrower shall take all such action so required.
Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value (if any) of the shares of Common Stock
deliverable upon exercise of the Lender's Purchase Option, the Borrower shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Borrower may validly and legally issue fully paid and non-
assessable shares of Common Stock at such adjusted Purchase Price.
SECTION 6.05 Transfer Taxes, Etc. The Borrower shall pay any and all
documentary stamp, issue or transfer taxes, and any other similar taxes payable
in respect of the issue or delivery of shares of Common Stock upon exercise of
the Lender's Purchase Option; provided, however, that the Borrower shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than that of
the Lender and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Borrower the amount of
any such tax or has established, to the satisfaction of the Borrower, that such
tax has been paid.
SECTION 6.06 Consolidation or Merger or Sale of Assets. Notwithstanding any
other provision herein to the contrary, in case of any consolidation or merger,
sale or transfer to which the Borrower is a party and which is permitted under
Section 4.07 above or otherwise upon the Lender's prior written consent (which
shall not be unreasonably withheld) and pursuant to which there is a change in
the Common Stock of the Borrower, then lawful provision, in a manner and on
terms reasonably satisfactory to counsel for the Lender, shall be made by the
corporation formed by such consolidation or the corporation whose securities,
cash or other property will immediately after the merger or consolidation be
owned, by virtue of the merger or consolidation, by the holders of Common Stock
immediately prior to the merger or consolidation, or the corporation which shall
have acquired such assets or securities of the Borrower (collectively the
"Formed, Surviving or Acquiring Corporation"), as the case may be, providing
that the Lender shall have the right thereafter upon payment of the Purchase
Price in effect immediately prior to such action to purchase upon exercise of
the Lender's Purchase Option the kind and amount of securities, cash or other
property that the Lender would have owned or have been entitled to receive after
the happening of such consolidation, merger, sale, lease or transfer had the
Lender's Purchase Option been exercised immediately prior to such action
(provided that, if the kind or amount of securities, cash or other property that
the Lender would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, lease or transfer is not the same for each
share of Common Stock in respect of which such rights of election shall not have
been exercised ("non-electing share"), then for the purposes of this Section
6.06 the kind and amount of securities, cash or other property which the Lender
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale, lease or transfer for each nonelecting share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). The Formed, Surviving or Acquiring Corporation, as the
case may be, shall make provision in a manner and on terms reasonably
satisfactory to counsel for the Lender, in its certificate or articles of
incorporation or other constituent documents to the end that the provisions set
forth in this Section 6.06 shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in
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relation to any shares of stock or other securities or property thereafter
deliverable upon exercise of the Lender's Purchase Option.
The above provisions of this Section 6.06 shall similarly apply to
successive consolidations, mergers, sales, leases or transfers.
SECTION 6.07 Transfer Restrictions.
(a) Legends on Common Stock.
(i) Until the third anniversary of the date of original
issuance of the shares of Common Stock, certificates representing the
shares of Common Stock purchased by the Lender upon exercise of the
Lender's Purchase Option and not otherwise registered pursuant to an
effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act") shall bear a legend substantially to
the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
SIMILAR STATE SECURITIES LAWS AND THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SAID ACT AND
LAWS."
The shares of Common Stock purchased by the Lender upon exercise of the
Lender's Purchase Option and not otherwise registered pursuant to an effective
registration statement under the Securities Act shall be subject to the
restrictions on transfer set forth in the legends referred to above until the
third anniversary of the date of original issuance of such shares of Common
Stock; provided, however, and notwithstanding the foregoing, such shares of
Common Stock may be resold under and pursuant to the terms and conditions of
Regulation S of the Securities Act, prior to the end of the third anniversary
date of the issuance of such shares.
(ii) The certificates evidencing shares of Common Stock purchased
by the Lender upon exercise of the Lender's Purchase Option and not
otherwise registered pursuant to an effective registration statement under
the Securities Act shall bear, until such time as the Borrower and the
transfer agent for the Common Stock shall have received evidence
satisfactory to each of them that the transfer of such shares of Common
Stock has been effected in accordance with the limitations on transfer set
forth in paragraph (a)(i) above, the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES, OPINIONS OF
COUNSEL AND OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
(b) Transfer Agent Requirements. The transfer agent and registrar for
the Common Stock shall not be required to accept for registration of
transfer any Common Stock bearing the legend contained in paragraph (a)(ii)
above, except upon presentation of satisfactory evidence that the
restrictions on transfer of the Common Stock referred to in the legend in
paragraph (a)(i) have been complied with, all in accordance with such
reasonable regulations and procedures as the Borrower may from time to time
agree with the transfer agent and registrar for the Common Stock.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the Note, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Lender and the Borrower, in the case of an amendment, or by
the party to be charged, in the case of a waiver or a consent, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 7.02 Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and delivered to an officer of the other party
or mailed or transmitted by facsimile; if to the Lender to its address at 9100
East Mineral Circle, Englewood, Colorado 80112-3299, Attention: Chief Financial
Officer (Fax No. 303-643-5269); if to the Borrower, to its address at 9100 East
Mineral Circle, Englewood, Colorado 80112-3299, Attention: Chief Financial
Officer (Fax No. 303-643-5505) or, as to each party, to such other address as
shall be designated by such party in a written notice to the other party. All
such notices and communications shall, when delivered to an officer of the other
party, be effective upon such delivery and, when mailed or transmitted by
facsimile, be effective when deposited in the mails or when transmitted
respectively, addressed as aforesaid; except that notices by the Borrower to the
Lender or by the Lender to the Borrower pursuant to the provisions of Section
1.05 shall not be effective until received by the Lender or the Borrower, as the
case may be, but such notices may be given by telephone and confirmed in writing
or by facsimile on the same day and shall be effective upon such telephonic
notice.
SECTION 7.03 No Waiver; Remedies. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder or under the Note,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under the Note preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 7.04 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Lender and their respective successors
and assigns, except that (i) the Borrower shall not have the right, to assign
its rights hereunder or any interest herein except to a successor by merger,
consolidation or sale of all or substantially all of the Borrower's assets, in
each case if permitted under Section 4.07 above, without the prior written
consent of the Lender, and (ii) the Lender shall not assign any of its rights or
obligations hereunder or under the Note, except to a successor by merger,
consolidation or sale of substantially all of the Lender's assets without the
prior written consent of the Borrower.
SECTION 7.05 Use of Proceeds. The proceeds of the Loans shall be used by
the Borrower for the planned construction and development of Fort Knox, other
growth opportunities and general corprate purposes.
SECTION 7.06 Demand Registration Rights. (i) At any time after the earlier
to occur of (i) the conversion of the Preferred Stock into shares of Common
Stock or (ii) the exercise of the Lender's Purchase Option, the Lender may make
one or more written requests to the Borrower (a "Demand") for registration under
and in accordance with the provisions of the Securities Act of all or part (but
not less than 1,000,000 shares per Demand) of the shares of Common Stock issued
to the Lender pursuant to Section 1.08 or Section 6.01 of this Agreement
("Registrable Shares"). Each such request shall specify the aggregate number of
Registrable Shares proposed to be registered and the intended method of
disposition thereof.
(i) Upon receipt of a Demand, the Borrower shall use its best
efforts to effect such registration to permit the sale of Registrable
Shares in accordance with the intended method of disposition thereof and
pursuant thereto, the Borrower shall as expeditiously as possible:
17
<PAGE>
(a) execute and deliver all such instruments and documents and do
or cause to be done all such other acts and things as may be necessary
or, in the opinion of the Lender, advisable to register such
Registrable Shares under the provisions of the Securities Act, and to
cause the registration statement relating thereto to become effective
and to remain effective for such period as prospectuses are required
by law to be furnished, and to make all amendments and supplements
thereto and to the related prospectus which, in the opinion of the
Lender, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of
the SEC applicable thereto;
(b) use its best efforts to qualify the Registrable Shares under
the applicable state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Registrable
Shares, as requested by the Lender;
(c) make available to the Lender, as soon as practicable, an
earnings statement that will satisfy the provisions of Section 11(a)
of the Securities Act; and (d) do or cause to be done all such other
acts and things as may be necessary to make such sale of the
Registrable Shares or any part thereof valid and binding and in
compliance with applicable law.
(ii) If any such Demand is made at a time when the Lender directly
or indirectly owns less than five percent 5% of the number of shares of
Common Stock outstanding, the Borrower may, if its Audit Committee of its
Board of Directors determines in the good faith exercise of its reasonable
judgment that it would be inadvisable to effect a demand registration,
defer such demand registration until the earliest practicable time at which
such demand registration can be reasonably effected, which period shall not
exceed three (3) months.
(iii) All Registration Expenses incurred in connection with the first
registration statement to be filed hereunder or under that certain Stock
Purchase Agreement between the Lender and the Borrower of even date
herewith (the "Stock Agreement") shall be paid by the Borrower. All
Registration Expenses incurred in connection with each additional
registration statement to be filed hereunder or under the Stock Agreement
shall be paid by the Lender. For purposes of this Agreement, "Registration
Expenses" shall mean any and all expenses incident to performance of or
compliance with this Section 7.06, including, without limitation, (i) all
SEC and stock exchange registration and filing fees, (ii) all fees and
expenses of complying with state securities or "Blue Sky" laws (including
fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Shares and determination of the
eligibility of the Registrable Shares for investment under the laws of such
jurisdiction as the Lender may indicate), (iii) all printing, messenger and
delivery expenses, (iv) all fees and expenses incurred in connection with
the listing of Registrable Shares on any exchange, and (v) the fees and
disbursements of counsel for the Borrower and of its independent public
accountants, but excluding underwriting discounts and commissions,
brokerage fees, transfer taxes, if any, fees and disbursements of counsel,
accountants or other experts or advisors to the Lender, and National
Association of Securities Dealers Inc. registration and filing fees.
SECTION 7.07 Expenses. The Borrower shall pay (i) all out-of-pocket
expenses of the Lender, including fees and disbursements of special counsel for
the Lender, in connection with the preparation of this Agreement, any waiver or
consent hereunder or any amendment hereof or any default or alleged default
hereunder and (ii) if an Event of Default occurs, or upon the occurrence of an
event that with notice or the lapse of time or both would constitute an Event of
Default, all out-of-pocket expenses incurred by the Lender, including fees and
disbursements of counsel, in connection with such actual or potential Event of
Default and collection, bankruptcy, insolvency and other enforcement
proceedings, actions or negotiations resulting therefrom. The Borrower shall
indemnify the Lender against any transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the execution and
delivery to the Lender of this Agreement, or any Note.
18
<PAGE>
SECTION 7.08 Prior Agreement. This Agreement and the Note issued hereunder
shall supersede in their entirety any prior negotiations, discussions,
understandings or arrangements between the Lender and the Borrower pertaining to
the subject matter of this Agreement.
SECTION 7.09 Governing Law. This Agreement and the Note shall be governed
by, and construed in accordance with, the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMAX GOLD INC.
<TABLE>
<CAPTION>
<S> <C>
By /s/ MARK A. LETTES Title: Vice President and Chief
----------------------- Financial Officer
ATTEST:
/s/ DEBORAH J. FRIEDMAN
-----------------------
CYPRUS AMAX MINERALS COMPANY
BY /s/ FRANCIS J. KANE
------------------------ Title: Vice President Investor
Relations and Treasurer
ATTEST:
/s/ KATHLEEN J. GORMLEY
-----------------------
</TABLE>
19
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$80,000,000.00 Date: March 10, 1995
FOR VALUE RECEIVED, Amax Gold Inc., a Delaware corporation (the
"Borrower"), promises to pay to the order of Cyprus Amax Minerals Company, a
Delaware corporation (the "Lender") at the office of the Lender located at 9100
East Mineral Circle, Englewood, Colorado 80112, or at such other place as the
Lender may direct in writing, in lawful money of the United States of America
and in immediately available funds, the principal amount of Eighty Million
Dollars or, if less than such principal amount, the aggregate unpaid principal
amount of all Loans made by the Lender to the Borrower pursuant to Article I of
the Agreement referred to below in accordance with the respective Schedules
applicable to such Loans attached to and made part of this Note. All principal
amounts outstanding under this Note on December 31, 2002 shall be paid in twenty
equal quarterly installments in accordance with Section 1.06 of such Agreement;
provided, however, that the last such installment shall be in the amount
necessary to repay in full the unpaid principal amount hereof; and, provided,
further, that the Lender, upon exercise of its Stock Purchase Option under
Article VI of such Agreement, may terminate or reduce the "Commitment", as
defined therein, whereupon such installments shall be due as of the date set for
closing such stock purchase pursuant to Section 6.01 of such Agreement.
The Borrower further promises to pay interest at said office in like money,
from the date hereof on the unpaid principal amount hereof outstanding from time
to time, at the rates and at the times set forth in Article I of such Agreement.
Notwithstanding anything contained herein to the contrary, at the election of
the Borrower the principal of this Note may be paid by the Borrower in Preferred
Stock of the Borrower in accordance with the provisions of Section 1.08 of the
Agreement, subject to satisfaction of the conditions set forth in Section 1.09
of such Agreement.
This Note is the Note referred to in Section 1.02 of the Revolving Credit
Agreement between the Borrower and the Lender dated as of March 10, 1995, as the
same may hereafter from time to time be amended or supplemented in accordance
with the terms thereof ("Agreement"), is entitled to the benefits thereof and
subject to the terms and conditions set forth therein (including, without
limitation, the Lender's rights to accelerate the due date hereof) and may be
paid and prepaid as provided therein.
Upon the occurrence of any of the Events of Default specified in the
Agreement, all amounts then remaining unpaid on this Note may be declared to be
or shall automatically become immediately due and payable as provided therein.
Amax Gold Inc.
By_______________________________
ATTEST:
_________________________________
Secretary
20
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS
MADE UNDER NOTE DATED MARCH 10, 1995
FROM AMAX GOLD INC.*
TO CYPRUS AMAX MINERALS COMPANY
Principal Amount of the Initial Loan: $__________
Date of the Initial Loan: __________
Interest Rate for the Initial Loan: __________
PRINCIPAL BORROWINGS
AND PAYMENTS OF THIS NOTE
<TABLE>
<CAPTION>
Amount Interest Principal Unpaid
Date Borrowed Rate Paid Paid Balance
---- -------- ---- -------- --------- -------
<S> <C> <C> <C> <C> <C>
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
</TABLE>
____________________
* All terms used in this Schedule shall have the meanings given them in
Agreement.
21
<PAGE>
EXHIBIT 10.13
EXECUTION COPY
LOAN AGREEMENT,
dated as of November 23, 1994,
among
COMPANIA MINERA MARICUNGA,
as the Borrower,
AMAX GOLD REFUGIO, INC. and
BEMA GOLD (BERMUDA) LTD.,
as the Intermediate Owners,
AMAX GOLD INC. and
BEMA GOLD CORPORATION,
as the Guarantors,
CANADIAN IMPERIAL BANK OF COMMERCE,
CREDIT LYONNAIS,
CREDIT LYONNAIS CANADA,
DEUTSCHE BANK AG,
Los Angeles
and/or Cayman Islands Branches,
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION,
and
N M ROTHSCHILD & SONS LIMITED,
as the Banks,
DEUTSCHE BANK AG,
New York Branch,
as the Technical Agent for the Banks,
and
N M ROTHSCHILD & SONS LIMITED,
as the Administrative Agent for the Banks.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS..................................... 3
1.1. Defined Terms.................................. 3
1.2. Use of Defined Terms........................... 40
1.3. Cross-References............................... 40
1.4. Accounting and Financial Determinations........ 40
1.5. Change in Accounting Principles................ 40
1.6. Dollar Equivalency Determinations.............. 41
1.7. Gold Equivalency Determinations................ 41
1.8. Project Determinations, etc.................... 42
1.9. General Provisions as to Certificates and
Opinions, etc.................................. 43
1.10. Gold Delivery.................................. 43
1.11. Interpretation................................. 43
ARTICLE 2. COMMITMENTS; BORROWING AND CONVERSION PROCEDURE. 45
2.1. Commitments.................................... 45
2.2. Procedure for Making Loans..................... 45
2.3. Continuation and Conversion Elections.......... 46
2.4. Records........................................ 47
2.5. Funding........................................ 48
2.6. Notes.......................................... 48
ARTICLE 3. PRINCIPAL PAYMENTS; INTEREST; COMMISSIONS....... 49
3.1. Principal Payments............................. 49
3.2. Interest Payments.............................. 53
3.2.1. Rate........................................... 53
3.2.2. Post-Maturity Rate............................. 53
3.2.3. Payment Dates.................................. 53
3.2.4. Rate Determinations............................ 54
3.3. Commissions.................................... 54
3.3.1. Participation Commission....................... 54
3.3.2. Commitment Commission.......................... 54
3.3.3. Agents' Commissions............................ 55
3.3.4. Commissions Payments to be made in Dollars..... 55
ARTICLE 4. PROJECT ACCOUNTS................................ 55
4.1. Construction Account........................... 55
4.2. Proceeds Account............................... 57
4.3. Proceeds Sub-Account (Debt Service Reserve),
etc. .......................................... 61
4.4. General Provisions Relating to the Project
Accounts....................................... 63
ARTICLE 5. INCREASED COSTS; TAXES; MARKET DISRUPTIONS;
GENERAL PAYMENT PROVISIONS..................... 65
5.1. Gold or Dollars Unavailable.................... 65
<PAGE>
5.2. Increased Costs, etc........................... 66
5.3. Funding Losses................................. 67
5.4. Increased Capital Costs........................ 68
5.5. Illegality..................................... 68
5.6. Taxes.......................................... 69
5.7. Mitigation..................................... 70
5.8. Payments, Computations, etc.................... 71
5.9. Proration of Payments.......................... 72
5.10. Miscellaneous Provisions for Payments in Gold.. 73
5.11. Setoff......................................... 74
5.12. Conversion upon Acceleration, Judgment
Currency, etc.................................. 74
5.13. Application of Proceeds........................ 76
ARTICLE 6. CONDITIONS PRECEDENT TO MAKING LOANS............ 77
6.1. Notes, etc..................................... 77
6.2. Resolutions, etc............................... 78
6.3. Support Agreements, etc........................ 79
6.4. Pledge Agreements.............................. 80
6.5. Security Agreements............................ 80
6.6. Subordination Agreement........................ 82
6.7. Project Documents; Approvals................... 82
6.8. Hedging Agreements............................. 83
6.9. Insurance...................................... 83
6.10. Political Risk Insurance....................... 83
6.11. Project Accounts............................... 84
6.12. Process Agent Acceptance....................... 84
6.13. Opinions of Counsel............................ 84
6.14. Independent Consultant's Certificate........... 85
6.15. DOCLOC Facility Agreement, etc................. 85
6.16. Closing Commissions, Expenses, etc............. 85
6.17. Compliance with Warranties, No Default, etc.... 86
6.18. Borrowing Request.............................. 86
6.19. Initial Compliance Certificate................. 86
6.20. Satisfactory Legal Form........................ 86
ARTICLE 7. REPRESENTATIONS AND WARRANTIES.................. 87
7.1. Organization, Power, Authority, etc............ 87
7.2. Due Authorization; Non-Contravention........... 87
7.3. Validity, etc.................................. 88
7.4. Legal Status................................... 88
7.5. Financial Information.......................... 89
7.6. Absence of Default............................. 90
7.7. Litigation, etc................................ 90
7.8. Materially Adverse Effect...................... 91
7.9. Burdensome Agreements.......................... 91
7.10. Taxes and Other Payments....................... 91
7.11. Mining Rights. ............................... 92
7.12. Ownership and Use of Properties; Liens......... 92
7.13. Subsidiaries................................... 93
7.14. Intellectual Property.......................... 93
- ii -
<PAGE>
7.15. Technology..................................... 93
7.16. Approvals; Project Documents................... 93
7.17. Development Plan; Feasibility Studies, etc..... 94
7.18. Environmental Warranties....................... 94
7.19. Pari Passu..................................... 96
ARTICLE 8. COVENANTS....................................... 96
8.1. Certain Affirmative Covenants.................. 96
8.1.1. Financial Information, etc..................... 97
8.1.2. Compliance with Laws...........................102
8.1.3. Approvals......................................102
8.1.4. Maintenance of Corporate Existence.............103
8.1.5. Foreign Qualification..........................103
8.1.6. Payment of Taxes, etc..........................103
8.1.7. Insurance......................................103
8.1.8. Books and Records..............................106
8.1.9. Project Completion and Management..............107
8.1.10. Hedging Agreements.............................107
8.1.11. Interest Rate Protection Agreements............108
8.1.12. Proceeds; Project Accounts.....................109
8.1.13. Provision of Staff.............................109
8.1.14. Environmental Covenant.........................109
8.1.15. Maintenance of Project Assets..................110
8.1.16. Political Risk Insurance.......................110
8.1.17. Pari Passu.....................................111
8.1.18. After-Acquired Collateral......................111
8.1.19. Accuracy of Information........................112
8.1.20. AGI's Control of the Refugio Project...........112
8.1.21. Mining Concessions.............................113
8.1.22. Sale of Production.............................113
8.1.23. Supplemental Notes.............................113
8.2. Certain Negative Covenants.....................113
8.2.1. Business Activities; Place of Business; Organic
Documents......................................113
8.2.2. Indebtedness...................................114
8.2.3. Liens..........................................115
8.2.4. Financial Condition of Borrower................116
8.2.5. Capital Expenditures...........................117
8.2.6. Investments....................................118
8.2.7. Restricted Payments, etc.......................118
8.2.8. Take or Pay Contracts..........................119
8.2.9. Consolidation, Merger, etc.....................119
8.2.10. Asset Dispositions, Deposits with Refineries,
etc............................................119
8.2.11. Transactions with Affiliates...................120
8.2.12. Restrictive Agreements, etc....................121
8.2.13. Inconsistent Agreements........................121
8.2.14. Project Documents..............................121
8.2.15. Actions under Project Documents................121
8.2.16. Bank Accounts..................................121
8.2.17. Royalty Agreements.............................122
- iii -
<PAGE>
ARTICLE 9. EVENTS OF DEFAULT...............................122
9.1. Events of Default..............................122
9.1.1. Non-Payment of Obligations.....................122
9.1.2. Non-Performance of Certain Covenants...........122
9.1.3. Non-Performance of Other Obligations...........122
9.1.4. Breach of Representation or Warranty...........123
9.1.5. Default on other Indebtedness..................123
9.1.6. Bankruptcy, Insolvency, etc....................124
9.1.7. Hedging Agreements; Interest Rate Protection
Agreements.....................................124
9.1.8. Project Documents, etc.........................125
9.1.9. Impairment of Loan Documents...................125
9.1.10. Abandonment, Mining Rights.....................125
9.1.11. Judgments......................................126
9.1.12. Political Risk Insurance, etc..................126
9.1.13. Change in Control..............................127
9.1.14. Default, etc. by Mining Contractor.............127
9.1.15. Default, etc by Construction Contractors.......127
9.1.16. Failure to Achieve Mechanical Completion and
Project Completion.............................127
9.1.17. Approvals......................................128
9.1.18. Materially Adverse Effect......................128
9.1.19. Cease to Carry on Business.....................128
9.1.20. Release Date...................................128
9.1.21. Failure to Acquire Certain Property Rights.....128
9.2. Action if Bankruptcy...........................128
9.3. Action if Other Event of Default...............129
9.4. Default after Release Date.....................129
9.5. Cure by Guarantors.............................129
ARTICLE 10. THE AGENTS.....................................130
10.1. Actions........................................130
10.2. Funding Reliance, etc..........................131
10.3. Exculpation....................................131
10.4. Successor......................................132
10.5. Loans by Rothschild and Deutsche Bank..........132
10.6. Rothschild as the Administrative Agent.........132
10.7. Credit Decisions...............................133
10.8. Copies, etc....................................133
ARTICLE 11. MISCELLANEOUS..................................133
11.1. Waivers, Amendments, etc.......................133
11.2. Notices........................................135
11.3. Costs and Expenses.............................135
11.4. Indemnification................................136
11.5. Survival.......................................137
11.6. Severability...................................138
11.7. Headings.......................................138
11.8. Counterparts, Effectiveness, etc...............138
11.9. Governing Law; Entire Agreement................138
11.10. Successors and Assigns.........................138
- iv -
<PAGE>
11.11. Sale and Transfer of Loans; Participations in
Loans..........................................139
11.11.1. Assignments....................................139
11.11.2. Participations.................................140
11.12. Other Transactions.............................141
11.13. Forum Selection and Consent to Jurisdiction;
Waiver of Immunity.............................141
11.14. Waiver of Jury Trial...........................142
11.15. English Language...............................143
- v -
<PAGE>
SCHEDULE I - Disclosure Schedule
SCHEDULE II-A - Refugio Project Map (Mining Rights)
SCHEDULE II-B - Refugio Project Map (Surface Rights)
EXHIBIT A-1 - Initial Note
EXHIBIT A-2 - Supplemental Note
EXHIBIT A-3 - Notes Operating Procedures Agreement
EXHIBIT B-1 - Borrowing Request
EXHIBIT B-2 - Continuation/Conversion Notice
EXHIBIT C-1 - AGI Support Agreement
EXHIBIT C-2 - DOCLOC Support Agreement
EXHIBIT C-3 - Bema Gold Support Agreement
EXHIBIT C-4 - Bema U.S. Pledge Agreement
EXHIBIT D-1 - AGRI Pledge Agreement
EXHIBIT D-2 - Bema Bermuda Pledge Agreement
EXHIBIT D-3 - AGRI Security Agreement
EXHIBIT D-4 - Bema Bermuda Security Agreement
EXHIBIT D-5 - Conditional Assignment of Contract Rights
(Foreign Investment Contract)
EXHIBIT E-1 - Borrower Security Agreement (U.S. Assets)
EXHIBIT E-2 - Mortgage Over Mining Concessions
EXHIBIT E-3 - Mortgage Over Real Estate
EXHIBIT E-4 - Mortgage Over Water Rights
EXHIBIT E-5 - Industrial Pledge
EXHIBIT E-6 - Promise to Grant Industrial Pledges
EXHIBIT E-7 - Promise to Grant Pledges Without Conveyance
EXHIBIT E-8 - Conditional Assignment of Contract Rights
EXHIBIT E-9 - Promise to Grant Mortgages Over Real Estate
EXHIBIT E-10 - Promise to Grant Mortgages Over Mining
Concessions
EXHIBIT F-1 - Project Account Agreement (U.S.)
EXHIBIT F-2 - Project Account Agreement (Chile)
EXHIBIT G-1 - Subordination Agreement (CMM)
EXHIBIT G-2 - Subordination Agreement (Bema Gold/Debentures)
EXHIBIT G-3 - Subordination Agreement (Bema Gold/AGI)
EXHIBIT G-4 - Agreement Regarding Trust Indenture
EXHIBIT H-1 - Opinion of Milbank, Tweed, Hadley & McCloy,
special New York counsel to the Obligors,
AGI Chile, Bema U.S. and Bema Chile
EXHIBIT H-2 - Opinion of Philippi, Yrarrazaval, Pulido,
Langlois & Brunner, Chilean counsel to the
Obligors
EXHIBIT H-3 - Opinion of Deborah Friedman, Esq.,
General Counsel of AGI and AGRI
EXHIBIT H-4 - Opinion of Ballard Spahr Andrews & Ingersoll,
special Colorado counsel
EXHIBIT H-5 - Opinion of Smith, Lyons, Torrance, Stevenson
& Mayer, Canadian counsel to Bema Gold, Bema
Bermuda, Bema Chile and Bema U.S.
EXHIBIT H-6 - Opinion of Conyers, Dill & Pearman, special
Bermuda counsel to Bema Bermuda
EXHIBIT H-7 - Opinion of Woodburn and Wedge, special Nevada
- vi -
<PAGE>
counsel to Bema U.S.
EXHIBIT H-8 - Opinion of Carey y Cia. Abogados, Chilean
counsel to the Bank Parties, as to general
matters of Chilean law
EXHIBIT H-9 - Opinion of Mayer, Brown & Platt, counsel to the
Bank Parties
EXHIBIT I-1 - Independent Consultant's Certificate
EXHIBIT I-2 - Insurance Consultant's Certificate
EXHIBIT I-3 - Mechanical Completion Certificate
EXHIBIT I-4 - Project Completion Certificate
EXHIBIT J - Compliance Certificate
EXHIBIT K - Liabilities Certificate
EXHIBIT L - Bank Assignment Agreement
EXHIBIT M - Process Agent Acceptance
EXHIBIT N-1 - Quarterly Report
EXHIBIT N-2 - Monthly Report
EXHIBIT N-3 - Borrower's Report (Pre-Project Completion)
EXHIBIT N-4 - Borrower's Report (Post-Project Completion)
- vii -
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of November 23, 1994 (this "Agreement"),
---------
among (1) COMPANIA MINERA MARICUNGA, a contractual mining company (sociedad
contractual minera) organized and existing under the laws of Chile (the
"Borrower"), (2) AMAX GOLD REFUGIO, INC., a Delaware corporation ("AGRI"), and
--------- ----
BEMA GOLD (BERMUDA) LTD., a company organized and existing under the laws of
Bermuda ("Bema Bermuda"; and, together with AGRI, collectively, the
------------
"Intermediate Owners"), (3) AMAX GOLD INC., a Delaware corporation ("AGI"), and
-------------------- ---
BEMA GOLD CORPORATION, a company organized and existing under the laws of the
Province of British Columbia ("Bema Gold"; and together with AGI, collectively,
---------
the "Guarantors"), (4) CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), CREDIT
---------- ----
LYONNAIS, CREDIT LYONNAIS CANADA, DEUTSCHE BANK AG, a bank organized under the
laws of Germany ("Deutsche Bank"), Los Angeles and/or Cayman Islands Branches,
-------------
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION and N M ROTHSCHILD & SONS
LIMITED, a company organized and existing under the laws of England
("Rothschild"; all of the foregoing institutions, collectively, the "Banks"),
---------- -----
(5) DEUTSCHE BANK, New York Branch, in its capacity as the technical agent for
the Banks (in such capacity, the "Technical Agent"), and (6) ROTHSCHILD, in its
---------------
capacity as the administrative agent for the Banks (in such capacity, the
"Administrative Agent").
---------------------
W I T N E S S E T H:
WHEREAS, the Borrower owns the Verde gold deposit and certain other
deposits comprising the Refugio gold property which is located 120 kilometres
east of Copiapo in the Maricunga Mining District, Province of Copiapo, Region
III, Chile and the Borrower proposes to construct certain facilities in order to
mine the Verde gold deposit in accordance with the Development Plan (such
construction and mining, the "Refugio Project"; other capitalized terms which
----------------
are used in this Agreement have the meanings assigned to such terms in Section
-------
1.1);
---
WHEREAS, the Borrower intends to engage solely in the business of
developing the ore extraction, processing and related facilities located at the
Mine and mining, producing and selling gold and other minerals contained within
those gold deposits located at the Mine;
WHEREAS, pursuant to the Construction Contracts, the Construction
Contractors have undertaken to develop and construct the Mine on behalf of the
Borrower as more particularly described therein;
WHEREAS, pursuant to the Mining Contract, the Mining Contractor has
undertaken to perform certain drilling, blasting, loading and hauling operations
at the Mine on behalf of the Borrower as more particularly described therein;
<PAGE>
WHEREAS, the Borrower has requested that the Banks provide commitments to
the Borrower to advance Loans for the purposes of financing bona fide capital
and operating expenses incurred in connection with the Refugio Project
(including any commissions payable to or for the account of any Bank Party
hereunder or under any other Loan Document);
WHEREAS, the Banks are willing, on the terms and conditions hereinafter
set forth (including Article 6), to extend commitments to make the Loans to the
---------
Borrower;
WHEREAS, as security for the due and punctual payment and performance of
the Borrower's Obligations, the Borrower is willing to grant to the Bank Parties
or to the Administrative Agent (for the ratable benefit of the Bank Parties) a
Lien over its right, title and interest in and to the Project Assets as set
forth in the Collateral Agreements to which it is a party;
WHEREAS, AGRI owns 100% of the Class B CMM Shares and Bema Bermuda owns
100% of the Class A CMM Shares, and such shares in the aggregate constitute the
entire issued and outstanding share capital of the Borrower;
WHEREAS, in consideration of the Banks agreeing to make Loans to the
Borrower and as security for the due and punctual payment and performance of the
Borrower's Obligations, each of AGRI and Bema Bermuda is willing to (a) pledge
to the Bank Parties all of the Class B CMM Shares and the Class A CMM Shares,
respectively, as set forth in the AGRI Pledge Agreement and the Bema Bermuda
Pledge Agreement, respectively, (b) grant to the Bank Parties a security
interest in its rights in the Foreign Investment Contract as set forth in the
Conditional Assignment of Contract Rights (Foreign Investment Contract), and (c)
grant to the Administrative Agent (for the ratable benefit of the Bank Parties)
security interests in certain of its assets and properties as set forth in the
AGRI Security Agreement and the Bema Bermuda Security Agreement;
WHEREAS, (a) AGI owns 100% of the issued and outstanding share capital of
AGRI and (b) Bema Gold and Bema Gold (U.S.) Inc., a Nevada corporation and a
wholly-owned Subsidiary of Bema Gold ("Bema U.S."), own all of the issued and
---------
outstanding share capital of Bema Bermuda;
WHEREAS, in consideration of the Banks agreeing to make the Loans to the
Borrower, AGI and Bema Gold have severally agreed with the Administrative Agent
(for the ratable benefit of the Bank Parties), inter alia, to guarantee
----- ----
unconditionally the due and punctual payment and performance of the Obligations
of the Borrower as set forth in the relevant Support Agreements; and
WHEREAS, as security for its obligations and for the due and punctual
payment and performance of the Borrower's Obligations, (a) each of AGI and Bema
Gold is willing to grant on a several basis a security interest to the
Administrative
- 2 -
<PAGE>
Agent (for the ratable benefit of the Bank Parties) in certain of its assets and
properties and to pledge to the Administrative Agent (for the ratable benefit of
the Bank Parties) all of its interest in the issued and outstanding share
capital of AGRI and Bema Bermuda, respectively, and (b) Bema U.S. is willing to
pledge to the Administrative Agent (for the ratable benefit of the Bank Parties)
all of its interest in the issued and outstanding share capital of Bema Bermuda;
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:
ARTICLE 1. DEFINITIONS
-----------------------
SECTION 1.1. DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall have the following meanings:
"Access Zone" means the areas designated as such on the Refugio Project
-----------
Map (Mining Rights).
"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 ten percent (10%) 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 Technical
------
Agent.
"AGI" is defined in the preamble.
--- --------
"AGI Chile" means AGI Chile Credit Corp., Inc., a Delaware corporation.
---------
"AGI Support Agreement" means that certain Support Agreement between AGI
---------------------
and the Administrative Agent, substantially in the form of Exhibit C-1 attached
-----------
hereto.
- 3 -
<PAGE>
"Agreement" is defined in the preamble.
--------- --------
"Agreement Regarding Trust Indenture" means that certain Agreement
-----------------------------------
Regarding Trust Indenture between the Administrative Agent and Bema Gold,
substantially in the form of Exhibit G-4 attached hereto.
-----------
"AGRI" is defined in the preamble.
---- --------
"AGRI Pledge Agreement" means that certain Pledge Agreement between AGRI
---------------------
and the Bank Parties, substantially in the form of the English translation
thereof attached hereto as Exhibit D-1.
-----------
"AGRI Security Agreement" means that certain Security Agreement between
-----------------------
AGRI and the Administrative Agent, substantially in the form of Exhibit D-3
-----------
attached hereto.
"Applicable Law" means, with respect to any Person or matter, any
--------------
supranational, national, federal, state, regional or local statute, law, rule,
treaty, convention, regulation, order, decree, request, determination or other
requirement (whether or not having the force of law) 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.
"Applicable Margin" means the sum of:
-----------------
(a) (i) at any time prior to the Release Date, two and seven-eighths
percent (2.875%) per annum, and (ii) at any time on or after the Release
Date, two and one-half percent (2.50%) per annum; plus
(b) with respect to any Political Risk Bank, the Political Risk
Premium as in effect with respect to such Political Risk Bank from time to
time.
"Approval" means each and every approval, authorization, license, permit,
--------
consent, filing and registration by or with any Governmental Agency or other
Person necessary to authorize or permit the occurrence of Mechanical Completion
or Project Completion, the execution, delivery or performance of this Agreement
or any other Operative Document (including any such approval, etc. required from
the Central Bank relating to the registration of the financial terms and
conditions of this Agreement and each other Loan Document and any such approval,
etc. 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 Mine) or for the validity or enforceability hereof or thereof, whether or
not referred to in Item 1 ("Approvals") of the Disclosure Schedule.
------ ---------
"Approved Budget" means the construction budget contained in Tables 7.1,
---------------
7.2 and 7.3 of the Development Plan containing details as to Project Costs to be
incurred prior to Project
- 4 -
<PAGE>
Completion, as the same may be amended from time to time pursuant to clause (b)
----------
of Section 1.8.
-----------
"Approved Subordinated Indebtedness" means any intercompany Indebtedness
----------------------------------
advanced by (a) either Guarantor, either Intermediate Owner, Bema Chile or AGI
Chile for the benefit of the Borrower and subject to the terms and conditions of
the Subordination Agreement (CMM) (including, in the case of Bema Bermuda and
Bema Chile, the IVA Advance) or (b) any other Affiliate of either Guarantor for
the benefit of the Borrower and subject to subordination and other terms and
conditions identical to those contained in the Subordination Agreement (CMM).
"Assignee Bank" is defined in Section 11.11.1.
------------- ---------------
"Assignor Bank" is defined in Section 11.11.1.
------------- ---------------
"Authorized Representative" means, relative to any Obligor, Bema U.S., AGI
-------------------------
Chile or the Independent Consultant, those of its officers whose signatures and
incumbency shall have been certified to the Administrative Agent pursuant to
Section 6.2.
-----------
"Banks" is defined in the preamble.
----- --------
"Bank Assignment Agreement" means an Assignment Agreement, duly executed
-------------------------
by an Assignor Bank and an Assignee Bank, substantially in the form of Exhibit L
---------
attached hereto.
"Bank Parties" means, collectively, the Agents and the Banks.
------------
"Base Gold Amount" means the Gold equivalent (calculated at the greater of
----------------
(a) the Loan Base Price (as set forth in clause (a) of the definition of such
----------
term), and (b) U.S.$350 per ounce of Gold) of the Total Commitment Amount.
"Bema Bermuda" is defined in the preamble.
------------ --------
"Bema Bermuda Pledge Agreement" means that certain Pledge Agreement
-----------------------------
between Bema Bermuda and the Bank Parties, substantially in the form of the
English translation thereof attached hereto as Exhibit D-2.
-----------
"Bema Bermuda Security Agreement" means that certain Security Agreement
-------------------------------
between Bema Bermuda and the Administrative Agent, substantially in the form of
Exhibit D-4 attached hereto.
-----------
"Bema Chile" means Minera Bema Gold (Chile) Limitada, a limited liability
----------
company organized under the laws of Chile.
"Bema Gold" is defined in the preamble.
--------- --------
"Bema Gold/AGI Subordinated Note" means that certain promissory note in
-------------------------------
the aggregate principal amount of
- 5 -
<PAGE>
U.S.$10,000,000, payable by Bema Gold to the order of AGI and in the form
attached to the Shareholders Agreement as Exhibit O.
"Bema Gold Support Agreement" means that certain Support Agreement between
---------------------------
Bema Gold and the Administrative Agent, substantially in the form of Exhibit C-3
-----------
attached hereto.
"Bema U.S." is defined in the tenth recital.
--------- -------------
"Bema U.S. Pledge Agreement" means that certain Pledge Agreement between
--------------------------
Bema U.S. and the Administrative Agent, substantially in the form of Exhibit C-4
-----------
attached hereto.
"Borrower" is defined in the preamble.
-------- --------
"Borrower Project Costs" mean Project Costs other than those payable
----------------------
pursuant to the Construction Contracts.
"Borrower Security Agreement (U.S. Assets)" means that certain Security
-----------------------------------------
Agreement between the Borrower and the Administrative Agent, substantially in
the form of Exhibit E-1 attached hereto.
-----------
"Borrower's Report (Post-Project Completion)" means a report to the
-------------------------------------------
Agents, the Banks and the Guarantors duly executed by an Authorized
Representative of the Borrower, substantially in the form of Exhibit N-4
-----------
attached hereto relating to the operation and management of the Mine.
"Borrower's Report (Pre-Project Completion)" means a report to the Agents,
------------------------------------------
the Banks, the Guarantors and the Independent Consultant duly executed by an
Authorized Representative of the Borrower, substantially in the form of Exhibit
-------
N-3 attached hereto relating to the status of the construction and development
---
of the Mine.
"Borrowing Date" means the Business Day on which the Loans shall have been
--------------
made pursuant to Section 2.2.
-----------
"Borrowing Request" means a loan request and certificate duly executed by
-----------------
an Authorized Representative of the Borrower and the other Obligors,
substantially in the form of Exhibit B-1 attached hereto.
-----------
"Buffer Zone" means the areas designated as such on the Refugio Project
-----------
Map (Mining Rights).
"Business Day" means:
------------
(a) any day which is not Saturday, Sunday, a legal holiday or any
other day on which banks are authorized or required to be closed in
London, England or New York, New York;
- 6 -
<PAGE>
(b) relative to the making, continuing, conversion, prepaying or
repaying of any Dollar Loans or the calculation of the LIBO Rate, any day
on which dealings in Dollars are carried on in the London interbank
market; and
(c) relative to the making, continuing, conversion, prepaying or
repaying of any Gold Loans, the calculation of the Gold Base Rate, the
determination of the London Price or the determination of the Gold or
Dollar equivalent of any amount based on the London Price, any day on
which dealings in Gold are carried on between members of the LBMA in
London.
"Calculation Date" means each of the Project Completion Date, the Release
----------------
Date and each Payment Date occurring after the Project Completion Date (and, in
the case of any calculation of any financial ratio with respect to the Project
Completion Date or the Release Date to be made prior to the Project Completion
Date or the Release Date, the Project Completion Date or the Release Date, as
the case may be, for such purposes shall be deemed to be the date on which such
dates are then scheduled to occur as set forth in the Development Plan).
"Canadian GAAP" is defined in Section 1.4.
------------- -----------
"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
(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 purposes of this Agreement
and each other Loan Document, 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 (Chile)" means, at any time:
----------------------------------
- 7 -
<PAGE>
(a) obligations issued or guaranteed by the Central Bank or by the
Treasury General of Chile maturing within 90 days from the purchase
thereof (or capable of redemption within the same 90 day period through
repurchase agreements entered into with any financial institutions
referred to in clause (b)); and
----------
(b) demand deposits, time deposits, certificates of deposit or other
obligations (including banker's acceptances and fondos mutuales) maturing
or capable of redemption by the holder not more than 90 days after the
date of acquisition or investment which are issued, accepted or guaranteed
by a banking institution in Chile and which are classified in the risk
category "A" or "B" in the "Acuerdo de Clasificacion de Instrumentos
Financieros de Oferta Publica Adoptado Por la Comision Clasificadora de
Riesgo" appearing from time to time in the "Diario Oficial de la Republica
de Chile".
"Cash Equivalent Investment (U.S.)" means, at any time:
---------------------------------
(a) any security, maturing not more than one year after the purchase
thereof, issued by the United States Treasury, the United States Federal
National Mortgage Association or the United States Federal Home Loan
Mortgage Corporation 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 is (i) rated at least A-l by Standard & Poor's Rating
Group, a division of McGraw Hill, Inc., and P-l by Moody's Investors
Service, Inc., (ii) issued by a corporation or company (other than any
Obligor or Affiliate thereof) and (iii) in certificated form (including
master notes held by The Depository Trust Company, a New York limited
purpose trust company, or one or more of its nominees or custodian banks);
or
(c) any negotiable certificate of deposit or banker's acceptance (in
either case, in certificated form and denominated in U.S. Dollars),
maturing not more than one year after the purchase thereof, which is
issued 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);
which in any case is purchased with funds standing to the credit of any
Project Account (U.S.).
- 8 -
<PAGE>
"Cash Equivalent Investments" means, as the context may require, Cash
---------------------------
Equivalent Investments (Chile) and/or Cash Equivalent Investments (U.S.).
"Cash Flow Prepayment Date" is defined in clause (d) of Section 3.1.
-------------------------- ---------- -----------
"Cash Flow Prepayment Percentage" means, with respect to any prepayment of
-------------------------------
Loans required to be made pursuant to clause (d) of Section 3.1, thirty three
---------- -----------
and one third percent (33 1/3%), provided, however, that following prepayment of
-------- -------
Historical Net Cash Flow pursuant to such clause (d) in an amount of
----------
U.S.$3,333,333, the term "Cash Flow Prepayment Percentage" shall mean fifty
-------------------------------
percent (50%).
"Cash Flow Ratio" means, for any period, an amount equal to the ratio,
---------------
expressed as a percentage, of:
(a) Future Net Cash Flow for such period;
to
(b) Funded Debt Service for such period.
"Cash Flow Schedule" means the schedule setting forth Future Net Cash Flow
------------------
of, and containing other financial and operational data relating to, the Refugio
Project for the period commencing on the date of commencement of Production and
ending on the last day of the Project Period, initially, in the form set forth
in Table 9.1 of the Development Plan and, thereafter, as the same may be amended
from time to time in accordance with clause (b) of Section 1.8.
---------- -----------
"Central Bank" means the Central Bank of Chile.
------------
"Change in Control" means:
-----------------
(a) the failure of AGI to own (and to have sole power to vote and
dispose of), directly and free and clear of all Liens (other than the Lien
in favor of the Bank Parties granted pursuant to the AGI Support
Agreement), 100% of the issued and outstanding share capital (however
designated) of AGRI;
(b) the failure of Bema Gold 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 in favor of the Bank Parties granted pursuant to the
Bema Gold Support Agreement and the Bema U.S. Pledge Agreement and other
Liens permitted to be incurred pursuant to the Bema Gold Support
Agreement), 100% of the issued and outstanding share capital (however
designated) of Bema Bermuda;
- 9 -
<PAGE>
(c) the failure of AGRI to own (and to have sole power to vote and
dispose of), directly and free and clear of all Liens (other than the Lien
in favor of the Bank Parties granted pursuant to the AGRI Pledge
Agreement), (i) 100% of the Class B CMM Shares and (ii) the greater of (x)
50% of the issued and outstanding share capital (however designated) of
the Borrower and (y) such portion of such share capital as is not then
owned by Bema Bermuda;
(d) the failure of Bema Bermuda to own (and to have sole power to
vote and dispose of), directly and free and clear of all Liens (other than
the Lien in favor of the Bank Parties granted pursuant to the Bema Bermuda
Pledge Agreement), either (i) 100% of the Class A CMM Shares not
previously transferred to AGRI or (ii) such portion of the issued and
outstanding share capital (however designated) of the Borrower as is not
then owned by AGRI; or
(e) the initiation of any procedure pursuant to the Shareholders
Agreement, the election of any course of action or the occurrence of any
other circumstance or event, in each case which would result in the
occurrence of any event referred to in clauses (a) through (d) above.
----------- ---
"Change Order" means a Change Order agreed pursuant to the provisions of
------------
clause (b)(1) of Section 3.2 of the Construction Contract referred to in clause
------
(b) of the definition of that term.
---
"Chile" means the Republic of Chile.
-----
"Chilean GAAP" is defined in Section 1.4.
------------ -----------
"Chilean Security Agreements" means, collectively, the Mortgage Over
---------------------------
Mining Concessions, the Mortgage Over Real Estate, the Mortgage Over Water
Rights, the Industrial Pledge, the Promise to Grant Pledges Without Conveyance,
the Promise to Grant Industrial Pledges, each Conditional Assignment of Contract
Rights, the Conditional Assignment of Contract Rights (Foreign Investment
Contract), the Promise to Grant Mortgages Over Real Estate, the Promise to Grant
Mortgages Over Mining Concessions and all Instruments governed by the laws of
Chile which are entered into by the Borrower pursuant to Section 8.1.18.
--------------
"CIBC" is defined in the preamble.
---- --------
"Class A CMM Shares" means that class of the issued and outstanding share
------------------
capital of the Borrower designated as "Series A".
"Class B CMM Shares" means that class of the issued and outstanding share
------------------
capital of the Borrower designated as "Series B".
- 10 -
<PAGE>
"Collateral Agreements" means, collectively, the Support Agreements, the
---------------------
Pledge Agreements, the Security Agreements and all Instruments entered into
pursuant to Section 8.1.18.
--------------
"Commitment" means, relative to any Bank, such Bank's obligation to make
----------
its Loan denominated in Dollars and continue and/or convert such Loan in either
Dollars or Gold, pursuant to the terms and subject to the conditions of this
Agreement.
"Commitment Amount" means (a) in relation to any Bank party hereto on the
-----------------
Effective Date, the amount set forth opposite its name on the signature pages
hereto and (b) in relation to an Assignee Bank which becomes a Bank subsequent
to the Effective Date but prior to the Borrowing Date, the amount assumed from
the Assignor Bank pursuant to the Bank Assignment Agreement by which such
Assignee Bank became a party to this Agreement, in each case as such amount may
be adjusted pursuant to any Bank Assignment Agreement to which such Bank or
Assignee Bank, as the case may be, is a party.
"Commitment Termination Date" means February 28, 1995 or, if earlier, the
---------------------------
date on which any of the following events shall occur:
(a) the occurrence of any Default occurring pursuant to any event
described in Section 9.1.6; or
-------------
(b) immediately when any other Event of Default shall have occurred
and be continuing and the Administrative Agent, acting at the direction of
the Required Banks, shall have given notice to the Borrower that the
Commitments have been terminated.
"Committed Hedging Agreements" is defined in Section 8.1.10.
---------------------------- --------------
"Compliance Certificate" means a certificate duly executed by an
----------------------
Authorized Representative of the Borrower, substantially in the form of Exhibit
-------
J attached hereto.
-
"Conditional Assignment of Contract Rights" means any certain Conditional
-----------------------------------------
Assignment of Contract Rights (Cesion condicional de contratos importantes y/o
de derechos emanados de contratos importantes), among the Borrower and the Bank
Parties, executed in Spanish in substantially the same form as the English
translation thereof attached hereto as Exhibit E-8 and relating individually to
-----------
each Project Document to which the Borrower is a party or beneficiary.
"Conditional Assignment of Contract Rights (Foreign Investment Contract)"
-----------------------------------------------------------------------
means that certain Conditional Assignment of Contract Rights (Foreign Investment
Contract) (Cesion condicional de derechos bajo el Contrato de Inversion
Extranjera), among the Intermediate Owners, the Borrower and the Bank Parties,
executed in Spanish in substantially the same form
- 11 -
<PAGE>
as the English translation thereof attached hereto as Exhibit D-5.
-----------
"Construction Account" is defined in clause (a) of Section 4.1.
-------------------- ---------- -----------
"Construction Contractor (Chile)" means Fluor Daniel Chile Ingenieria y
-------------------------------
Construccion S.A., a company organized and existing under the laws of Chile, or
such other construction company of international repute as shall be satisfactory
to all of the Banks in their reasonable discretion.
"Construction Contractor (Offshore)" means Fluor Daniel Wright Ltd., a
----------------------------------
company organized and existing under the laws of the Province of British
Columbia, or such other construction company of international repute as shall be
satisfactory to all of the Banks in their reasonable discretion.
"Construction Contractors" means, collectively, the Construction
------------------------
Contractor (Chile) and the Construction Contractor (Offshore).
"Construction Contracts" means, collectively, (a) the Agreement for Phase
----------------------
1 Basic Engineering Services for the Refugio Project, made effective as of June
3, 1994, between the Borrower and the Construction Contractor (Chile), (b) the
Agreement for Phase 2 Engineering, Procurement and Construction of the Refugio
Project between the Borrower and the Construction Contractor (Chile) in the form
attached to the Development Plan as Appendix J and (c) the Agreement for the
Offshore Supply of Equipment for the Refugio Project between the Borrower and
the Construction Contractor (Offshore) in the form attached to the Development
Plan as Appendix J./2/
"Construction Contracts Guaranty" means the guaranty of Fluor Corporation,
-------------------------------
a Delaware corporation in favor of the Borrower, as it relates to the
Construction Contractors' obligations under the Construction Contracts in the
form attached to the Construction Contract referred to in clause (b) of the
----------
definition thereof as Exhibit F.
"Construction Sub-Account (Chile)" is defined in clause (b) of Section
-------------------------------- ---------- -------
4.1.
"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
- 12 -
<PAGE>
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/Conversion Notice" means a notice of continuation or
------------------------------
conversion and certificate duly executed by an Authorized Representative of each
Obligor (or, in the case of a notice requesting continuation only, the
Borrower), substantially in the form of Exhibit B-2 attached hereto.
-----------
"Contract Price" has the meaning provided in Section 3.1 of the
--------------
Construction Contract referred to in clause (b) of the definition of that term.
----------
"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.
"Current Ratio" means, at any date, the ratio, expressed as a percentage,
-------------
of:
(a) current assets of the Borrower at such date (excluding, however,
the sum of (i) any balances standing to the credit of the Proceeds Sub-
Account (Debt Service Reserve), the Proceeds Sub-Account (Debt Service
Reserve - Prepayment Proceeds) and the Proceeds Sub-Account (Debt Service
Reserve-Stamp Duty)) at such date, plus (ii) the lesser of (x) any
balances standing to the credit of the Proceeds Account at such date, and
(y) the Required CapEx Balance as in effect at the later to occur of the
Release Date or the Payment Date immediately preceding such date);
to
--
(b) current liabilities of the Borrower at such date (excluding,
however (i) any current portion of any Indebtedness with a scheduled final
maturity which is later than one year after such date and (ii) in the case
of any calculation of the Current Ratio on any date which is less than one
year prior to the Final Maturity Date, any principal of, and interest on,
the Loans).
"Custodian Bank" means Banco BICE or such other bank located in Chile as
--------------
shall be consented to from time to time by the Required Banks.
"Cyprus Amax" means Cyprus Amax Minerals Company, a Delaware corporation.
-----------
"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.
- 13 -
<PAGE>
"Deutsche Bank" is defined in the preamble.
------------- --------
"Development Plan" means that certain Refugio Gold Project Development
----------------
Plan containing a plan for the consummation of the Refugio Project and the
operation of the Mine and incorporating the Approved Budget and the Cash Flow
Schedule, dated October, 1994, together with all appendices thereto (including
the Construction Contracts, the Mining Contract and the Feasibility Studies) in
the form supplied to the Bank Parties' Chilean counsel in connection with the
execution and delivery of this Agreement by each party thereto, as the same may
be amended from time to time pursuant to clause (b) of Section 1.8.
---------- -----------
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
-------------------
Schedule I.
----------
"Discount Rate" means, in connection with the determination of Present
-------------
Value of Future Net Cash Flow, (a) at any time when any Dollar Loans shall be
outstanding at the date of preparation of the relevant Compliance Certificate,
eight percent (8%) per annum, and (b) at all other times, four percent (4%) per
annum.
"DOCLOC Facility" means the revolving loan facility made available by
---------------
Cyprus Amax to AGI pursuant to the DOCLOC Facility Agreement or any successor to
the DOCLOC Facility Agreement implemented pursuant to the undertakings of Cyprus
Amax contained in the DOCLOC Support Agreement.
"DOCLOC Facility Agreement" means the Revolving Credit Agreement, dated as
-------------------------
of April 15, 1994, between AGI and Cyprus Amax in the form attached as Appendix
A to the Notice of Special Meeting of Shareholders of AGI, dated June 30, 1994.
"DOCLOC Support Agreement" means the letter agreement among AGI, Cyprus
------------------------
Amax and the Bank Parties, substantially in the form of Exhibit C-2 attached
-----------
hereto.
"Dollar" and the sign "U.S.$" mean lawful money of the United States of
------ -----
America.
"Dollar Lending Office" means, (a) with respect to each Bank, the office
---------------------
of such Bank designated as such below its signature hereto or such other office
of such Bank as may be designated from time to time by notice from such Bank to
the Administrative Agent and the Borrower, and (b) 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 Bank.
"Dollar Loan" means, relative to each Bank, the portion of such Bank's
-----------
Loan which is from time to time denominated in Dollars.
"Effective Date" is defined in Section 11.8.
-------------- ------------
- 14 -
<PAGE>
"encaje" means the reserve requirement on foreign loans provided for in
------
Chapter XIV of the Compendium of Foreign Exchange Regulations of the Central
Bank.
"Enforcement Event" shall mean either (a) the occurrence of any Event of
-----------------
Default described in Section 9.1.6 with respect to the Borrower or (b) the
-------------
acceleration of all or any portion of the outstanding Principal Amount of the
Loans and/or other Obligations pursuant to Section 9.3 as a result of the
-----------
occurrence of any other Event of Default.
"Environmental Impact Assessment" means the Evaluacion de Impacto
-------------------------------
Ambiental, dated October, 1994, prepared by SRK S.A. in the form attached to the
Development Plan as Appendix H.
"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.
"Environmental Review" means the review of the environmental aspects of
--------------------
the Refugio Project and the Mine contained in, and forming a part of, the
Technical Review.
"Environmental Review Standards" is defined in clause (a) of Section 7.18.
------------------------------ ---------- ------------
"Event of Default" is defined in Section 9.1.
---------------- -----------
"Feasibility Studies" means, collectively, (a) that certain Verde Gold
-------------------
Deposit, Refugio Property, Revised Feasibility Study, dated December, 1992, and
(b) that certain Verde Gold Project, Capital and Operating Cost Estimate Update,
dated February, 1994, in each case as prepared by MRDI.
"Final Maturity Date" means the earlier to occur of (a) the tenth Payment
-------------------
Date or (b) any other date on which the final repayment of the Loans is
scheduled to be made as a consequence of any voluntary or mandatory repayment or
prepayment made pursuant to Section 3.1, 5.1 or 5.5.
----------- --- ---
"Fiscal Quarter" means any quarter of a Fiscal Year.
--------------
"Fiscal Year" means, with respect to any Obligor, any period of twelve
-----------
consecutive calendar months ending on December 31, and references to a Fiscal
Year with a number corresponding to any calendar year (e.g., the "1994 Fiscal
Year") refer to the Fiscal Year ending on the December 31 occurring during such
calendar year.
"Foreign Investment Contract" means the Foreign Investment Contract
---------------------------
executed pursuant to Decree Law 600 (including Article 11 bis thereof) among the
Intermediate Owners, the Borrower and the Government of the Republic of Chile as
in effect on the date hereof.
- 15 -
<PAGE>
"F.R.S. Board" means the Board of Governors of the Federal Reserve System.
------------
"Funded Debt Service" means, for any period, the amount in Dollars (which,
-------------------
in the case of any Funded Indebtedness which is not denominated in Dollars shall
be the Dollar equivalent thereof calculated pursuant to the definition of
"Funded Indebtedness" (together with interest and other amounts accruing in
--------------------
respect of the Principal Amount of any Funded Indebtedness)), which will be
necessary in order to pay in full all principal of and interest (after taking
into account all Interest Rate Protection Agreements in effect during such
period which shall have been shown, to the satisfaction of the Administrative
Agent, to provide hedging in respect of all relevant interest payments) and
other amounts accruing in respect of Funded Indebtedness which (in the case of
all such principal, interest or other amounts) is scheduled to become due and
payable during such period (or, in the case of any determination of Funded Debt
Service for the purposes of calculating Historical Net Cash Flow for any period,
such amount which was actually paid during such period).
"Funded Indebtedness" means at any date:
-------------------
(a) the Principal Amount of all outstanding Dollar Loans at such
date; and
(b) the Dollar equivalent of the Principal Amount of all outstanding
Gold Loans at such date calculated at the Loan Base Price with respect to
each such Gold Loan.
"Future Net Cash Flow" means, for any period the remainder of:
--------------------
(a) the Dollar equivalent (calculated at the date of determination of
Future Net Cash Flow (i) in the case of any such ounces of Gold which are
covered by a Hedging Agreement in effect on the relevant date of
calculation, at the price for delivery of Gold specified in such Hedging
Agreement (or, if no price other than a floor price for delivery of Gold
is specified in such Hedging Agreement, the minimum price for delivery of
Gold referred to therein), (ii) in the case of any such ounces of Gold
scheduled to be produced during a period when Hedged Project Costs are
then scheduled to be incurred (other than ounces of Gold which are covered
by a Hedging Agreement of the nature referred to in clause (a)(i)), at
-------------
U.S.$360 per ounce of Gold, and (iii) in the case of all other ounces of
Gold, at U.S.$325 per ounce of Gold) of the remainder of (x) the total
estimated ounces of Gold from Production during such period as calculated
from the Cash Flow Schedule, less (y) the aggregate payments of ounces of
Gold payable during such period by way of production royalties calculated
and payable as a percentage of Gold produced and sold in connection with
the Refugio Project,
- 16 -
<PAGE>
less
----
(b) Project Costs for such period (excluding, however, Funded Debt
Service for such period).
"GAAP" means, as the context may require, either of Canadian GAAP, Chilean
----
GAAP or U.S. GAAP.
"Gold" means gold bullion measured in fine ounces troy weight.
----
"Gold Base Rate" means, with respect to any Gold Loan outstanding for any
--------------
Interest Period, the relevant Reuters' Rate for such Interest Period.
"Gold Lending Office" means, (a) with respect to each Bank, an office
-------------------
maintained by or on behalf of such Bank designated as such below its signature
hereto or such other office maintained by or on behalf of such Bank in London,
England as may be designated from time to time by notice from such Bank to the
Administrative Agent and the Borrower, and (b) with respect to the
Administrative Agent, the office of the Administrative Agent designated as such
from time to time by notice to the Borrower.
"Gold Loan" means, relative to each Bank, the portion of such Bank's Loan
---------
which is from time to time denominated in Gold.
"Gold Obligation" is defined in clause (a) of Section 5.12.
--------------- ---------- ------------
"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.
"Group" is defined in Section 10.6.
----- ------------
"Guarantors" is defined in the preamble.
---------- --------
"Guaranty" 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, to furnish funds for the maintenance of net
worth, working capital or earnings of any Person or to purchase any products,
properties or services of any Person primarily to enable such Person to pay any
obligation or to assure any creditor against any loss) the debt, obligation, or
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 such Person's
obligation under any Guaranty shall (subject to any limitation set forth
therein) be deemed to be the outstanding principal amount (or maximum
outstanding principal amount, if larger) of
- 17 -
<PAGE>
the debt, obligation, or other liability guaranteed thereby or, if such
principal amount is not stated therein, or determinable pursuant to the
provisions thereof, the maximum liability reasonably anticipated in respect
thereof as determined in good faith by the Person obligated thereunder to the
reasonable satisfaction of the Administrative Agent.
"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.
"Hedged Project Costs" is defined in Section 8.1.10.
-------------------- --------------
"Hedging Agreements" is defined in Section 8.1.10.
------------------ --------------
"Hedging Counterparties" is defined in Section 8.1.10.
---------------------- --------------
"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 Hedging Agreements and Interest Rate Protection
Agreements).
"Historical Net Cash Flow" means, for any period, the excess, if any, of:
------------------------
(a) the excess, if any, of (i) the actual gross revenues realized by
the Borrower (including the net Dollar proceeds of the sale of ounces of
Gold from Production actually received by the Borrower) during such
period, less (ii) the Dollar equivalent (calculated at the date of payment
----
of any relevant production royalty) of the aggregate payments of ounces of
Gold actually paid during such period by way of production royalties
calculated and payable as a percentage of Gold produced and sold in
connection with the Refugio Project,
less
----
(b) the Project Costs actually paid in such period (and, in
determining Project Costs for such period any Project Operating Costs of
the nature referred to in clause (d) of the definition of such term which
----------
are actually paid in Gold shall be the Dollar equivalent thereof
calculated at the date of payment thereof).
"Impermissible Qualification" means, relative to the opinion or report of
---------------------------
any independent certified public accountant
- 18 -
<PAGE>
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;
(b) which relates to any limited scope of examination of matters
relevant to such financial statement which has resulted from any action of
the relevant 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
the Borrower or either Guarantor to be in default of any of its
obligations under Section 8.2.4 or Section 8.2 of the relevant Support
------------- -----------
Agreement, as the case may be.
"Indebtedness" of any Person means, without duplication:
------------
(a) all obligations of such Person for borrowed money or precious
metals (including (i) in the case of such obligations, all notes payable
and drafts accepted representing extensions of credit, (ii) in the case of
any such Person which is an Obligor, such Obligor's Obligations, and (iii)
in the case of such precious metals, 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) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such Person
as of the date at which Indebtedness is to be determined;
(e) net payment liabilities of such Person under all Hedging
Obligations;
(f) 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)
- 19 -
<PAGE>
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
(g) all Contingent Liabilities of such Person in respect of any of
the foregoing.
"Indemnified Liabilities" is defined in Section 11.4.
----------------------- ------------
"Indemnified Parties" is defined in Section 11.4.
------------------- ------------
"Indemnity Letters" is defined in clause (e) of Section 11.4.
----------------- ---------- ------------
"Independent Consultant" means Pincock, Allen & Holt or such other
----------------------
independent mining consultant as is retained by the Technical Agent (in
consultation with the Required Banks but, so long as no Default shall have
occurred and be continuing, with the prior written consent of the Borrower, such
consent not to be unreasonably withheld or delayed) acting on behalf of, and in
consultation with, the Banks.
"Independent Consultant's Certificate" means a certificate duly executed
------------------------------------
by an Authorized Representative of the Independent Consultant, substantially in
the form of Exhibit I-1 attached hereto.
-----------
"Industrial Pledge" means that certain Industrial Pledge (Prenda
-----------------
Industrial), among the Borrower and the Bank Parties, executed in Spanish in
substantially the same form as the English translation thereof attached hereto
as Exhibit E-5.
-----------
"Initial Loan Amount" is defined in Section 2.1.
------------------- -----------
"Initial Note" means any promissory note issued by the Borrower in favor
------------
of any Bank, executed in Spanish in substantially the same form as the English
translation thereof attached hereto as Exhibit A-1.
-----------
"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" means Barton Consulting Limited or such other
--------------------
insurance consultant of international repute as shall be satisfactory to the
Technical Agent (in consultation with the Required Banks) in its reasonable
discretion.
- 20 -
<PAGE>
"Insurance Consultant's Certificate" means a certificate duly executed by
----------------------------------
the Insurance Consultant, substantially in the form of Exhibit I-2 attached
-----------
hereto.
"Insurance Summary" means the summary of the insurance requirements of,
-----------------
and policies in effect for, the Refugio Project delivered pursuant to clause (b)
----------
of Section 6.9.
-----------
"Interest Period" means, relative to any Loan of either type:
---------------
(a) initially, the period from the date such Loan is made (or, as the
case may be, converted from a different type of Loan) to the day which
numerically corresponds to such date one, two, three or six months
thereafter (or such other date as agreed between all the Banks and the
Borrower and, subject, without prejudice to the provisions of Section 5.1,
-----------
in the case of each such period with respect to any Gold Loan, to the
availability of funds for such period to each Bank) as the Borrower may
irrevocably select in the Borrowing Request delivered pursuant to Section
-------
2.2 or, in the case of any such Loan which is to be converted from a
---
different type of Loan, the relevant Continuation/Conversion Notice in
respect of such conversion delivered pursuant to Section 2.3;
-----------
(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, two, three or six months
thereafter (or such other date as agreed between all the Banks and the
Borrower and, subject as provided in clause (a)) as the Borrower may
----------
irrevocably select in the relevant Continuation/Conversion Notice
delivered pursuant to Section 2.3;
-----------
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 of one month's or such other duration as shall be required
in order to comply with the other provisions of this Agreement;
(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 scheduled Final Maturity Date;
- 21 -
<PAGE>
(f) no more than one Interest Period shall be in effect at any one time
with respect to any type of Loans;
(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; and
(h) the availability of any Interest Period shall be subject to
approval thereof from the Central Bank.
"Interest Rate Protection Agreement" is defined in Section 8.1.11.
---------------------------------- --------------
"Interest Rate Protection Counterparty" is defined in Section 8.1.11.
------------------------------------- --------------
"Intermediate Owners" is defined in the preamble.
------------------- --------
"Investment" means, relative to any Person:
----------
(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 Guaranty made or issued 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.
"IVA" means value added tax (impuesto al valor agregado) as charged in
---
Chile on the sale of goods and the provision of services.
"IVA Advance" means the non-interest bearing advance in an amount not in
-----------
excess of U.S.$1,200,000 made by Bema Bermuda and Bema Chile to the Borrower
arising from the payment of IVA by Bema Bermuda and Bema Chile for the benefit
of the Borrower prior to the Effective Date.
"LBMA" means The London Bullion Market Association.
----
"Liabilities Certificate" means a certificate, duly executed by the chief
-----------------------
financial or accounting Authorized Representative of the Borrower, substantially
in the form of
- 22 -
<PAGE>
Exhibit K attached hereto and satisfying each of the conditions set forth in
---------
clause (n) of Section 8.1.1.
---------- -------------
"LIBO Rate" means, relative to any Interest Period for any Dollar Loans
---------
(or, for the purposes of clause (a) of the definition of "Reuters' Rate", for
----------
the Dollar equivalent (calculated as set forth therein) of any Gold Loans), the
rate of interest equal to the average (rounded upwards to the nearest four
decimal places) of the quotes for "LIBOR", as such quotes appear on the Reuters'
Screen LIBO Page (or such other page or service in replacement thereof as may be
utilized by banks generally from time to time for the purpose of displaying
quotes for London Interbank Offered Rates) as at 11:00 a.m. (London time) for
the number of months (or different period) comprising such Interest Period,
calculated at the date which is two Business Days prior to the first day of such
Interest Period; provided, however, that in the event that less than two such
-------- -------
quotes appear on such screen, page or service at such time, the Administrative
Agent will request the principal London office of each Bank to provide the
Administrative Agent with its quotation for offers of Dollar deposits to leading
banks in the London interbank market for such period and in an amount comparable
to the principal amount of such Bank's Dollar Loan (or, in the case of any
determination of the LIBO Rate made for purposes of the definition of "Reuters'
Rate", the Dollar equivalent (calculated as set forth therein) of such Bank's
Gold Loan), and the "LIBO Rate" shall equal the average of such quoted rates.
---------
"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, with respect to any Bank at any time, such Bank's Loan
----
outstanding at such time (whether denominated in Dollars or Gold).
"Loan Base Price" means, (a) in the case of the Gold Loans converted from
---------------
Dollar Loans on the Borrowing Date pursuant to the penultimate sentence of the
final paragraph of Section 2.2, the London Price as in effect on the date which
-----------
is two Business Days prior to the Borrowing Date, (b) in the case of any Gold
Loans converted from Dollar Loans pursuant to any Continuation/Conversion Notice
or otherwise, the greater of (i) the Loan Base Price with respect to such Dollar
Loans, and (ii) the London Price as in effect two Business Days prior to the
relevant date of conversion, and (c) in the case of any Dollar Loans converted
from Gold Loans pursuant to any Continuation/Conversion Notice or otherwise, the
lesser of (i) the Loan Base Price with respect to such Gold Loans, and (ii) the
London Price as in effect two Business Days prior to the relevant date of
conversion.
- 23 -
<PAGE>
"Loan Document" means any of this Agreement, the Notes, the Notes
-------------
Operating Procedures Agreement, the Collateral Agreements, the Project Account
Agreements, the Subordination Agreements, the Agreement Regarding Trust
Indenture 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
delivered to, and representing obligations incurred to, either Agent or any Bank
(including, at any time, any Hedging Agreement or any Interest Rate Protection
Agreement entered into directly by the Borrower in accordance with Section
-------
8.1.10 or 8.1.11, respectively, and which, in each case, is provided by any Bank
------ ------
which remains a Bank at such time).
"Loan Life Ratio" means, at any date, the ratio, expressed as a
---------------
percentage, of:
(a) the Present Value of Future Net Cash Flow for the period
commencing on such date and ending on the then scheduled Final Maturity
Date
to
(b) Funded Indebtedness at such date.
"London Gold Fixing" means a gold price fixing meeting among the five
------------------
members from time to time of the London gold market.
"London Price" means, on any day, the fixing price per fine ounce troy (in
------------
Dollars) for gold as announced at the afternoon London Gold Fixing for such day;
provided, however, that if the afternoon London Gold Fixing shall not have
-------- -------
occurred for such day, the "London Price" for such day shall be the fixing price
------------
per fine ounce troy (in Dollars) for gold as announced at the morning London
Gold Fixing for such day or if the morning London Gold Fixing shall not have
occurred for such day, the "London Price" for such day shall be the publicly
------------
quoted price per fine ounce troy (in Dollars) for Gold on such other accessible
international gold market (allowing for physical delivery of such Gold) as may
be reasonably selected by the Administrative Agent; and, provided, further,
-------- -------
however, that in the event the Administrative Agent shall have been unable to
-------
select any other such international gold market, then the "London Price" for
------------
such day shall mean such price as the Agents shall reasonably determine. In the
event that such day is not a Business Day, then the "London Price" shall be the
------------
London Price on the most recently preceding Business Day.
"Materially Adverse Effect" means, with respect to any Obligor, 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, or is or would be
reasonably likely to be materially adverse, to the
- 24 -
<PAGE>
ability of such Obligor to make any payment or perform any other material
obligation required under any Operative Document or, in the case of the
Borrower, to develop and operate the Mine substantially in accordance with the
Development Plan.
"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.
"Mechanical Completion" means the achievement of each of "Mechanical
---------------------
Completion and Performance Tests A & B" under (and as defined in) Exhibit C to
the Construction Contract referred to in clause (b) of the definition of that
----------
term and certain production, economic and/or legal criteria referred to in the
Mechanical Completion Certificate.
"Mechanical Completion Certificate" means a certificate duly executed in
---------------------------------
one or more counterparts by an Authorized Representative of each of the Borrower
and the Independent Consultant, substantially in the form of Exhibit I-3
-----------
attached hereto.
"Mechanical Completion Date" means the first Business Day immediately
--------------------------
following the day on which the Technical Agent shall have received counterparts
of the Mechanical Completion Certificate executed by each Person referred to in
the definition thereof.
"Milestone Failure" means the failure (in the opinion of the Required
-----------------
Banks acting in consultation with the Independent Consultant) to achieve any of
the stages during construction of the Mine set forth below in accordance with
the provisions and standards set forth in the Construction Contracts on or prior
to the date set forth opposite such stage:
<TABLE>
<CAPTION>
Stage Date
-------------------------------------------------------- ------------------
<S> <C>
Temporary construction camp completion March 31, 1995
Water supply system procurement March 31, 1995
Primary crusher and coarse ore
stockpile foundations complete June 30, 1995
ADR plant mechanically complete September 30, 1995
Leach ponds mechanically complete December 31, 1995
Crushing plant mechanically complete December 31, 1995.
</TABLE>
"Mine" means (a) the Verde gold deposit at the site known as the Refugio
----
gold property, located 120 kilometres east of Copiapo in North Central Chile,
and (b) those certain associated beneficiation facilities, together with all
plant sites, waste dumps, ore dumps, crushing circuits, heap leach pads,
abandoned heaps, power supply systems and ancillary and infrastructure
facilities located thereat which are used in connection with the operation
thereof and in each case as described in further detail in the Development Plan
and the Construction Contracts.
- 25 -
<PAGE>
"Mining Contract" means that certain agreement between the Borrower and
---------------
the Mining Contractor in the form attached to the Development Plan as Appendix
G.
"Mining Contractor" means Eltin (Chile) S.A. or such other mining company
-----------------
of international repute as shall be satisfactory to all of the Banks in their
reasonable discretion.
"Mining Rights" means all interests in the surface of the lands, the
-------------
minerals in (or that may be extracted from) the 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 used by or necessary to the
Borrower to operate the Mine.
"Monthly Report" means a report to the Agents and the Banks from the
--------------
Independent Consultant, substantially in the form of Exhibit N-2 attached hereto
-----------
relating to the status of the construction and development of the Mine, and
relating to each consecutive calendar monthly period occurring after the
Effective Date and prior to the Project Completion Date.
"Montreal Trust" means Montreal Trust Company of Canada.
--------------
"Mortgage Over Mining Concessions" means that certain Mortgage Over Mining
--------------------------------
Concessions (Hipoteca de Concesiones Mineras), among the Borrower and the Bank
Parties, executed in Spanish in substantially the same form as the English
translation thereof attached hereto as Exhibit E-2 and relating to those mining
-----------
concessions referred to in Item 2 ("Mortgaged Mining Concessions") of the
------ ----------------------------
Disclosure Schedule.
"Mortgage Over Real Estate" means that certain Mortgage Over Real Estate
-------------------------
(Hipoteca de Inmuebles), among the Borrower and the Bank Parties, executed in
Spanish in substantially the same form as the English translation thereof
attached hereto as Exhibit E-3 and relating to that real estate referred to in
-----------
Item 3 ("Mortgaged Real Estate") of the Disclosure Schedule.
------ ---------------------
"Mortgage Over Water Rights" means that certain Mortgage Over Water Rights
--------------------------
(Hipoteca de Derechos de Aguas), among the Borrower and the Bank Parties,
executed in Spanish in substantially the same form as the English translation
thereof attached hereto as Exhibit E-4 and relating to those water rights
-----------
referred to in Item 4 ("Mortgaged Water Rights") of the Disclosure Schedule.
------ ----------------------
"MRDI" means Mineral Resource Development Inc.
----
"1990 Secured Debentures" means those certain secured convertible
-----------------------
debentures issued pursuant to that certain Indenture, dated as of June 1, 1990,
between Bema Gold and Central Guaranty Trust Company of Canada (as predecessor
of Montreal Trust), as trustee.
- 26 -
<PAGE>
"1994 Convertible Debentures" means those certain unsecured convertible
---------------------------
debentures in an aggregate principal amount of U.S.$33,000,000 issued pursuant
to that certain Trust Indenture, dated as of September 30, 1994, between Bema
Gold and Montreal Trust, as trustee.
"Non-Core Zone Property Rights" means:
-----------------------------
(a) a right of way from Chile and from the Chilean Army in respect of
the access road appearing on the Refugio Project Map (Surface Rights);
(b) easements from Chile and from the Chilean Army in respect of the
water pipeline (including all the installations required for the adequate
extraction of water from the water boreholes) and electricity line and
maintenance roads in respect thereof appearing as the water pipeline and
the right of way requested from Chile on the Refugio Project Map (Surface
Rights);
(c) the acquisition of the right of use of the surface lands
currently appearing as "Leased Lands" from the Chilean Army on the Refugio
Project Map (Surface Rights);
(d) easements from the Chilean Army including water pipeline,
electricity line, maintenance roads, camp, plant, internal rights of way
and other related facilities over the surface lands appearing as "Leased
Lands" from the Chilean Army on the Refugio Project Map (Surface Rights);
(e) the surface lands currently owned by Chile appearing on the
Refugio Project Map (Surface Rights) (or, in lieu thereof, easements of
the nature referred to in clause (d) in respect of the plot of land
----------
referred to in this clause);
(f) mining easements from the holders of each of the relevant mining
concessions in the "Access Zone Property (Requested)" appearing on the
Refugio Project Map (Mining Rights);
(g) mining easements over surface lands relating to the construction
and development of the Refugio Project from the holders of the mining
concessions in the Outside Zone; and
(h) mining concessions Hielos 1 through 9 and Lagunas 1 through 11 in
the Buffer Zone.
"Non-Core Zone Property Rights Target Acquisition Date" means the date
-----------------------------------------------------
which is three months after the Effective Date.
- 27 -
<PAGE>
"Non-Core Zone Statutory Easements" means easements to which the Borrower
---------------------------------
is entitled to apply for pursuant to Articles 120 through 125 of the Mining Code
of Chile and the pertinent provisions of the Water Code of Chile as a result of
the mining concessions relating to the Refugio Project owned by the Borrower
which easements (together with the Mining Rights owned by the Borrower on the
Effective Date) grant the Borrower the right to:
(a) construct and operate the relevant facilities constituting the
Mine as contemplated by the Development Plan; and
(b) access the Refugio Property (including the Mine) by each of roads
and water pipelines (including all the installations required for the
adequate extraction of water from the water boreholes).
"Non-Material Approvals" is defined in clause (a)(ii) of Section 7.16.
---------------------- -------------- ------------
"Notes" means, collectively, the Initial Notes and the Supplemental Notes.
-----
"Notes Operating Procedures Agreement" means that certain Notes Operating
------------------------------------
Procedures Agreement among the Administrative Agent, the Custodian Bank and the
Borrower, executed in Spanish in substantially the same form as the English
translation thereof attached hereto as Exhibit A-3.
-----------
"Obligations" means, with respect to any Obligor, all obligations of such
-----------
Obligor with respect to the repayment or performance of all obligations
(monetary or otherwise) of such Obligor arising under or in connection with this
Agreement and each other Loan Document.
"Obligors" means, collectively, the Borrower, the Intermediate Owners and
--------
the Guarantors.
"OECD" means the Organization for Economic Cooperation and Development.
----
"Operative Documents" means, collectively, the Loan Documents, the Project
-------------------
Documents, the DOCLOC Support Agreement and the DOCLOC Facility Agreement.
"Organic Document" means with respect to (a) the Borrower, its Amended and
----------------
Restated By-Laws (Estatutos) registered on November 18, 1992 and in the form
attached to the Shareholders Agreement as Exhibit B, as amended in the manner
required pursuant to clause (a)(iii) of Section 6.2; (b) Bema Chile, its duly
--------------- -----------
registered by-laws (Estatutos); (c) AGI, AGI Chile or AGRI, its certificate of
incorporation and its by-laws; (d) Bema U.S., its articles of incorporation and
its by-laws; (e) Bema Gold, its memorandum and articles of association; (f) Bema
Bermuda, its memorandum of association and its bye-laws; and (g) any Obligor,
- 28 -
<PAGE>
all shareholder agreements (including, with respect to the Borrower, the
Shareholders Agreement), voting trusts, and similar arrangements applicable to
any of its authorized shares of capital stock or other equity interests.
"ounce of Gold" means a fine ounce troy weight of gold in a form readily
-------------
tradeable with members of the LBMA from time to time.
"Outside Zone" means the areas designated as such on the Refugio Project
------------
Map (Mining Rights).
"Ownership Percentage" means, with respect to either Guarantor at any
--------------------
time, such Guarantor's direct and/or indirect ownership interest (expressed as a
percentage and calculated to the nearest three decimal places) of the Class A
CMM Shares and the Class B CMM Shares considered as a whole, at such time. The
Ownership Percentage of each Guarantor shall be altered from time to time to
reflect adjustments to the "Ownership Interest" pursuant to the Shareholders
Agreement.
"Participant" is defined in Section 11.11.2.
----------- ---------------
"Payment Date" means each June 30 and December 31, commencing with the
------------
first such date to follow or coincide with the earlier to occur of (a) December
31, 1996 and (b) the date which falls six calendar months after the Mechanical
Completion Date.
"Percentage" means, relative to any Bank and at any time, (a) if any Loans
----------
(calculated, in the case of Gold Loans, at the Dollar equivalent thereof) are
outstanding, the ratio (expressed as a percentage) of (i) the Principal Amount
of such Bank's Loans at such time to (ii) the Principal Amount of all the Banks'
Loans at such time or (b) if no Loans are outstanding, the ratio (expressed as a
percentage) of (i) such Bank's Commitment Amount at such time to (ii) the Total
Commitment Amount; provided, however, that at any time when the Banks shall have
-------- -------
no further Commitments hereunder and all Obligations of each Obligor in
connection with each Loan Document (excluding any Hedging Agreement or Interest
Rate Protection Agreement) shall have been paid and performed in full then, to
the extent any Hedging Agreement or Interest Rate Protection Agreement shall
then be outstanding, the term "Percentage" means, relative to any Bank which is
a party to any such Instrument and at any time, the ratio (expressed as a
percentage) of (c) such Bank's net exposure under all such Instruments to which
it is a party, to (d) the net exposure of all Banks under all such Instruments
to which any Bank is a party.
"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.
- 29 -
<PAGE>
"Peso" means lawful money of Chile.
----
"Pledge Agreements" means, collectively, the AGRI Pledge Agreement, the
-----------------
Bema Bermuda Pledge Agreement and the Bema U.S. Pledge Agreement.
"Political Risk Bank" means any Bank which shall have elected by notice to
-------------------
the Borrower and the Guarantors at any time on or prior to the Release Date to
take out Political Risk Insurance.
"Political Risk Insurance" means, with respect to any Political Risk Bank,
------------------------
a policy of insurance in form and substance satisfactory to such Political Risk
Bank naming such Political Risk Bank as beneficiary and insuring such Political
Risk Bank for such coverages and against such risks with respect to the
Borrower's Obligations to pay the Principal Amount of (and interest accruing on)
such Political Risk Bank's Loan as would be customarily offered by the Export
Development Corporation, the Multilateral Insurance Guaranty Agency, the
Overseas Private Insurance Corporation or any other Person providing equivalent
insurance in transactions similar to those contemplated by this Agreement and
the other Operative Documents.
"Political Risk Premium" means, with respect to any Political Risk Bank,
----------------------
the excess, if any, of (a) the cost (expressed as a percentage rate per annum of
the amount of such Political Risk Bank's Loans insured pursuant to Political
Risk Insurance in effect at such time) to such Political Risk Bank of such
Political Risk Insurance at such time, less (b) 0.75% per annum.
"Present Value of Future Net Cash Flow" means, for any period (a
-------------------------------------
"Calculation Period"), the aggregate of discounted Future Net Cash Flow for such
-------------------
period calculated as set forth in this definition. Without prejudice to clause
------
(a) of Section 1.8, discounted Future Net Cash Flow for any Calculation Period
--- -----------
shall be determined, in respect of any Calculation Period which does not
coincide with any single period referred to in the Cash Flow Schedule, on a pro
rata basis calculated from the periods set forth in the Cash Flow Schedule and
in the case of any determination of Future Net Cash Flow made for purposes of
determining the Loan Life Ratio or the Project Life Ratio, the Calculation
Period shall be divided into consecutive periods (each a "Discount Period") of
---------------
six months (or, in the case of the last such period, the period commencing on
the last day of the penultimate such period and ending on the last day of the
Calculation Period), and shall be discounted, with respect to any Future Net
Cash Flow scheduled to accrue during any Discount Period, at the relevant
Discount Rate to the first day of such Calculation Period from the day which
represents the mid-point of such Discount Period.
"Principal Amount" means, (a) with respect to any Gold Loan outstanding at
----------------
any date, the aggregate principal amount
- 30 -
<PAGE>
(calculated in ounces of Gold) of such Gold Loan at such date, and (b) with
respect to any Dollar Loan outstanding at any date, the aggregate principal
amount (calculated in Dollars) of such Dollar Loan at such date.
"Proceeds Account" is defined in clause (a) of Section 4.2.
---------------- ---------- -----------
"Proceeds Sub-Account (Chile)" is defined in clause (d) of Section 4.2.
---------------------------- ---------- -----------
"Proceeds Sub-Account (Collateral Collections)" is defined in clause (a)
--------------------------------------------- ----------
of Section 4.2.
-----------
"Proceeds Sub-Account (Debt Service Reserve)" is defined in clause (a) of
------------------------------------------- ----------
Section 4.3.
-----------
"Proceeds Sub-Account (Debt Service Reserve - Prepayment Proceeds)" is
-----------------------------------------------------------------
defined in clause (a) of Section 4.3.
---------- -----------
"Proceeds Sub-Account (Debt Service Reserve - Stamp Duty)" is defined in
--------------------------------------------------------
clause (a) of Section 4.3.
-----------
"Proceeds Sub-Account (Other Collections)" is defined in clause (a) of
---------------------------------------- ----------
Section 4.2.
-----------
"Process Agent" is defined in Section 11.13.
------------- -------------
"Process Agent Acceptance" means a letter from the Process Agent to the
------------------------
Administrative Agent, substantially in the form of Exhibit M attached hereto.
---------
"Production" means, for any period, the number of ounces of Gold contained
----------
in dore which have been produced, or (in the case of any period or portion
thereof to occur in the future) which are scheduled in the Cash Flow Schedule to
be produced, at the Mine during such period.
"Production (Hedging Adjusted)" means, for any period, the excess of (a)
-----------------------------
Production for such period less (b) Funded Debt Service, if any, for such period
----
in respect of Funded Indebtedness denominated in Gold.
"Project Account Agreement (Chile)" means that certain Project Account
---------------------------------
Agreement, among the Administrative Agent, the Project Account Bank (Chile), and
the Borrower, substantially in the form of the English translation thereof
attached hereto as Exhibit F-2.
-----------
"Project Account Agreement (U.S.)" means that certain Project Account
--------------------------------
Agreement, among the Administrative Agent, the Project Account Bank (U.S.), and
the Borrower, substantially in the form of Exhibit F-1 attached hereto.
-----------
- 31 -
<PAGE>
"Project Account Agreements" means, collectively, the Project Account
--------------------------
Agreement (U.S.) and the Project Account Agreement (Chile).
"Project Account Bank (Chile)" means Banco BICE or such other bank located
----------------------------
in Chile with which, from time to time with the consent of the Required Banks,
the Construction Sub-Account (Chile) and the Proceeds Sub-Account (Chile) shall
be maintained.
"Project Account Bank (U.S.)" means The Chase Manhattan Bank, N.A. or such
---------------------------
other bank located in New York City with which, from time to time with the
consent of the Required Banks, the Construction Account, the Proceeds Sub-
Account (Debt Service Reserve), the Proceeds Sub-Account (Debt Service Reserve -
Prepayment Proceeds), the Proceeds Sub-Account (Debt Service Reserve - Stamp
Duty) and the Proceeds Account shall be maintained.
"Project Account Banks" means, collectively, the Project Account Bank
---------------------
(Chile) and the Project Account Bank (U.S.).
"Project Accounts" means, collectively, the Project Accounts (Chile) and
----------------
the Project Accounts (U.S.).
"Project Accounts (Chile)" means, collectively, the Construction Sub-
------------------------
Account (Chile) and the Proceeds Sub-Account (Chile).
"Project Accounts (U.S.)" means, collectively, the Construction Account,
-----------------------
the Proceeds Sub-Account (Debt Service Reserve), the Proceeds Sub-Account (Debt
Service Reserve -Prepayment Proceeds), the Proceeds Sub-Account (Debt Service
Reserve - Stamp Duty) and the Proceeds Account.
"Project Assets" means (a) all properties, assets or other rights, whether
--------------
real or personal, tangible or intangible, now owned or hereafter acquired by or
for the benefit of the Borrower, which are used or intended for use in or
forming part of the Mine, including all properties, assets or other rights
acquired by the Borrower with the proceeds of the Loans, and (b) without
limiting the generality of the foregoing, all of the Refugio Project Properties.
"Project Capital Costs" means, for any period, the aggregate of all
---------------------
Capital Expenditures scheduled to be, or, as the case may be, actually paid in
accordance with the Cash Flow Schedule (or, in the case of any such payment
scheduled to be, or, as the case may be, actually paid prior to Project
Completion, the Approved Budget) by the Borrower during such period in respect
of the Refugio Project.
"Project Completion" means the date following the Mechanical Completion
------------------
Date on which certain production, economic and/or legal criteria referred to in
the Project Completion Certificate shall have been achieved.
- 32 -
<PAGE>
"Project Completion Certificate" means a certificate (together with all
------------------------------
attachments thereto) duly executed in one or more counterparts by an Authorized
Representative of each of the Borrower and the Independent Consultant,
substantially in the form of Exhibit I-4 attached hereto.
-----------
"Project Completion Date" means the first Business Day immediately
-----------------------
following the day on which the Technical Agent shall have received counterparts
of the Project Completion Certificate executed by each Person referred to in the
definition thereof.
"Project Costs" means, for any period, the Project Operating Costs and the
-------------
Project Capital Costs for such period.
"Project Documents" means, collectively, (a) the Construction Contracts,
-----------------
the Construction Contracts Guaranty, the Mining Contract, the Shareholders
Agreement, the Foreign Investment Contract, the Refugio Project Agreement and
the Data Transfer Agreement in the form of Exhibit E to the Shareholders
---------
Agreement in each such case in the form provided to the Bank Parties in
connection with their execution and delivery of this Agreement, (b) all other
Instruments referred to in Item 5 ("Project Documents") of the Disclosure
------ -----------------
Schedule, in each such case in the form provided to the Administrative Agent
pursuant to Section 6.7, (c) all Hedging Agreements and Interest Rate Protection
-----------
Agreements not constituting Loan Documents and (d) all other Instruments
required to be provided to the Technical Agent pursuant to clause (r) of Section
---------- -------
8.1.1, in each case in the form supplied pursuant to such clause.
-----
"Project Life Ratio" means, at any date, the ratio, expressed as a
------------------
percentage, of:
(a) the Present Value of Future Net Cash Flow for the period
commencing on such date and ending on the last day of the Project Period,
to
(b) Funded Indebtedness at such date.
"Project Operating Costs" means, for any period, the aggregate of all
-----------------------
payments scheduled to be, or, as the case may be, actually paid by the Borrower
to any Person (excluding, however, any payment by the Borrower to any Affiliate
of the Borrower permitted to be made pursuant to Section 8.2.7) during such
-------------
period in accordance with the Cash Flow Schedule (or, in the case of any such
payment scheduled to be, or, as the case may be, actually paid prior to Project
Completion, the Approved Budget) together with any applicable income taxes
scheduled to be, or, as the case may be, actually paid during such period, in
each such case to the extent that such payments are scheduled to be paid in
connection with the operation of the Mine, including:
- 33 -
<PAGE>
(a) the cash costs scheduled to be, or, as the case may be, actually
paid in accordance with the Cash Flow Schedule (or, as set forth above,
the Approved Budget) during such period in connection with the operation,
maintenance and reclamation of the Mine in order to mine, crush, leach,
process, refine and deliver Project Output for sale;
(b) all profit, income, property and other taxes (including encaje)
imposed by any Governmental Agency, in each such case scheduled to be, or,
as the case may be, actually paid during such period;
(c) all payments scheduled to be, or as the case may be, actually
paid under royalty agreements (including instruments creating or
transferring Mining Rights) during such period (excluding, however,
payments by way of production royalties calculated and payable as a
percentage of Gold produced and sold in connection with the Refugio
Project); and
(d) Funded Debt Service and payments in respect of Hedging Agreements
or Interest Rate Protection Agreements entered into directly by the
Borrower in accordance with Section 8.1.10 or 8.1.11, respectively, for
-------------- ------
such period.
"Project Output" means all products from the Mine including Gold.
--------------
"Project Party" means any Obligor, either Construction Contractor, the
-------------
Mining Contractor and any Affiliate, agent, adviser, consultant, officer,
director or other associate of such Person retained, employed or consulted by
such Person in connection with the consummation of the Refugio Project.
"Project Period" means the period commencing on the Effective Date and
--------------
continuing until the earlier of:
(a) December 31, 2007; and
(b) the date on which the Reserves of the Mine have been (or are
expected to be) extracted, milled, refined and sold, in each case in
accordance with the Development Plan.
"Promise to Grant Industrial Pledges" means that certain Promise to Grant
-----------------------------------
Industrial Pledges (Promesa de Prenda Industrial), among the Borrower and the
Bank Parties, executed in Spanish in substantially the same form as the English
translation thereof attached hereto as Exhibit E-6.
-----------
"Promise to Grant Mortgages Over Mining Concessions" means that certain
--------------------------------------------------
Promise to Grant Mortgages Over Mining Concessions (Promesa de Hipoteca de
Concessiones Mineras) among the Borrower and the Bank Parties, executed in
Spanish in substantially the
- 34 -
<PAGE>
same form as the English translation thereof attached hereto as Exhibit E-10.
------------
"Promise to Grant Mortgages Over Real Estate" means that certain Promise
-------------------------------------------
to Grant Mortgages Over Real Estate (Promesa de Hipoteca de Bienes Raices) among
the Borrower and the Bank Parties, executed in Spanish in substantially the same
form as the English translation thereof attached hereto as Exhibit E-9.
-----------
"Promise to Grant Pledges Without Conveyance" means that certain Promise
-------------------------------------------
to Grant Pledges Without Conveyance (Promesa de Constitucion de Prenda sin
Desplazamiento), among the Borrower and the Bank Parties, executed in Spanish in
substantially the same form as the English translation thereof attached hereto
as Exhibit E-7.
-----------
"Quarterly Report" means a report to the Agents and the Banks from the
----------------
Independent Consultant, substantially in the form of Exhibit N-1 attached hereto
-----------
and relating to the status of the Mine and the progress of the Refugio Project
(including, in the case of each Quarterly Report prepared with respect to the
period ending on March 31 of each calendar year, a full environmental audit in
connection therewith), the Borrower's compliance with this Agreement (including
Section 8.2.4) and each other Operative Document to which it is a party and such
-------------
other matters in connection therewith as either Agent (or any Bank through such
Agent) may reasonably request, and relating to each consecutive three-monthly
period ending on March 31, June 30, September 30 and December 31 of each
calendar year.
"Quoted Interest Period" means any Interest Period having a duration of
----------------------
one, two, three or six months.
"Refugio Project" is defined in the first recital.
--------------- -------------
"Refugio Project Agreement" means that certain Refugio Project Agreement,
-------------------------
dated as of November 17, 1992, between Bema Gold and AGI.
"Refugio Project Map (Mining Rights)" means the map of the area of the
-----------------------------------
Refugio Project attached hereto as Schedule II-A.
-------------
"Refugio Project Map (Surface Rights)" means the map of the area of the
------------------------------------
Refugio Project attached hereto as Schedule II-B.
-------------
"Refugio Project Map" means, collectively, the Refugio Project Map (Mining
-------------------
Rights) and the Refugio Project Map (Surface Rights).
"Refugio Project Properties" means, collectively, the properties referred
--------------------------
to in the Refugio Project Map.
"Regulatory Change" means the occurrence after the Effective Date of any
-----------------
change in or abrogation of, or
- 35 -
<PAGE>
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of any:
(a) statute, law, rule, or regulation applicable to any Bank Party,
or
(b) guideline, interpretation, directive, consent decree,
administrative order, request or determination (whether or not having the
force of law) applicable to such Bank 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 Bank Party.
"Release Date" means the date which is the earlier of (a) the first date
------------
following the Project Completion Date on which (i) the amounts standing to the
credit of the Proceeds Account and the Proceeds Sub-Account (Debt Service
Reserve) shall be in excess of the Required CapEx Balance and the Required Debt
Service Reserve Balance, respectively, and (ii) the Borrower shall have been
granted either (x) pursuant to a binding non-appealable judgment, full right and
title in and to the Non-Core Zone Statutory Easements, or (y) such other Mining
Rights as all the Banks, in their reasonable discretion, shall have determined
(on the basis of legal advice from counsel in Chile and such other evidence
(including evidence as to the availability of financial resources) as the Banks
shall deem appropriate) are sufficient to enable the Borrower to operate the
Mine without any adverse effect on the development of the Refugio Project as
contemplated by the Development Plan or (b) the date of payment in full of the
Borrower's Obligations; provided, however, that the Release Date may not occur
-------- -------
on any date on which a Default (including a Default arising as a result of the
Borrower's failure to make the deposit required to be made on the Release Date
pursuant to Section 8.1.23) shall have occurred and be continuing.
--------------
"Required Banks" means, at any time, Banks having, in the aggregate, a
--------------
Percentage of more than sixty-six and two thirds (66 2/3%).
"Required CapEx Balance" is defined in clause (b) of Section 4.2.
---------------------- ---------- -----------
"Required Completion Expenditures" is defined in clause (e) of Section
-------------------------------- ---------- -------
4.1.
"Required Debt Service Reserve Balance" is defined in clause (b) of
------------------------------------- ----------
Section 4.3.
-----------
"Required Guarantor Contribution" means the excess, if any, of (a) the sum
-------------------------------
of (i) U.S.$42,000,000, plus (ii) the excess, if any, of (x) the Total
Commitment Amount, less (y) the Initial Loan Amount, less (b) the sum of (i) the
aggregate of all amounts
- 36 -
<PAGE>
expended by the Borrower in respect of Capital Expenditures during the period
commencing on June 1, 1994 and ending on the Borrowing Date which were
reasonably required to be incurred in order to develop the Refugio Project in
accordance with the Development Plan, plus (ii) free Peso cash balances
maintained by the Borrower as at the Borrowing Date and deposited into the
Construction Sub-Account (Chile) pursuant to clause (b) of Section 4.1.
---------- -----------
"Required Maintenance Expenditures" is defined in clause (e)(i) of Section
--------------------------------- ------------- -------
4.2.
---
"Required Stamp Duty Amount" means, at any time, the amount of stamp duty
--------------------------
(impuesto de timbres) which would be payable (based on rates as in effect at
such time) in connection with the presentment in evidence of the Supplemental
Notes delivered to all the Banks in the event such Supplemental Notes were
completed in an aggregate principal face amount which is equivalent to fifty per
cent (50%) of the Dollar equivalent of the Principal Amount of all Loans
outstanding at such time.
"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.
"Reserves" means those reserves of Gold at the Mine calculated (in a
--------
manner satisfactory to the Independent Consultant) using guidelines specified by
the U.S. Bureau of Mines and the U.S. Geological Survey in "Principles of A
Resource/Reserve Classification for Minerals", U.S. Geological Survey circular
831, 1980 and in a manner which is consistent with the procedures outlined in
Section 3.3.7 ("Reserve Classification") and Section 3.3.8 ("Gold Grade
Interpretation"), Section 3.4 ("Geological Reserve Base") and Section 4.2 ("Base
Case Minable Reserves and Mine Plan") of the Feasibility Study referred to in
clause (a) of the definition of such term.
----------
"Reuters' Rate" means, for any Interest Period in relation to any Gold
-------------
Loans, the excess of
(a) the LIBO Rate for such Interest Period and for an amount
comparable to the aggregate Dollar equivalent (calculated on the date
referred to below) of such Gold Loans, over
(b) the average (rounded upwards to the nearest four decimal places)
of the London interbank forward bullion rates quoted by the market making
members of the LBMA for a period equal to such Interest Period as the same
appear under the heading "Loco London Gold Lending Rates (vs. U.S.$)" on
the Reuters' Screen GOFO, GOFP or GOFQ Page (or such other page or service
in replacement thereof as may be utilized by banks generally from time to
time for the purpose of displaying quotes for loco London Gold lending
- 37 -
<PAGE>
rates) as at 10:00 a.m. (London time) on the date referred to below,
in each case calculated at the date which is two Business Days immediately
preceding the first day of such Interest Period; provided, however, that for any
-------- -------
Interest Period of the nature referred to in clause (c) or (g) of the definition
---------- ---
of such term which is not a Quoted Interest Period the percentage calculated
pursuant to clause (b) above shall be the higher of (x) the mean of the London
----------
interbank forward bullion rates quoted by the market making members of the LBMA
for a period equal to the Quoted Interest Period which is next longest to such
Interest Period as the same appear on the Reuters' Screen GOFO, GOFP or GOFQ
Page (or such other page or service) as aforesaid, and (y) the average of such
quoted rates for a period equal to the Quoted Interest Period which is next
shortest to such Interest Period as the same may appear on the Reuters' Screen
GOFO, GOFP or GOFQ Page (or such other page or service) as aforesaid (or, if
such Interest Period is for a period of less than one month, the rate certified
by the Administrative Agent from time to time as being its rate for lending
overnight funds in Gold); and provided, further, however, in the event that the
-------- ------- -------
percentage calculated pursuant to clause (b) for any Interest Period shall
----------
exceed the percentage calculated pursuant to clause (a) for such Interest Period
----------
then the "Reuters' Rate" for such Interest Period shall be zero.
-------------
"Rothschild" is defined in the preamble.
---------- --------
"Security Agreements" means, collectively, the Chilean Security
-------------------
Agreements, the Borrower Security Agreement (U.S. Assets), the AGRI Security
Agreement and the Bema Bermuda Security Agreement.
"Shareholders Agreement" means that certain Shareholders Agreement
----------------------
concerning CMM, dated November 18, 1992, as amended by an amendment in the same
form as the amendment provided to the Bank Parties prior to their execution and
delivery of this Agreement.
"Subordination Agreement (Bema Gold/AGI)" means that certain Subordination
---------------------------------------
Agreement among Bema Gold, AGI and the Administrative Agent, substantially in
the form of Exhibit G-3 attached hereto.
-----------
"Subordination Agreement (Bema Gold/Debentures)" means that certain
----------------------------------------------
Subordination Agreement among Bema Gold, Montreal Trust (in its capacity as
trustee for the holders of the 1994 Convertible Debentures) and the
Administrative Agent, substantially in the form of Exhibit G-2 attached hereto.
-----------
"Subordination Agreement (CMM)" means that certain Subordination
-----------------------------
Agreement, among the Guarantors, the Intermediate Owners, AGI Chile, Bema Chile,
the Borrower and the
- 38 -
<PAGE>
Administrative Agent, substantially in the form of Exhibit G-1 attached hereto.
-----------
"Subordination Agreements" means, collectively, the Subordination
------------------------
Agreement (Bema Gold/AGI), the Subordination Agreement (Bema Gold/Debentures)
and the Subordination Agreement (CMM).
"Subsidiary" means, with respect to any Person, any corporation at least a
----------
majority or more of the outstanding shares of capital stock of which having
ordinary voting power to elect a majority of the board of directors or other
governing body of such corporation (irrespective of whether at the time capital
stock of any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) is at the time owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person.
"Supplemental Note" means any promissory note to be issued by the
-----------------
Custodian Bank on behalf of the Borrower in favor of any Bank, executed in
Spanish in substantially the same form as the English translation thereto
attached hereto as Exhibit A-2.
-----------
"Support Agreements" means, collectively, the AGI Support Agreement and
------------------
the Bema Gold Support Agreement.
"Tangible Net Worth" means, with respect to the Borrower at any time, the
------------------
net worth of the Borrower at such time, after subtracting therefrom the
aggregate amount of any intangible assets of the Borrower (including goodwill,
franchises, licenses, patents, trademarks, trade names, copyrights, service
marks, brand names but excluding, to the extent classified as intangible assets,
development expenses incurred in connection with the Refugio Project) and after
adding back thereto the aggregate amount of Approved Subordinated Indebtedness
deducted in computing such net worth.
"Tax Credit" is defined in clause (b) of Section 5.7.
---------- ---------- -----------
"Tax Payment" is defined in clause (b) of Section 5.7.
----------- ---------- -----------
"Tax Review" means the review of the tax aspects of the Refugio Project
----------
and the Mine, dated October 20, 1994, prepared by Price Waterhouse & Co.
"Taxes" is defined in Section 5.6.
----- -----------
"Technical Agent" is defined in the preamble.
--------------- --------
"Technical Review" means the Technical Audit, Refugio Gold Project,
----------------
Maricunga District, Chile, dated October 25, 1994 (PAH Project 9067) prepared by
the Independent Consultant.
- 39 -
<PAGE>
"Total Commitment Amount" means, subject to the terms and conditions of
-----------------------
this Agreement, U.S.$85,000,000.
"type" means either Gold Loans or Dollar Loans, as the case may be.
----
"United States" or "U.S." means the United States of America, its 50
------------- ----
States and the District of Columbia.
"U.S. GAAP" is defined in Section 1.4.
--------- -----------
SECTION 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 the Disclosure Schedule each
other Loan Document and each notice and other communication delivered from time
to time in connection with this Agreement or any other Loan Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. 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 (including under Section 8.2.4 and Section 8.2 of each Support
------------- -----------
Agreement) 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 (a) in the case of the Borrower (except as set forth in
clause (b)), AGRI and AGI, the United States ("U.S. GAAP"), (b) solely in the
---------- ---------
case of the Borrower's financial statements described in clauses (e) and (f) of
----------- ---
Section 7.5, Chile ("Chilean GAAP"), or (c) in the case of Bema Gold and Bema
----------- ------------
Bermuda, Canada ("Canadian GAAP"), in each case, applied (except, with respect
-------------
to AGI (but subject to the foregoing provisions of this Section and to the
provisions of Section 1.5), in connection with any change in the method by which
-----------
it accounts for inventory (including its gold work-in-process leach pad
inventory)) on a basis consistent with the preparation of the relevant financial
statements referred to in Section 7.5 (and, with respect to the Borrower in the
-----------
case of U.S. GAAP, on a basis consistent with the preparation of the financial
statements of AGI referred to in Section 7.5 other than as such statements may
-----------
relate to policies for inventory accounting)).
SECTION 1.5. CHANGE IN ACCOUNTING PRINCIPLES. If, after the Effective
Date, there shall (without prejudice to clause (a)(iv) of Section 8.2.1) be any
-------------- -------------
change to any Obligor's Fiscal Year, or in the application of the accounting
principles used in
- 40 -
<PAGE>
the preparation of the financial statements referred to in Section 7.5 as a
-----------
result of the promulgation of rules, regulations, pronouncements, or opinions by
the U.S. Securities and Exchange Commission or the U.S. Financial Accounting
Standards Board or the Canadian Institute of Chartered Accountants, as the case
may be, or agencies with similar functions (or, in the case of AGI, as a result
of any change in the method by which it accounts for inventory (including its
gold work-in-process leach pad inventory)), 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 such Obligor found in this Agreement or any
other Loan Document, the parties hereto 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
-------- -------
Banks have given their consent to such amendments, such Obligor's financial
condition shall continue to be evaluated on the same principles as those used in
the preparation of the financial statements of such Obligor referred to in
Section 7.5.
-----------
SECTION 1.6. DOLLAR EQUIVALENCY DETERMINATIONS. Except as otherwise
set forth in this Agreement or any other Loan Document, all calculations or
determinations to be made from time to time under this Agreement or any other
Loan Document in connection with the Dollar equivalent of any amount denominated
in Gold shall be calculated by multiplying:
(a) the amount of ounces of such Gold;
by
(b) the London Price on the date which is two Business Days prior to
the date on which such calculation is to be made or such other price or
date as may be specified by the other terms and conditions of this
Agreement.
For purposes of clarification only, references in respect of the Dollar
equivalency of any Dollar-denominated Obligations (including Dollar Loans)
arising under this Agreement or any other Loan Document mean the amount of any
such Obligation in Dollars.
SECTION 1.7. GOLD EQUIVALENCY DETERMINATIONS. Except as otherwise set
forth in this Agreement or any other Loan Document, all calculations or
determinations to be made from time to time under this Agreement or any other
Loan Document in connection with the Gold equivalent of any amount denominated
in Dollars shall be calculated by dividing:
(a) such Dollar denominated sum;
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<PAGE>
by
(b) the London Price on the date which is two Business Days prior to
the date on which such calculation is to be made or such other price or
date as may be specified by the other terms and conditions of this
Agreement.
SECTION 1.8. PROJECT DETERMINATIONS, ETC.
(a) (i) All determinations and calculations relating to the
Refugio Project (including the determination or calculation, as the
case may be, of Mechanical Completion, Project Completion, Cash Flow
Ratio, Funded Debt Service, Funded Indebtedness, Future Net Cash
Flow, Historical Net Cash Flow, Loan Life Ratio, Present Value of
Future Net Cash Flow, Production, Project Capital Costs, Project
Costs, Project Life Ratio, Project Operating Costs, Project Output
and Reserves) shall be:
(x) in the case of any such projected determination or
calculation, made in accordance with the Development Plan as in
effect from time to time; and
(y) determined to the reasonable satisfaction of the
Banks.
(ii) All determinations and calculations to be made in
accordance with the Cash Flow Schedule by reference to a specified
period shall, in the event such period does not appear in the Cash
Flow Schedule, be determined or calculated on a pro rata basis for
such specified period from the actual periods referred to in the Cash
Flow Schedule.
(b) The Borrower shall from time to time after the Effective Date,
and upon not less than thirty (30) Business Days notice to the Banks and
in consultation with the Independent Consultant, modify the Development
Plan (including the Approved Budget and the Cash Flow Schedule) as a
result of, and to reflect any, change in any fact, event or circumstance
which renders the Development Plan as currently in effect materially
inaccurate; provided, however, that (i) the Borrower shall give prompt
-------- -------
notice to the Banks of any such change which it believes is likely to
result in a modification to the Development Plan, (ii) the Borrower shall
furnish the Banks with details as to any proposed modification no later
than fifteen (15) Business Days prior to the proposed effectiveness
thereof and shall furnish each Bank with a copy of the Development Plan as
modified following the effectiveness of such modification, and (iii) in
the event that the Required Banks determine prior to the date of such
effectiveness
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<PAGE>
that any proposed modification to the Development Plan would, or would
reasonably be likely to, adversely affect either (x) the Borrower's
ability to comply with its obligations under Section 8.2.4, (y) the target
-------------
dates for achievement of Mechanical Completion or Project Completion (as
then set forth in the Development Plan), or (z) the availability of funds
to construct and operate the Mine in accordance with the Development Plan
as then currently in effect (including the availability of funds to make
any payments scheduled to be made under the Construction Contracts), no
such modification or supplement shall be effective unless and until
approved by all the Banks. As a condition precedent to the effectiveness
of any modification to the Development Plan the Borrower will furnish to
the Technical Agent a Compliance Certificate calculated as of the
effective date of such modification, together with such information
concerning the calculations and assumptions used by the Borrower in
delivering such Compliance Certificate as the Technical Agent shall have
requested.
SECTION 1.9. 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 Bank 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 any Obligor
shall be deemed to represent and warrant that the facts stated in such
certificate are true and accurate.
SECTION 1.10. GOLD DELIVERY. Without prejudice to the provisions of
clause (a) of Section 5.8, any physical delivery of Gold hereunder shall be
---------- -----------
delivered loco London as more particularly set forth in this Agreement and in a
form conforming in all respects with the requirements for good delivery and the
specification for a good delivery bar of gold as specified by the LBMA from time
to time.
SECTION 1.11. 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
- 43 -
<PAGE>
excludes such Person in any other capacity or individually;
(c) reference to either gender includes the other gender;
(d) reference to any agreement (including this Agreement and the
Schedules and Exhibits hereto and any other Loan Document), document
(including the Approved Budget, Development Plan, Cash Flow Schedule and
the Insurance Summary) 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 (including the Notes) 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 reenacted, 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" (and with correlative meaning "include") 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) reference to a "company" or "corporation" shall be construed as a
reference to the analogous form of business entity used in any relevant
jurisdiction; and
(l) when an expression is defined, another part of speech or
grammatical form of that expression has a corresponding meaning.
- 44 -
<PAGE>
ARTICLE 2. COMMITMENTS; BORROWING AND CONVERSION PROCEDURE
-----------------------------------------------------------
SECTION 2.1. COMMITMENTS. Subject to the terms and conditions of this
Agreement (including Article 6), each Bank severally and for itself alone agrees
---------
that it will (a) make a loan (relative to each such Bank, its "Loan") to the
----
Borrower as set forth in this Section, and (b) from time to time convert its
Loan (or any portion thereof) from one type of Loan into another type of Loan as
set forth in Section 2.3. Each Bank's Loan will be advanced in Dollars, but
-----------
will (as provided in the second paragraph of Section 2.2) immediately be
-----------
converted to, and denominated in, Gold.
On any one Business Day occurring during the period from the Effective
Date to the Commitment Termination Date, each Bank will make its Loan
denominated in Dollars (to be converted as aforesaid) to the Borrower equal to
such Bank's Percentage of the Dollar equivalent of the Base Gold Amount (such
Dollar equivalent amount, the "Initial Loan Amount"). For the avoidance of
-------------------
doubt, each Bank will only make one Loan hereunder to the Borrower.
SECTION 2.2. PROCEDURE FOR MAKING LOANS. By delivering the Borrowing
Request to the Administrative Agent on or before 10:00 a.m., London time, the
Borrower may request on any Business Day occurring prior to the Commitment
Termination Date, 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 Banks on the Business Day set forth in the Borrowing Request in the
Principal Amount calculated pursuant to the second paragraph of Section 2.1.
-----------
Upon receipt of the Borrowing Request, the Administrative Agent shall promptly
notify each Bank of the contents thereof and of such Bank's Percentage of the
requested Loans, and such Borrowing Request shall not thereafter be revocable by
the Borrower.
Subject to the terms and conditions of this Agreement (including Article
-------
6), the Loans requested to be made in the Borrowing Request shall be made on the
Business Day specified therein. On such Business Day and subject to such terms
and conditions, each Bank shall, on or before 11:00 a.m., London time, credit
such Dollar account of the Administrative Agent at its Dollar Lending Office as
the Administrative Agent may notify to the Banks with an amount of Dollars,
equal to such Bank's Percentage of the aggregate Principal Amount of the Loans
to be made pursuant to Section 2.1. To the extent funds are received by the
-----------
Administrative Agent from the Banks in respect of the Loans requested by the
Borrowing Request, the Administrative Agent shall make such funds available to
the Borrower by crediting the Principal Amount of such Loans to the Construction
Account. The Dollar Loans made on the Borrowing Date shall, on the Borrowing
Date, and without further action by the Borrower (including the delivery of a
Continuation/Conversion Notice pursuant to Section 2.3), be converted
-----------
immediately into Gold Loans in a Principal Amount equivalent to the Base Gold
Amount and the Administrative Agent shall notify each Bank of the Base
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<PAGE>
Gold Amount, the Principal Amount of its Dollar Loan, the London Price as in
effect two Business Days prior to the Borrowing Date and the Principal Amount of
its Gold Loan as converted from its Dollar Loan pursuant to this Section. No
Bank's obligation to make its Loan as aforesaid shall be affected by any other
Bank's failure to make its Loan.
SECTION 2.3. CONTINUATION AND CONVERSION ELECTIONS. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 10:00
a.m., London time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than three nor more than five Business Days'
notice (counting the date on which such notice is given) prior to the expiration
of any Interest Period with respect to any then outstanding Loans of either type
(or during an Interest Period in the case of any prepayment made pursuant to
clause (c) of Section 3.1 or as a result of any repayment pursuant to Section
---------- ----------- -------
5.1 or 5.5, subject, in each such case, to Section 5.3), that all or a portion
--- --- -----------
of such Loans be, upon the expiration of such Interest Period (or during such
Interest Period, as the case may be), converted into Loans of another type, or
continued as Loans of such type for the Interest Period or Interest Periods
specified in such Continuation/Conversion Notice; provided, however, that, at
-------- -------
any one time, only one Interest Period with respect to each type of Loans may be
outstanding from all Banks at such time; and provided, further, however, that
-------- ------- -------
immediately following any such conversion of either type of Loans, the aggregate
Principal Amount of all Gold Loans and/or Dollar Loans, as the case may be,
shall not be less than the lesser of (A) one eighth of the aggregate Principal
Amount of all Loans then outstanding (and for the purposes of the foregoing all
calculations shall be made in Dollars utilizing the Dollar equivalent of any
then outstanding Gold Loans as at the date of the proposed conversion) or (B)
30,000 ounces of Gold and/or U.S.$10,000,000, as the case may be; and provided,
--------
further, however, that no Loans may be converted into any other type of Loans:
------- -------
(a) at any time when any Default has occurred and is continuing or
would occur as a consequence of such conversion,
(b) unless, simultaneously with the effective date of such
Continuation/Conversion Notice, (i) the Borrower shall have made any
repayment or prepayment of Loans then required to be made pursuant to
Section 3.1, and (ii) the Borrower shall have furnished to the
-----------
Administrative Agent a Compliance Certificate calculated as of such date,
together with such information concerning the calculations and assumptions
used by the Borrower in delivering such Compliance Certificate as the
Administrative Agent shall have requested, and
(c) without prejudice to the provisions of clause (a), unless,
----------
simultaneously with the delivery of the relevant Continuation/Conversion
Notice, the
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<PAGE>
Administrative Agent shall have received from the Borrower (i) in the case
of any conversion into Dollar Loans, copies of documentation relating to
Hedging Agreements and Interest Rate Protection Agreements, if any,
required to be implemented upon such conversion pursuant to Sections
--------
8.1.10 and 8.1.11, respectively, (ii) a certificate of the Borrower as to
------ ------
the effectiveness of such Hedging Agreements or Interest Rate Protection
Agreements, as the case may be, and (iii) evidence of the termination of
any Hedging Agreement or any Interest Rate Protection Agreement relating
to any converted Gold Loans or Dollar Loans, as the case may be.
In the absence of delivery of a Continuation/Conversion Notice with
respect to any Loans at least three Business Days before the last day of the
then current Interest Period with respect thereto, such Loans shall, on such
last day, automatically be deemed to be continued as Loans of the same type
having an Interest Period with a duration equal to that of the Interest Period
then expired (if such Interest Period was a Quoted Interest Period) or one month
(in all other cases).
Notwithstanding the foregoing, the Borrower may not request that more than
two conversions (excluding, for the avoidance of doubt, the conversion effected
on the Borrowing Date pursuant to Section 2.2) of Loans from one type to another
-----------
type be effected during any 12 month period.
For the purposes of computing the Principal Amount of the Loans
outstanding after any conversion pursuant to this Section,
(d) the Principal Amount of any Dollar Loans converted from Gold
Loans shall be the excess, if any, of (i) the Dollar equivalent of such
Gold Loans calculated at the date of conversion, less (ii) the sum of the
----
Principal Amounts of (A) any repayment required to be, and actually, made
on the date of conversion pursuant to clause (e)(i) of Section 3.1 and (B)
------------- -----------
any other prepayments or repayments required to be, and actually, made on
such date.
(e) the Principal Amount of any Gold Loans converted from Dollar
Loans shall be in the excess, if any, of (i) the Gold equivalent of such
Dollar Loans calculated at the date of conversion, less (ii) the sum of
----
the Principal Amounts of (A) any repayment required to be, and actually,
made on the date of conversion pursuant to clause (e)(ii) of Section 3.1
-------------- -----------
and (B) any other prepayments or repayments required to be, and actually,
made on such date.
SECTION 2.4. RECORDS. Without limiting the provisions of Section 2.6,
-----------
each Bank's Gold Loan and Dollar Loan shall be evidenced by a gold loan account
and a dollar loan account, respectively, maintained by such Bank. The Borrower
hereby irrevocably authorizes each Bank to make (or cause to be made)
appropriate account entries, which account entries, if made,
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<PAGE>
shall evidence inter alia the date of, the Principal Amount of, any repayments
----- ----
of, the interest rate on, and the Interest Period applicable to, the relevant
type of Loans then outstanding to such Bank pursuant hereto. Any such account
entries indicating the outstanding Principal Amount of either type of Loans
outstanding to such Bank 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. In case of any discrepancy between the records
of the Administrative Agent and the records of any Bank with respect to any
matter referred to in this Section, the records of such Bank shall be deemed to
control. Subject to the foregoing, in case of any discrepancy as to the
Principal Amounts of the Loans between the loan accounts and records described
in this Section and the face amounts of the Notes, the loan accounts and records
described in this Section shall be deemed to control.
SECTION 2.5. FUNDING. Each Bank may, if it so elects, fulfil its
obligation to make or maintain any portion of the Principal Amount of its Loans
by causing an offshore branch, Affiliate or banking facility of such Bank to
make such Loans; provided, however, that in such event any Loans shall be deemed
-------- -------
to have been made by such Bank, and the obligation of the Borrower to repay such
Loan, and pay interest thereon, shall nevertheless be to such Bank 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 Bank pursuant to Section 5.1, 5.2, 5.4, 5.5 or 5.6 which arises
----------- --- --- --- ---
solely as a consequence of an election made by such Bank pursuant to this
Section.
SECTION 2.6. NOTES.
(a) The Notes shall serve as additional evidence of the Borrower's
obligation to pay the Principal Amount of the Loans and interest thereon,
but shall not limit, reduce or otherwise affect the Obligations of the
Borrower under this Agreement and each other Loan Document to which it is
a party. In addition, the rights of the Banks under this Agreement and
each other Loan Document to which the Borrower is a party shall not be
limited, reduced or otherwise affected by the existence of, or any action
with respect to, the Notes. Any reduction (by repayment, prepayment or
otherwise) in the Principal Amount of the Loans hereunder or repayment or
prepayment of the face amount of the Notes, as the case may be, shall
discharge pro tanto the equivalent face amount of the Notes or, as the
--- -----
case may be, the corresponding Principal Amount of Loans hereunder.
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<PAGE>
(b) Upon the payment and performance in full of the Borrower's
Obligations hereunder and under each other Loan Document to which it is a
party, the Administrative Agent shall instruct the Custodian Bank to
cancel and return the Notes to the Borrower.
(c) The Banks agree that they will not demand payment of the face
amount of any Note until a Principal Amount of the Loans corresponding to
such face amount shall have become due and payable pursuant to this
Agreement.
(d) The Borrower agrees that the Banks' exercise of their rights and
remedies with respect to the Notes before a competent court in Chile shall
not require evidence from the Borrower or any other Person to the effect
that any Note represents the Borrower's Obligations under this Agreement
and each other Loan Document to which it is a party or that any condition
precedent to the payment of such Note or any such Obligation has been met.
ARTICLE 3. PRINCIPAL PAYMENTS; INTEREST; COMMISSIONS
-----------------------------------------------------
SECTION 3.1. PRINCIPAL PAYMENTS. The Borrower will make payment in
full of the unpaid Principal Amount of all Loans at the Final Maturity Date.
Prior thereto, 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;
(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.$5,000,000 and (y) in the case of Gold Loans, be in
an aggregate Principal Amount of multiples of 10,000 ounces of Gold;
(iii) the Borrower shall, simultaneously with providing the
notice referred to in sub-clause (a)(i), provide the Administrative
-----------------
Agent with certified copies of relevant Approvals from Chile
(including the Central Bank) and such other evidence as the
Administrative Agent may reasonably require in connection with any
Approval required or advisable in connection with such prepayment;
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<PAGE>
(iv) no such partial prepayment shall be made prior to the Project
Completion Date unless, in connection with such prepayment, all the
Banks shall have received evidence satisfactory to them from the
Borrower to the effect that, following such proposed prepayment, the
Borrower shall have sufficient funds available to it in order to
achieve Project Completion in the manner contemplated by the
Development Plan; and
(v) the Administrative Agent shall have received evidence of the
termination of any Hedging Agreement or any Interest Rate Protection
Agreement relating to the prepaid Gold Loans or Dollar Loans, as the
case may be.
(b) shall, on each Payment Date prior to the Final Maturity Date,
make a mandatory repayment of each type of Loan outstanding on such date
in a Principal Amount equal to the lesser of (i) quotient of (x) the
aggregate Principal Amount of such type of Loan outstanding on such date
(before giving effect to all other prepayments or repayments required to
be made on such date) divided by (y) the aggregate number of Payment Dates
scheduled to occur on such date and thereafter to (and including) the
Final Maturity Date, and (ii) the aggregate Principal Amount of Loans
outstanding on such Payment Date; provided, however, that (A) any
-------- -------
prepayment of the Principal Amount of any Loans made prior to such Payment
Date pursuant to clause (a), (c), (d), (e) or (f) shall, for purposes of
---------- --- --- --- ---
calculating the Principal Amount of each type of Loans pursuant to sub-
---
clause (b)(i)(x), be added back to the Principal Amount of Loans actually
----------------
outstanding on such Payment Date, and (B) for the purposes of calculating
the amount to be repaid pursuant to the foregoing provisions of this
clause any prior prepayment of the Principal Amount of any type of Loan of
the nature referred to in clause (A) shall be allocated pro rata to the
types of Loans then outstanding (and, for such purposes, if the type of
Loan previously prepaid is different to the type of any Loan scheduled to
be repaid pursuant to this clause then such pro rata allocation shall be
made by converting (at the Gold equivalent or Dollar equivalent thereof,
as the case may be, calculated at the relevant Payment Date) Loans
outstanding on such Payment Date into the type of Loan which was prepaid
prior to such Payment Date.
(c) shall, within three Business Days after:
(i) any Business Day on which Gold Loans are outstanding and on
which:
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<PAGE>
(x) the Dollar equivalent (calculated as at such Business
Day) of the Principal Amount of all Gold Loans outstanding on
such Business Day
exceeds
-------
(y) one hundred and fifty percent (150%) of the Dollar
equivalent (calculated at the Loan Base Price) of the aggregate
Principal Amount of such outstanding Gold Loans,
or
(ii) any period of 20 consecutive days during which Gold Loans
are outstanding and on each day of which:
(x) the Dollar equivalent of the Principal Amount of all
Gold Loans outstanding on each such day
exceeds
-------
(y) one hundred thirty-three and one-third percent
(133 1/3%) of the Dollar equivalent (calculated at the Loan Base
Price) of the aggregate Principal Amount of such outstanding
Gold Loans on each such day,
at the Borrower's discretion do any of the following: (1) 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 (c)(i) or (ii), as the
------------- ----
case may be (in the case of clause (c)(ii), calculated as of the last day
--------------
of the relevant 20 day period); (2) arrange for the provision 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
all the Banks with a value at least equal to the Dollar equivalent of such
excess; or (3) convert, subject to clause (e), Section 5.3 and to the last
---------- -----------
paragraph of Section 2.3, all Gold Loans into Dollar Loans with an initial
-----------
Interest Period of one month or such other Interest Period as may be
requested by the Borrower (and, in connection with such conversion, the
Borrower shall supply all items of documentation referred to in clause (c)
----------
of Section 2.3). 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 (c)(1) on the date which is
-------------
three Business Days after the occurrence of the event described in clause
------
(c)(i) or clause (c)(ii), as the case may be.
------ --------------
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<PAGE>
(d) shall, on each date (a "Cash Flow Prepayment Date") which is the
-------------------------
last day of the Interest Period first expiring on or following the tenth
Business Day after each Payment Date, prepay all Loans outstanding on such
Cash Flow Prepayment Date in a Principal Amount equal to the Cash Flow
Prepayment Percentage of Historical Net Cash Flow for the six-month period
ending on such Payment Date, and, in the event that the Cash Flow
Prepayment Date shall occur on a date which is later than the tenth
Business Day following the relevant Payment Date then the Borrower shall
(without prejudice to its obligation to make the prepayment referred to in
this clause), on the tenth such Business Day, deposit an amount equal to
the amount of the required prepayment into the Proceeds Sub-Account (Debt
Service Reserve-Prepayment Proceeds).
(e) shall, on each effective date of (and simultaneously with, and as
a condition to) a conversion of (i) Gold Loans into Dollar Loans pursuant
to Section 2.3 or 5.1 or clause (c)(3), make a mandatory prepayment of the
----------- --- -------------
Dollar Loans outstanding (or to be outstanding) on such date in a
Principal Amount equal to the product of (x) the excess, if any, of (A)
the London Price in effect two Business Days prior to such date, less (B)
----
the Loan Base Price with respect to such Gold Loans, multiplied by (y) the
Principal Amount of the Gold Loans converted, and (ii) Dollar Loans into
Gold Loans pursuant to Section 2.3 or 5.1, make a mandatory repayment of
----------- ---
the Gold Loans outstanding (or to be outstanding) on such date in a
Principal Amount equal to the excess, if any, of (x) the Gold equivalent
(calculated at the date of conversion) of the Principal Amount of Dollar
Loans converted, less (y) the Gold equivalent (calculated at the date of
----
conversion utilising the Loan Base Price with respect to the Dollar Loans
converted) of the Principal Amount of the Dollar Loans converted.
(f) shall, on each date of receipt of proceeds of any insurance
policy which are required by the terms of clauses (c)(i) and (iv) of
-------------- ----
Section 8.1.7 to be applied against the Loans, make a mandatory prepayment
-------------
of the Loans outstanding on such date in a Principal Amount equal to the
amount of such proceeds.
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. 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. Any
repayment or prepayment of the Principal Amount of the Loans pursuant to this
Section (excluding, however, clauses (a), (c) or (e)) shall be applied ratably
--- --- ---
between types of Loans. Amounts repaid or prepaid may not be re-borrowed. For
the avoidance of doubt, unless any of the foregoing clauses requires otherwise,
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<PAGE>
Gold Loans and Dollar Loans required to be repaid or prepaid pursuant to this
Section shall be paid or prepaid in Gold and Dollars, respectively.
SECTION 3.2. INTEREST PAYMENTS. The Borrower shall make payments of
interest in accordance with this Section.
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 the Gold
Base Rate for Gold Loans as in effect from time to time plus the Applicable
Margin in respect of such Gold Loan as in effect from time to time, and (b) in
the case of each Dollar Loan (excluding, however, the Principal Amount of the
Dollar Loans made on the Borrowing Date prior to their conversion into Gold
Loans pursuant to the provisions of the final paragraph of Section 2.2), the sum
-----------
of the LIBO Rate for Dollar Loans as in effect from time to time plus the
Applicable Margin in respect of such Dollar Loans as in effect from time to
time.
SECTION 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 Base Rate for such Interest Periods (not exceeding
three months) as the Administrative Agent may from time to time select,
(ii) the Applicable Margin in respect of such Gold Loan plus (iii) 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 (not
exceeding three months) as the Administrative Agent may from time to time
select, (ii) the Applicable Margin in respect of such Dollar Loan plus
(iii) two percent (2%).
SECTION 3.2.3. PAYMENT DATES. 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 commencing with the
first three month period commencing on the first day of such Interest
Period);
(b) the Maturity of such Loan; and
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<PAGE>
(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.
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.
In the event that, prior to the payment of any interest on any Loan
maintained by any Political Risk Bank, the Borrower shall have made any payment
to or on behalf of such Political Risk Bank in respect of premiums payable in
connection with Political Risk Insurance maintained by such Political Risk Bank
and, in accordance with the terms and conditions of the arrangements entered
into between the Borrower and such Political Risk Bank with respect to Political
Risk Insurance, such payment is to be credited against the amount of interest
payable hereunder then the amount of such interest shall be paid net of such
payment; provided, however, that for all purposes of this Agreement and each
-------- -------
other Loan Document the Borrower shall be deemed to be required to pay the full
amount of interest referred to in this Agreement without reference to any such
arrangements unless the Administrative Agent shall have received notice from the
relevant Political Risk Bank not less than five (5) Business Days prior to the
relevant interest payment date giving details of the lesser amount of interest
payable to such Political Risk Bank on such interest payment date.
SECTION 3.2.4. RATE DETERMINATIONS. All determinations by the
Administrative Agent of the rate of interest applicable to any Loan shall be
conclusive absent manifest error.
SECTION 3.3. COMMISSIONS. The Borrower (or, in the case of Section
-------
3.3.1, each of the Guarantors on an equal and several basis) confirms and agrees
-----
that it will pay the commissions set forth in this Section. All commissions
once paid shall be non-refundable.
SECTION 3.3.1. PARTICIPATION COMMISSION. To the Administrative Agent for
the account of the Banks and on the Effective Date, a participation commission
in the amount of U.S.$127,500 for each Bank (or, in the case of Credit Lyonnais
and Credit Lyonnais Canada, $63,750).
SECTION 3.3.2. COMMITMENT COMMISSION. To the Administrative Agent for
the account of each Bank, for the period (including any portion thereof when its
Commitment is suspended by reason of any Obligor's inability to satisfy any
condition of Article 6) commencing on the Effective Date and continuing through
---------
the Commitment Termination Date, a commitment commission at the rate of three-
eighths of one percent (0.375%) per annum on such Bank's Percentage of the daily
average unused portion of
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<PAGE>
the Total Commitment Amount. The commitment commissions described in this
Section shall be payable in arrears on the earlier to occur of the Borrowing
Date and the Commitment Termination Date.
SECTION 3.3.3. AGENTS' COMMISSIONS. To each Agent, for its own account,
commissions in accordance with the terms of the letters, dated November 18,
1994, from the Agents to the Guarantors.
SECTION 3.3.4. COMMISSIONS PAYMENTS TO BE MADE IN DOLLARS. All
commissions payable under Section 3.3 shall be payable in Dollars.
-----------
ARTICLE 4. PROJECT ACCOUNTS
----------------------------
SECTION 4.1. CONSTRUCTION ACCOUNT.
(a) The Borrower shall promptly deposit all the proceeds of the
Dollar Loans made on the Borrowing Date and of the Required Guarantor
Contribution made on or prior to the Borrowing Date into a single purpose
account (the "Construction Account") established by the Borrower in New
--------------------
York City in its name with the Project Account Bank (U.S.). In addition,
the Borrower shall promptly deposit all monies received by it pursuant to
the provisions of Section 3.1 of the AGI Support Agreement into the
-----------
Construction Account.
(b) For the purposes of facilitating the remission of Dollars from
the Construction Account and the payment of invoices in respect of Project
Costs denominated in Pesos the Borrower may establish a single purpose
account denominated in Pesos (the "Construction Sub-Account (Chile)"), in
--------------------------------
Santiago in the Borrower's name with the Project Account Bank (Chile).
All free Peso cash balances maintained by the Borrower as at the Borrowing
Date shall be deposited into the Construction Sub-Account (Chile) on the
Borrowing Date. For the purposes of the foregoing, and to the extent
permitted by Applicable Law and the Foreign Investment Contract, (i) the
Project Account Bank (U.S.) may on the first day of each calendar month
remit Dollars contained in the Construction Account to the Project Account
Bank (Chile) (for immediate conversion by the Project Account Bank (Chile)
into Pesos and the deposit of such Pesos into the Construction Sub-Account
(Chile)) in an amount not in excess of the excess, if any, of (x) the
equivalent in Dollars of the amount calculated pursuant to the penultimate
sentence of clause (c) with respect to such calendar month, less (y)
----------
balances standing to the credit of the Construction Sub-Account (Chile) on
such day which are not then expected to be required to fund the payment of
Project Costs already incurred or expected to be incurred, and (ii) the
Project Account Bank
- 55 -
<PAGE>
(Chile) and the Borrower shall obtain all Approvals, and take all action,
as the Administrative Agent deems necessary or advisable to comply with
Applicable Law and to protect the Bank Parties' interests in all balances
standing to the credit of the Construction Sub-Account (Chile). Any
amount received by the Borrower in respect of any refund of IVA relating
to the IVA Advance shall be deposited into the Construction Sub-Account
(Chile).
(c) No amount other than bona fide Project Costs (which shall be
reflected in the Development Plan) and (to the extent then permitted to be
paid pursuant to Section 8.2.7) repayments of the IVA Advance may be
-------------
disbursed on the instructions of the Borrower or otherwise from the
Construction Account or the Construction Sub-Account (Chile); provided,
--------
however, that any Borrower Project Costs which are scheduled, pursuant to
-------
the Development Plan, to be incurred in any one calendar month may be
incurred and paid for in any prior calendar month; provided, further,
-------- -------
however, that the aggregate amount of such accelerated Borrower Project
-------
Costs incurred in any one calendar month may not exceed 10% of the
aggregate Borrower Project Costs scheduled to be incurred during such
calendar month and the aggregate of all such accelerated Borrower Project
Costs shall not exceed 5% of all Borrower Project Costs scheduled to be
incurred in connection with the Refugio Project during the Project Period,
in each case as set forth in the Development Plan. In addition, the
amount of Dollars that may be remitted from the Construction Account to
the Construction Sub-Account (Chile) during any one calendar month may not
exceed the Dollar equivalent (calculated at the then prevailing market
rates) of those Peso-denominated Project Costs scheduled to be paid during
such month pursuant to the Approved Budget. For the avoidance of doubt,
amounts may be disbursed from the Construction Sub-Account (Chile) to
those bank accounts referred to in Section 8.2.16 (subject to the limits
--------------
set forth thereon) for the purpose of funding the payment of Project Costs
otherwise permitted to be paid from the Construction Sub-Account (Chile)
pursuant to this Section.
(d) To the extent there are balances standing to the credit of the
Construction Account and/or the Construction Sub-Account (Chile) at the
Project Completion Date, such balances will, to the extent permitted by
Applicable Law and the Foreign Investment Contract, be transferred to the
Proceeds Account and/or the Proceeds Sub-Account (Chile), respectively.
To the extent that such balances are not permitted by Applicable Law to be
transferred as aforesaid then the such balances may only be disbursed for
the purposes, and in the manner set forth, in clauses (c), (d) and (e) of
----------- --- ---
Section 4.2 as if references therein to the Proceeds Accounts and the
-----------
Proceeds Sub-Account (Chile) were references to the
- 56 -
<PAGE>
Construction Account and the Construction Sub-Account (Chile),
respectively.
(e) At any time when any Default or any Milestone Failure shall have
occurred and be continuing but prior to the occurrence of an Enforcement
Event, the Borrower may only request or direct the relevant Project
Account Bank to disburse funds (including Dollars remitted from the
Construction Account to the Construction Sub-Account (Chile) pursuant to
clause (b)) from the Construction Account and the Construction Sub-Account
----------
(Chile) for the purpose of payment of costs referred to below and shall be
paid in the following order of priority:
(i) first, for payment of those Project Costs otherwise
-----
permitted by clause (c) (other than Project Costs referred to in
----------
clauses (e)(ii) and (e)(iii)) which are necessary to permit the
--------------- --------
achievement of Project Completion; provided, however, that no such
-------- -------
amount may be disbursed in respect of the payment of any such Project
Cost which, in the reasonable opinion of the Required Banks (acting
in consultation with the Independent Consultant), are not necessary
to permit the achievement of Project Completion. All Project Costs
in respect of which amounts are permitted to be disbursed from the
Construction Account or the Construction Sub-Account (Chile) pursuant
to this clause are referred to herein as "Required Completion
-------------------
Expenditures";
------------
(ii) second, for payment of the Principal Amount of Loans, all
------
interest accrued thereon and other payment Obligations (other than as
referred to in clause (e)(iii)) of the Borrower then due and owing;
---------------
and
(iii) third, for payments in respect of Hedging Agreements or
-----
Interest Rate Protection Agreements entered into directly by the
Borrower in accordance with Section 8.1.10 or 8.1.11, respectively.
-------------- ------
(f) For the avoidance of doubt, references in this Agreement to the
Construction Account shall not, and shall not be deemed to, include a
reference to the Construction Sub-Account (Chile).
SECTION 4.2. PROCEEDS ACCOUNT.
(a) The Borrower shall promptly deposit all proceeds of the export
and sale of Project Output, all proceeds derived from the exercise of any
Hedging Agreement or Interest Rate Protection Agreement and (to the extent
required pursuant to Section 8.1.7) all proceeds payable in a currency
-------------
other than Pesos under policies of insurance maintained by the Borrower
relating to loss or damage to
- 57 -
<PAGE>
the Project Assets or Production into a sub-account (the "Proceeds Sub-
------------
Account (Collateral Collections)) of a single purpose offshore account
--------------------------------
(the "Proceeds Account") established by the Borrower in New York City in
----------------
its name with the Project Account Bank (U.S.). The Borrower shall
promptly deposit (i) to the extent required pursuant to Section 8.1.7, all
-------------
proceeds payable in a currency other than Pesos under policies of
insurance maintained by the Borrower relating to matters other than the
loss or damage to the Project Assets or Production, and (ii) to the extent
permitted by Applicable Law, all other amounts (other than amounts
received after the Project Completion Date by way of refunds of IVA)
received by it in connection with the Refugio Project into a second sub-
account of the Proceeds Account (the "Proceeds Sub-Account (Other
---------------------------
Collections)"; and, collectively with the Proceeds Sub-Account (Collateral
------------
Collections), the "Proceeds Account"). The Borrower shall not deposit or
----------------
transfer any funds other than the amounts referred to in the first
sentence of this clause into the Proceeds Sub-Account (Collateral
Collections). The Borrower shall, to the extent not permitted by
Applicable Law to deposit such amounts to the Proceeds Sub-Account (Other
Collections), promptly deposit all other amounts received by it in
connection with the Refugio Project and, in addition, amounts received
after the Project Completion Date by way of refunds of IVA into the
Proceeds Sub-Account (Chile).
(b) On the Release Date and on each Payment Date thereafter (after
giving effect to all payments due to be made on such date and the amount
of each payment scheduled to be paid by the Borrower (or remitted by the
Borrower to the Proceeds Sub-Account (Debt Service Reserve - Prepayment
Proceeds)) within ten Business Days after such Payment Date pursuant to
clause (d) of Section 3.1), the balance standing to the credit of the
---------- -----------
Proceeds Account shall be in excess of the amount (such amount, the
"Required CapEx Balance") of the Project Capital Costs scheduled to be
-----------------------
paid in accordance with the Cash Flow Schedule during the six month period
commencing on the Release Date or such Payment Date, as the case may be.
(c) No amount other than amounts referred to in this clause shall be
disbursed on the instructions of the Borrower or otherwise from either the
Proceeds Account or the Proceeds Sub-Account (Chile); provided, however,
-------- -------
that any Borrower Project Costs which are scheduled, pursuant to the
Development Plan, to be incurred in any one calendar month may be incurred
and paid for in any prior calendar month; provided, further, however, that
-------- ------- -------
the aggregate amount of such accelerated Borrower Project Costs incurred
in any one calendar month may not exceed 10% of the aggregate Borrower
Project Costs scheduled to be incurred during such calendar month and the
aggregate of all such accelerated Project Costs shall not exceed 5%
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<PAGE>
of all Borrower Costs scheduled to be incurred in connection with the
Refugio Project during the Project Period, in each case as set forth in
the Development Plan. On the terms and subject to the conditions of this
Agreement (including Section 4.4), the Project Account Bank (U.S.) shall,
-----------
on instructions of the Borrower, disburse funds from the Proceeds Account
for application in the following order of priority:
(i) for payment of bona fide Project Costs (excluding, however,
Project Costs of the nature referred to in clauses (c)(ii) and
---------------
(c)(iii)) then payable by the Borrower (and for which moneys have not
--------
been previously or are not being simultaneously disbursed from the
Proceeds Account or any other Project Account) and not otherwise
restricted from being paid pursuant to the terms of this Agreement or
any other Loan Document;
(ii) for payment of the Principal Amounts of Loans (other than
pursuant to clause (d) of Section 3.1), all interest accrued thereon
---------- -----------
and other payment Obligations (other than as referred to in clause
------
(c)(iii)) of the Borrower then due and owing;
--------
(iii) for payments in respect of Hedging Agreements or Interest
Rate Protection Agreements entered into directly by the Borrower in
accordance with Section 8.1.10 or 8.1.11, respectively;
-------------- ------
(iv) subject to the first proviso to clause (b) of Section 4.3,
----- ---------- -----------
for deposit to the Proceeds Sub-Account (Debt Service Reserve) to the
extent necessary to ensure that the amount standing to the credit
thereof is not less than the Required Debt Service Reserve Balance;
(v) for payment of the Principal Amounts of Loans, or transfer
of monies to the Proceeds Sub-Account (Debt Service Reserve -
Prepayment Proceeds) in respect thereof, in each case together with
interest accrued thereon pursuant to clause (d) of Section 3.1;
---------- -----------
(vi) upon the Release Date, for transfer of the Required Stamp
Duty Amount as at the Release Date to the Proceeds Sub-Account (Debt
Service Reserve -Stamp Duty), and at all times after the Release Date
to ensure that the balance standing to the credit of the Proceeds
Sub-Account (Debt Service Reserve -Stamp Duty) is not less than the
Required Stamp Duty Amount as at such time; and
(vii) for payment of amounts as and when permitted to be made
pursuant to Section 8.2.7.
-------------
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<PAGE>
(d) For the sole purpose of facilitating the remission of Dollars from the
Proceeds Account to Chile in order to fund the payment of invoices in
respect of Project Costs denominated in Pesos pursuant to clause (c)(i),
-------------
the Borrower may establish a single purpose account denominated in Pesos
(the "Proceeds Sub-Account (Chile)") in Santiago in the Borrower's name
----------------------------
with the Project Account Bank (Chile). For the purposes of the foregoing,
and to the extent permitted by Applicable Law and the Foreign Investment
Contract, the Project Account Bank (Chile) and the Borrower shall obtain
all Approvals, and take all action, as the Administrative Agent deems
necessary or advisable to comply with Applicable Law and to protect the
Bank Parties' interests in all balances standing to the credit of the
Proceeds Sub-Account (Chile). All amounts received by the Borrower in
respect of the proceeds of any disposition of Project Assets (subject
always to the provisions of this Agreement and the Chilean Security
Agreements and excluding proceeds from the sale of Project Output)
together with any amounts received by the Borrower in connection with the
expropriation or other taking of any Project Assets as a result of any
action of the nature referred to in clause (b) or (c) of Section 9.1.12,
---------- --- --------------
shall be deposited into such bank account in the U.S. which is pledged to
the Bank Parties as the Administrative Agent shall direct. The amount of
Dollars that may be remitted from the Proceeds Account to the Proceeds
Account Bank (Chile) for conversion into Pesos and deposit into the
Proceeds Sub-Account (Chile) during any one calendar month may not exceed
the excess, if any, of (i) the Dollar equivalent (calculated at the then
prevailing market rates) of those Peso-denominated Project Costs described
in clause (c)(i) scheduled to be paid during such month pursuant to the
-------------
Cash Flow Schedule, less (ii) balances standing to the credit of the
Proceeds Sub-Account (Chile) on such day which are not then expected to be
required to fund the payment of Project Costs already incurred or expected
to be incurred. Any Dollars so remitted shall immediately be converted by
the Project Account Bank (Chile) into Pesos and deposited into the
Proceeds Sub-Account (Chile).
For the avoidance of doubt, amounts may be disbursed from the
Proceeds Sub-Account (Chile) to those accounts referred to (and subject to
the limitations contained) in Section 8.2.16 (subject to the limits set
--------------
forth therein) for the purpose of funding the payment of Project Costs
otherwise permitted to be paid from the Proceeds Sub-Account (Chile)
pursuant to this Section.
(e) At any time when any Default shall have occurred and be
continuing but prior to the occurrence of an Enforcement Event and subject
to the provisions of clause (c)(ii) of Section 4.4, the Borrower may
-------------- -----------
instruct the relevant Project Account Bank only to disburse funds
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<PAGE>
(including Dollars remitted from the Proceeds Account to the Proceeds Sub-
Account (Chile) pursuant to clause (d)) from the Proceeds Account and the
----------
Proceeds Sub-Account (Chile) for the purpose of payment of costs referred
to below and shall be paid in the following order of priority:
(i) first, for payment of such Project Costs (other than Project
-----
Costs referred to in clauses (e)(ii) and (e)(iii)) which are
--------------- --------
necessary in order to maintain the Mine in normal working condition;
provided, however, that no such amount may be disbursed in respect of
-------- -------
the payment of any such Project Cost which, in the reasonable opinion
of the Required Banks (acting in consultation with the Independent
Consultant) shall not be necessary to maintain the Mine in normal
working condition. All Project Costs in respect of which amounts are
permitted to be disbursed from the Proceeds Account or the Proceeds
Sub-Account (Chile) pursuant to this clause are referred to herein as
"Required Maintenance Expenditures";
---------------------------------
(ii) second, for payment of the Principal Amounts of Loans, all
------
interest accrued thereon and other payment Obligations (other than as
referred to in clause (e)(iii)) of the Borrower then due and owing;
---------------
and
(iii) third, for payments in respect of Hedging Agreements and
-----
Interest Rate Protection Agreements entered into directly by the
Borrower in accordance with Section 8.1.10 or 8.1.11 respectively.
-------------- ------
(f) For the avoidance of doubt, references in this Agreement to the
Proceeds Account shall not, and shall not be deemed to, include a
reference to any of the Proceeds Sub-Account (Chile), the Proceeds Sub-
Account (Debt Service Reserve), the Proceeds Sub-Account (Debt Service
Reserve - Prepayment Proceeds) or the Proceeds Sub-Account (Debt Service
Reserve - Stamp Duty).
SECTION 4.3. PROCEEDS SUB-ACCOUNT (DEBT SERVICE RESERVE), ETC.
(a) The Borrower shall establish three single purpose sub-accounts
(the "Proceeds Sub-Account (Debt Service Reserve"), the "Proceeds Sub-
------------------------------------------ ------------
Account (Debt Service Reserve-Prepayment Proceeds"), and the "Proceeds
------------------------------------------------- --------
Sub-Account (Debt Service Reserve - Stamp Duty") respectively) of the
----------------------------------------------
Proceeds Account.
(b) On all dates commencing with the Release Date the balance
standing to the credit of the Proceeds Sub-Account (Debt Service Reserve)
shall be in excess of the
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<PAGE>
sum (such sum, the "Required Debt Service Reserve Balance") of (i) the
-------------------------------------
aggregate Dollar equivalent (calculated, in the case of any then
outstanding Gold Loans, as at such date) of the Principal Amount of Loans
scheduled to be repaid pursuant to clause (b) of Section 3.1) during the
---------- -----------
six month period commencing on such date, and (ii) the aggregate Dollar
equivalent (calculated, in the case of any then outstanding Gold Loans, as
aforesaid) of the aggregate amount of interest to accrue on the Loans
during such period (calculated, with respect to any Loan in the case of
any portion of such period which shall occur after the termination of any
Interest Period then applicable to such Loan, on the basis of an Interest
Period of six months duration and calculated on the basis of the Political
Risk Premium as in effect on the relevant date of calculation); provided,
--------
however, that, notwithstanding the foregoing, (x) in the event that on any
-------
Payment Date there are insufficient balances standing to the credit of the
Proceeds Account to make the repayment of any instalment of the Principal
Amount of the Loans and interest accrued thereon (including, for the
avoidance of doubt, that portion of the Applicable Margin constituted by
the Political Risk Premium) then required to be paid or (y) in the event
that on the date on which any Principal Amount of any Loan is required to
be prepaid, or any amount is required to be deposited into the Proceeds
Sub-Account (Debt Service Reserve-Prepayment Proceeds) within ten Business
Days of any Payment Date pursuant to clause (d) of Section 3.1, there are
---------- -----------
insufficient amounts standing to the credit of the Proceeds Account to
make such prepayment or deposit, then, in each such case, the balance
standing to the credit of the Proceeds Sub-Account (Debt Service Reserve)
may be less than the Required Debt Service Reserve Balance but only to the
extent that such depletion is caused by application of the proceeds of the
Proceeds Sub-Account (Debt Service Reserve) to fund such payments or
deposits; and provided, further, however, that the Required Debt Service
-------- ------- -------
Reserve Balance shall be required to be maintained again within 60 days of
such Payment Date. The Borrower shall promptly notify the Administrative
Agent of any intention to deplete the Proceeds Sub-Account (Debt Service
Reserve) in the manner referred to in this proviso.
(c) On the terms and subject to the conditions of this Agreement, the
Borrower may instruct the Project Account Bank (U.S.) to disburse funds
from the Proceeds Sub-Account (Debt Service Reserve) for application for
payment of the Principal Amounts of Loans and all interest accrued thereon
then due and owing.
(d) Subject to clause (c)(ii) of Section 4.4, (i) amounts previously
-------------- -----------
deposited to the Proceeds Sub-Account (Debt Service Reserve-Prepayment
Proceeds) pursuant to
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<PAGE>
clause (d) of Section 3.1 may only be utilized to fund any prepayment
---------- -----------
required to be made pursuant to such clause, and (ii) amounts previously
deposited to the Proceeds Sub-Account (Debt Service Reserve - Stamp Duty)
may only be utilized to fund the payment of any stamp duty due and payable
in connection with the Supplemental Notes. If at any time the balance of
the Proceeds Sub-Account (Debt Service Reserve - Stamp Duty) exceeds the
Required Stamp Duty Amount at such time then the Borrower may instruct the
Proceeds Account Bank (U.S.) to transfer such excess to the Proceeds
Account.
(e) If on the last Business Day of any calendar month the balance of
the Proceeds Sub-Account (Debt Service Reserve) exceeds the Required Debt
Service Reserve Balance calculated on such date and if no Default shall
then have occurred and be continuing, the Borrower may instruct the
Proceeds Account Bank (U.S.) to transfer such excess on such date to the
Proceeds Account.
(f) No amounts other than amounts referred to in clauses (c) and (e)
----------- ---
and in the first proviso to clause (b) may be disbursed from the Proceeds
------------- ----------
Sub-Account (Debt Service Reserve).
(g) Without prejudice to any provision of any Collateral Agreement,
at any time when any Default shall have occurred and be continuing, no
withdrawal may be directed by the Borrower from the Proceeds Sub-Account
(Debt Service Reserve).
(h) For the avoidance of doubt, references in this Agreement to the
Proceeds Sub-Account (Debt Service Reserve) shall not be deemed to include
a reference to either the Proceeds Sub-Account (Debt Service Reserve -
Prepayment Proceeds) or the Proceeds Sub-Account (Debt Service Reserve -
Stamp Duty).
SECTION 4.4. GENERAL PROVISIONS RELATING TO THE PROJECT ACCOUNTS.
(a) The Borrower shall deposit moneys to, and moneys shall be
disbursed from, the Project Accounts solely for the purposes described in
this Article. Without prejudice to the provisions of Section 8.1.12, the
--------------
Borrower shall not deposit into any Project Account any moneys other than
moneys derived from, or received in connection with, the Refugio Project.
(b) Without prejudice to any provision of any Collateral Agreement,
at any time when any Enforcement Event shall have occurred and be
continuing, no withdrawal may be made from any Project Account without the
prior written consent of the Required Banks.
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(c) (i) Any repayment of the Principal Amount of any Loans to
be made from any Project Account shall (without prejudice to the
right of the Administrative Agent or any Bank to obtain such
repayment or prepayment of any Obligation from any other source,
including the other Project Accounts) be made (x) in the case of
Dollar Loans, in Dollars by disbursing from the relevant Project
Account to the Administrative Agent an amount sufficient to provide
for such repayment or prepayment, or (y) in the case of Gold Loans,
in ounces of Gold by disbursing from the relevant Project Account to
Rothschild or any other member of the LBMA reasonably acceptable to
the Administrative Agent an amount sufficient to provide for such
repayment or prepayment in ounces of Gold with irrevocable
instructions to transfer such ounces of Gold to the account of the
Administrative Agent referred to in clause (a) of Section 5.8.
---------- -----------
(ii) If there are insufficient funds in the Proceeds Account,
the Proceeds Sub-Account (Debt Service Reserve) or the Proceeds Sub-
Account (Debt Service Reserve - Prepayment Proceeds) for any
repayment or prepayment of the Principal Amount of any Loans required
to be made with balances standing to the credit thereof, the Proceeds
Account, the Proceeds Sub-Account (Debt Service Reserve), the
Proceeds Sub-Account (Debt Service Reserve-Prepayment Proceeds) and
the Proceeds Sub-Account (Debt Service Reserve - Stamp Duty) shall
each be disbursed in full, (x) in the case of Dollar Loans
outstanding at such time, to the Administrative Agent, or (y) in the
case of Gold Loans outstanding at such time, to Rothschild or such
other member of the LBMA with instructions as aforesaid and, in
either such case, the Borrower shall pay any remainder of such
repayment or prepayment in accordance with the relevant provisions of
Section 3.1.
-----------
(d) At any time when no Default shall then have occurred and be
continuing and subject to the terms and conditions of the Foreign
Investment Contract, the Borrower shall, to the extent practicable in
order to perform its obligations under each Operative Document to which it
is a party and to develop the Refugio Project in accordance with the
Development Plan, direct the relevant Project Account Bank to invest
amounts held in any Project Account in the appropriate type of Cash
Equivalent Investments; provided, however, that (i) such Cash Equivalent
-------- -------
Investments are pledged to or otherwise encumbered in favor of the
Administrative Agent as security for the Obligations pursuant to the
relevant Collateral Agreement or other documentation satisfactory to the
Administrative Agent, (ii) in the case of the
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<PAGE>
Proceeds Account and the Proceeds Sub-Account (Debt Service Reserve), an
aggregate amount of such Cash Equivalent Investments (U.S.) equal to or in
excess of the Dollar equivalent (calculated from time to time) of the next
succeeding repayment of the Principal Amount of the Loans scheduled to be
made pursuant to clause (b) of Section 3.1 shall mature on or prior to the
---------- -----------
date of such scheduled payment set forth in such clause, (iii) upon the
occurrence of an Enforcement Event, the Administrative Agent shall be
entitled to direct the relevant Project 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, and (iv) upon maturity of any Cash Equivalent
Investment acquired pursuant to this clause the proceeds thereof (and upon
receipt of any interest or other payment in respect of any such Cash
Equivalent Investment, the amount of such payment) shall immediately be
either deposited into the relevant Project Account or, subject to the
provisions of clause (c) and this clause, invested in other appropriate
----------
Cash Equivalent Investments.
(e) The Project Accounts (Chile) and the Project Accounts (U.S.)
shall be operated, as set forth in this Article 4, by the relevant Project
---------
Account Bank acting at the request of the Administrative Agent and
pursuant to the terms and conditions of the Project Account Agreement
(Chile) and Project Account Agreement (U.S.), respectively, and of this
Agreement. The Borrower shall not terminate the appointment of either
Project Account Bank or make any change in its instructions to any Person
to deposit any amount into any Project Account. The Borrower shall not
consent to any amendment, modification or waiver to, or in connection
with, any Project Account Agreement.
ARTICLE 5. INCREASED COSTS; TAXES; MARKET DISRUPTIONS; GENERAL
---------------------------------------------------------------
PAYMENT PROVISIONS
------------------
SECTION 5.1. GOLD OR DOLLARS UNAVAILABLE.
(a) If, prior to the date on which the Administrative Agent shall
make any determination of the Gold Base Rate or, as the case may be, the
LIBO Rate for any Interest Period, the Administrative Agent shall have
determined or shall have been notified (for any reason whatsoever) that:
(i) in the case of any Gold Loans to be outstanding during such
Interest Period, any Bank is, due to circumstances outside its
control (including the unavailability of Gold, or the inability of
the Banks to determine the Gold Base Rate), unable to
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<PAGE>
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 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 Banks in the
London interbank market, or (y) by reason of circumstances affecting
the Banks in the London interbank market, adequate means do not exist
for ascertaining the interest rate applicable hereunder to such
Dollar 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 manifest 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 Banks and
----------
the Borrower shall negotiate for a period not exceeding 30 days with a
view to agreeing an alternative basis (including an alternative to the
Gold Base Rate) for making or maintaining the Loans affected by the
circumstances described in clause (a). During such time period interest
----------
shall accrue on the Principal Amount of each affected Bank'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 Bank's affected Loans shall bear interest at a rate
per annum equal to the sum of (i) the cost to such Bank of funding such
type of Loans (as determined by such Bank which determination shall, in
the absence of manifest error, be conclusive and binding on the Borrower)
plus (ii) the Applicable Margin as in effect from time to time with
respect to such Bank.
(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 Banks' then
outstanding Loans which are affected by the circumstances described in
clause (a) be immediately converted using the principles set forth in
----------
Section 2.3 into another type of Loans, or if such type of Loans is
-----------
unavailable hereunder, be immediately repaid in full (subject, however, to
Section 5.3).
-----------
SECTION 5.2. INCREASED COSTS, ETC.
(a) The Borrower agrees to reimburse each Bank for any increase
(other than as specifically covered in any other Section of this Article)
in the cost to such Bank of
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<PAGE>
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 receivable by such Bank 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 with respect to Regulation D of the F.R.S. Board), then, in any
such event, such Bank 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 Bank for such
increased cost or reduced amount. Such notice shall, in the absence of
manifest 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 Bank, 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 Bank, 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 Bank'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 Bank for the
increased cost or reduced amount described in clause (a).
----------
SECTION 5.3. FUNDING LOSSES. In the event any Bank 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 Bank to make, continue, maintain or convert any
portion of the Principal Amount of either type of 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
(b) any action of the Borrower resulting in any Loans not being made,
maintained or converted in accordance with the Borrowing Request or the
Continuation/Conversion Notice, as the case may be, given therefor;
then, upon the request of such Bank to the Borrower (with a copy to the
Administrative Agent), the Borrower shall pay to the Administrative Agent for
the account of such Bank such amount as will (in the reasonable determination of
such Bank) reimburse
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<PAGE>
such Bank 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
Bank to the Administrative Agent and the Borrower and shall, in the absence of
manifest error, be conclusive and binding on the Borrower.
SECTION 5.4. INCREASED CAPITAL COSTS.
(a) If any Regulatory Change affects or would affect the amount of
capital required or expected to be maintained by any Bank or any Person
controlling such Bank, and such Bank 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 Bank 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 Bank to the Borrower, the Borrower may, at its option (i) within five
days of receipt of such notice, pay directly to such Bank additional
amounts sufficient to compensate such Bank or such controlling Person for
such reduction in rate of return or (ii) prepay the Principal Amount of
and interest on such affected Bank's then outstanding Loans (subject,
however, to Section 5.3). A statement of such Bank as to any such
-----------
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding
on the Borrower. In determining such amount, such Bank 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 Bank 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 17 April 1989, on the
own funds of credit institutions (89/299/EC) and the Council of the
European Communities Directive of 18 December 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 Bank 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
Bank's obtaining knowledge thereof.
SECTION 5.5. ILLEGALITY.
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<PAGE>
(a) If, as the result of any Regulatory Change, any Bank shall determine
(which determination, in the absence of manifest error, shall be
conclusive and binding on the Borrower) that it is unlawful for such Bank
to make either type of Loan, the obligations of such Bank to make any
portion of the Principal Amount of such type of Loan shall, upon such
determination (and telephonic notice thereof confirmed in writing to the
Administrative Agent and the Borrower), forthwith be suspended until such
Bank 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 Bank to make
such type of Loan shall be reinstated.
(b) If, as the result of any Regulatory Change, any Bank shall
determine (which determination, in the absence of manifest error, shall be
conclusive and binding on the Borrower) that it is unlawful for such Bank
to continue or convert either type of Loan, then, upon notice by such Bank
to the Administrative Agent and the Borrower, such Bank 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 Bank, 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 2.3) such Bank's then
-----------
outstanding Loans which are affected by the circumstances described in
clause (a) 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 Bank's then outstanding Loans (subject,
however, to Section 5.3).
-----------
SECTION 5.6. TAXES. All payments by the Borrower or any other Obligor
of principal of, and interest on, the Loans and all other amounts payable
pursuant to this Agreement or any other Loan Document to the Administrative
Agent or any other Bank Party shall be made free and clear of, and without
deduction for any, present or future income, excise, stamp or other taxes, fees,
duties, withholdings or other charges of any nature whatsoever imposed (a) in
the case of the Borrower, by Chile (including encaje) or by any taxing authority
of any other jurisdiction, and (b) in the case of any other Obligor by any
taxing authority, in each case other than franchise taxes and taxes imposed on
or measured by the recipient's net income or receipts (such items referred to as
"Taxes"). In the event that any withholding or deduction from any payment to be
-----
made by any Obligor hereunder or under any other Loan Document is required in
respect of any Taxes pursuant to any Applicable Law, then such Obligor will:
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<PAGE>
(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 the Person or
Persons 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 Taxes are directly asserted against any Bank Party with respect
to any payment received by such Bank Party hereunder or under any other Loan
Document, such Bank Party may pay such Taxes and the relevant Obligor 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 not such
Taxes been asserted.
If any Obligor 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 Bank Parties, the
required receipts or other required documentary evidence, such Obligor shall
indemnify the Administrative Agent or the relevant Bank Parties, 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 purposes of this Section,
a distribution hereunder or under any other Loan Document by the Administrative
Agent or any Bank Party to or for the account of any Bank Party shall be deemed
a payment by the relevant Obligor.
The Bank Parties agree to cooperate with each Obligor in completing and
delivering or filing tax-related forms which would reduce or eliminate any
amount of the nature referred to in the first paragraph of this Section required
to be deducted or withheld on account of payment made by such Obligor under this
Agreement or any other Loan Document; provided, however, that no Bank Party
-------- -------
shall be under any obligation to execute and deliver any such form if, in the
opinion of such Bank Party, completion of any such form could result in an
adverse consequence with respect to the business or tax position of such Bank
Party.
SECTION 5.7. MITIGATION.
(a) In the event that any Obligor makes payment of any amount
pursuant to Section 5.4 or 5.6 or that any Bank seeks payment of an amount
----------- ---
pursuant to Section 5.4 or 5.6
----------- ---
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<PAGE>
(including as a result of such Bank no longer qualifying as a "registered
financial institution" with the Central Bank) or because of circumstances
resulting in the 30 day negotiation period described in clause (b) of
----------
Section 5.1, 5.2 or 5.5, such affected Bank 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 Bank's Dollar Lending Office and/or Gold
Lending Office to another jurisdiction and the application for a Tax
Credit); provided, however, that no Bank 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 under this Agreement 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.
(b) If, pursuant to clause (a), any Bank effectively obtains a refund
----------
of tax or credit (a "Tax Credit") against a payment made by the Borrower
----------
pursuant to Section 5.6 (a "Tax Payment"), and such Bank is able to
----------- -----------
identify such Tax Credit as being attributable to such Tax Payment, then
such Bank, after actual receipt of such Tax Credit, shall reimburse the
Borrower for such amount as such Bank shall reasonably determine to be the
proportion of such Tax Credit as shall be reasonably attributable to such
Tax Payment; provided, however, that no Bank 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
Bank in connection with the assessment or payment of any Taxes. Each Bank
shall have absolute discretion as to whether to claim any Tax Credit, and
if it does so claim, the extent, order and manner in which it does so. No
Bank shall be obliged to disclose information regarding its tax affairs or
computations to the Borrower.
SECTION 5.8. PAYMENTS, COMPUTATIONS, ETC. All payments by any Obligor
pursuant to this Agreement or (except as otherwise set forth therein) any other
Loan Document, whether in respect of Principal Amount, interest or otherwise,
shall (except with respect to any repayment or prepayment of the Principal
Amount of any Gold Loan or the payment of any interest accrued thereon (each of
which shall be payable in Gold) or except as otherwise expressly provided in
this Agreement or any other Loan Document) be paid in Dollars. All such
payments shall be made by such Obligor:
(a) if in Gold, to the Administrative Agent for the account of each
Bank Party entitled thereto, by delivery of Gold to an unallocated loco
London gold account of the Administrative Agent at the Administrative
Agent's Gold
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<PAGE>
Lending Office, which account shall be designated from time to time by
notice to the Borrower from the Administrative Agent; and
(b) if in Dollars, to the Administrative Agent for the account of
each Bank 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 Bank 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 Bank 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.,
London time, 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 Bank 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 Bank 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 Bank to the Administrative Agent by notice from time to time
and maintained at its Dollar Lending Office. All interest and commissions shall
be computed on the basis of the actual number of days (including the first day
but excluding the last day) occurring during the period for which such interest
or commission is payable over a year comprised of 360 days. The Administrative
Agent shall, promptly after the first day of each Interest Period with respect
to each type of Loan, notify each Bank of the interest rate applicable to such
type of Loan during such Interest Period. 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.
SECTION 5.9. PRORATION OF PAYMENTS. If any Bank 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 Banks entitled thereto upon the Principal Amount of and interest on all
Loans (other than, for the avoidance of doubt, any payment
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<PAGE>
received by any Political Risk Bank under any policy of Political Risk
Insurance), such Bank shall purchase from the other Banks such participations in
Loans held by them as shall be necessary to cause such purchasing Bank to share
the excess payment or other recovery ratably 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 Obligor agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section may, to the fullest
extent permitted by Applicable Law, exercise all its rights of payment
(including pursuant to Section 5.11) with respect to such participation as fully
------------
as if such Bank were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Bank receives a secured claim in lieu of a setoff to which this Section
applies, such Bank shall, to the extent practicable, exercise its rights in
respect of such secured claim in a manner consistent with the rights of the
Banks entitled under this Section to share in the benefit of any recovery on
such secured claim. For the avoidance of doubt, each Bank shall participate in
the making of, continuation of, or conversion into, any type of Loans to the
extent of its Percentage of the Principal Amount of such type of Loans to be
outstanding immediately following the making, continuation or conversion of such
Loans.
SECTION 5.10. MISCELLANEOUS PROVISIONS FOR PAYMENTS IN GOLD. Without
duplication of any costs or expenses otherwise charged (directly or indirectly)
to any Obligor, all costs and charges to be reasonably incurred by the
Administrative Agent or any Bank in connection with the physical delivery of
Gold as a result of the making, continuation, conversion, payment, prepayment or
repayment of any Gold Loan (including costs and expenses (including United
Kingdom Value Added Tax) in respect of collection, shipment, cartage,
warehousing, packaging, refining, converting, insurance or otherwise), shall be
paid in Dollars directly by the Borrower or, if actually incurred by the
Administrative Agent or any Bank, shall be reimbursed in Dollars by the Borrower
within three Business Days after demand by the Administrative Agent (for its own
account or for the account of such Bank, as the case may be). Any demand for
payment of any amount by the Administrative Agent or any Bank hereunder shall be
accompanied with supporting documentation in reasonable detail.
Without affecting any other obligation of any Person hereunder or under
any other Loan Document (including the obligation of each Obligor to make
payments to any unallocated loco London gold account at the Gold Lending Office
of the Administrative Agent pursuant to clause (a) of Section 5.8), if any
---------- -----------
Obligor shall have physically delivered or arranged for the physical delivery to
the Administrative Agent of a number of ounces of Gold that is at least 99% of,
and no greater than 101% of, the number of ounces of Gold to be paid, repaid or
prepaid
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<PAGE>
(whether in respect of the Principal Amount of any Gold Loan or any interest
thereon or any other Obligation denominated in Gold) hereunder, then such
payment, repayment or prepayment shall be deemed to have been made on the date
of such delivery; provided, however, that any Gold delivered as aforesaid after
-------- -------
11:00 a.m., London time, on any Business Day shall be deemed to have been
delivered on the immediately succeeding Business Day; and provided, further,
-------- -------
however, that, in connection with any physical delivery of Gold as aforesaid, if
-------
any Obligor shall plan to deliver physically or arrange for the physical
delivery of a number of ounces of Gold to be paid, repaid or prepaid hereunder,
the Borrower shall give notice to the Administrative Agent not less than five
Business Days before such payment is due (and if, and to the extent that, such
payment, etc. shall be in respect of Obligations owing to any Bank, the
Administrative Agent shall promptly thereafter notify such Bank thereof) of the
number of ounces of Gold intended to be delivered or arranged to be physically
delivered, and any difference between the number of ounces of Gold actually
physically delivered and the number of ounces of Gold due to be paid, repaid or
prepaid hereunder shall be settled by a compensation payment by the relevant
Obligor to the Person (or Persons) entitled to such payment, repayment or
prepayment or, as the case may be, by such Person (or Persons) to the relevant
Obligor, in each such case equal to the Dollar equivalent (calculated on the
second Business Day after notice of such delivery) of the amount of such
difference and notified to the Borrower and the relevant Bank (or Banks) no
later than the second Business Day preceding such delivery. The Administrative
Agent qua Administrative Agent shall have no duty or obligation with respect to
---
any part of such compensation payment, except for losses, costs or expenses
incurred as a result of its gross negligence or wilful misconduct.
SECTION 5.11. SETOFF. In addition to and not in limitation of any
rights of any Bank Party under Applicable Law, each Bank 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 and any Intermediate Owner then or thereafter maintained with such
Bank Party, as the case may be, in whatever currency or precious metals
(including Gold) (and, as security for the Obligations owing to each Bank Party,
but not to the exclusion of any other rights such Bank Party may have, the
Borrower and each Intermediate Owner hereby grants to each Bank 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. The rights of each Bank Party under this
-----------
Section are in addition to any other rights and remedies (including other rights
of setoff under Applicable Law or otherwise) which such Bank Party may have.
SECTION 5.12. CONVERSION UPON ACCELERATION, JUDGMENT CURRENCY, ETC. (a)
Upon any Enforcement Event any Bank may, at
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its option, and notwithstanding clause(a) of Section 2.3 convert any Gold Loan
--------- -----------
then outstanding into a Dollar Loan. Upon the occurrence of any default in the
payment of any Principal Amount of any Gold Loan maintained by any Political
Risk Bank in respect of which such Political Risk Bank reasonably believes that
it is entitled to, and intends to, make a claim under the relevant policy of
Political Risk Insurance for payment of such amount after any applicable grace
period, then such Political Risk Bank may, at its option, and notwithstanding
clause (a) of Section 2.3, convert such defaulted portion of such Gold Loan into
---------- -----------
a Dollar Loan. For the purpose of computing the Principal Amount of any Loan
outstanding after any conversion pursuant to the foregoing two sentences, 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 or payment default, any Bank or Political Risk Bank, as the case may be,
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 payment
default, or for 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 relevant Obligor 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 Bank:
(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 any Obligor hereunder or under any other Loan
Document, such Bank, at its own expense, must, at any time or from time to
time purchase Gold in an open exchange market to satisfy its obligations
to any funding source which has provided Gold to such Bank to make, in
whole or in part, any Gold Loan.
Such indemnity obligations of the Borrower:
(iii) shall be payable in Dollars;
(iv) shall be determined in accordance with (and at the times
provided pursuant to) this Section; and
(v) shall be enforceable, insofar as clause (a) above is concerned,
----------
as a separate or additional cause of action, and such enforceability shall
not be affected by
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<PAGE>
any prior judgment being obtained for any other sums due under this
Agreement or any other Loan Document.
(b) Each Obligor hereby agrees that:
(i) If, for the purposes of obtaining judgement in any court, it is
necessary to convert a sum due hereunder in Dollars into another currency,
such Obligor 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 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 such Obligor in respect of any sum due from it
to any Bank 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 Bank Party, as the case may be, of any sum
adjudged to be so due in such other currency, such Bank Party, as the case
may be, 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 Bank Party in Dollars, such
Obligor, as a separate obligation and notwithstanding any such judgment,
hereby indemnifies and holds harmless such Bank Party against such loss,
and if the Dollars so purchased exceed the sum originally due to such Bank
Party, such Bank Party shall remit to such Obligor such excess.
SECTION 5.13. APPLICATION OF PROCEEDS. If at any time any amount
received by the Administrative Agent is less than the amount then due and
payable pursuant to this Agreement or any other Loan Document (including any
proceeds received by the Administrative Agent 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) such amount may, in the discretion
of the Administrative Agent (acting with the consent of the Required Banks), be
held by the Administrative Agent as additional collateral security under the
relevant Collateral Agreement 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:
(a) first, to amounts outstanding to the Bank Parties (or any of
-----
them) under any Loan Document (excluding, however, any Hedging Agreement
and any Interest Rate Protection Agreement) in respect of any amount other
than interest on, or the Principal Amount of, any Loan;
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<PAGE>
(b) second, to amounts outstanding to the Bank Parties (or any of them)
------
under any Loan Document (excluding, however, any Hedging Agreement and any
Interest Rate Protection Agreement) in respect of interest on any Loan;
(c) third, to amounts outstanding to the Bank Parties (or any of
-----
them) under any Loan Document (excluding, however, any Hedging Agreement
and any Interest Rate Protection Agreement) in respect of the Principal
Amount of any Loan; and
(d) fourth, pro rata to net payment obligations of the Borrower to
------ --------
any Bank Party under any Loan Document which is a Hedging Agreement or an
Interest Rate Protection Agreement.
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.
ARTICLE 6. CONDITIONS PRECEDENT TO MAKING LOANS
------------------------------------------------
The obligations of the Banks 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 Article shall be
dated on, or prior to, and shall be in full force and effect on, the Borrowing
Date.
SECTION 6.1. NOTES, ETC. The Administrative Agent shall have received:
(a) Initial Notes, duly executed by an Authorized Representative of
the Borrower and duly notarized before a Chilean notary public, payable to
the order of each Bank, in such quantities as such Bank shall require in
aggregate principal face amount equal to such Bank's Commitment Amount;
(b) unexecuted Supplemental Notes payable to the order of each Bank;
(c) evidence of the deposit with the Custodian Bank of (i) the
Initial Notes, duly executed and notarized as aforesaid (together with
evidence of the payment of all stamp tax imposed by any relevant
Governmental Authority in connection with the execution and notarization
of the Initial Notes), and (ii) the unexecuted Supplemental Notes;
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(d) an irrevocable power of attorney, duly executed by an Authorized
Representative of the Borrower in favor of the Custodian Bank authorizing
the Custodian Bank to (i) resign each Initial Note on behalf of the
Borrower as provided for in the Notes Operating Procedures Agreement, (ii)
execute the Supplemental Notes on behalf of the Borrower and complete the
blanks in the Supplemental Notes with the appropriate face amounts and
take all other necessary actions with respect thereto as required by the
Administrative Agent pursuant to the Notes Operating Procedure Agreement,
and (iii) take all other necessary action with respect to the Notes and
the Notes Operating Procedures Agreement as required under Applicable Law;
and
(e) counterparts of the Notes Operating Procedures Agreement, duly
executed by the Custodian Bank and an Authorized Representative of the
Borrower.
SECTION 6.2. RESOLUTIONS, ETC. The Administrative Agent shall have
received:
(a) from each Obligor, Bema U.S. and AGI Chile a certificate of its
Secretary or similar officer as to:
(i) resolutions of its Board of Directors, Management Committee
or similar body then in full force and effect authorizing the
execution, delivery and performance of this Agreement and each other
Operative Document or other document to be executed by it in
connection with the transactions contemplated hereby and thereby
(including resolutions required to effect the availability of the
DOCLOC Facility in all circumstances),
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement and each other
Operative Document or other document executed or to be executed by
it, and
(iii) its Organic Documents as then in effect (together, with
in the case of the Borrower, evidence that its By-Laws (Estatutos)
shall have been amended in a manner satisfactory to all the Banks so
as to reflect the amendments to the Shareholders Agreement contained
in the amendment to that document referred to in the definition
thereof),
upon which certificates each Bank Party may conclusively rely until it
shall have received a further certificate of the Secretary or similar
officer of the relevant Obligor or AGI Chile, as the case may be,
cancelling or amending such prior certificate;
(b) from the Independent Consultant, a certificate of its Secretary
or similar officer as to the incumbency
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<PAGE>
and signature of those of its officers authorized to act with respect to
each Completion Certificate, each Liabilities Certificate and each other
Loan Document or other document to be executed by it and each other matter
contemplated hereby, upon which certificate each Bank Party may
conclusively rely until it shall have received a further certificate of
the Secretary or similar officer of the Independent Consultant cancelling
or amending such prior certificate; and
(c) such other documents (certified if requested) as the
Administrative Agent may reasonably request from any Obligor or the
Independent Consultant, as the case may be, with respect to any Organic
Document, Contractual Obligation, Operative Document or Approval.
SECTION 6.3. SUPPORT AGREEMENTS, ETC. The Administrative Agent shall
have received counterparts of (a) the AGI Support Agreement and the Bema Gold
Support Agreement, duly executed by an Authorized Representative of each of AGI
and Bema Gold, respectively, together with:
(i) all share certificates evidencing the shares pledged or
charged by each Support Agreement and all other documents and
instruments otherwise required to be delivered to the Administrative
Agent pursuant thereto (including stock powers executed in blank);
and
(ii) evidence that all filings, stampings, registrations,
recordings and other actions necessary or, in the opinion of counsel
to the Bank Parties, advisable in order to create in favor of the
Administrative Agent (for the ratable benefit of the Bank Parties) a
valid and perfected first-priority Lien over all of the Collateral
purported to be covered by (and as defined in) each such Support
Agreement have been taken and are effective; and
(iii) copies of execution counterparts of each Deposit Account
Agreement (as defined in each Support Agreement) required by the
terms of the relevant Support Agreement to be in effect on the
Borrowing Date executed on behalf of each party thereto together with
evidence of the deposit into any account the subject of such Deposit
Account Agreement then required to have been deposited into such
account; and
(b) a copy of the Bema Gold/AGI Subordinated Note certified by an
Authorized Representative of each of AGI and Bema Gold; and
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<PAGE>
(c) copies of certificates of the nature referred to in clauses (i)
and (ii) of the ninth paragraph of the opinion referred to in clause (e)
----------
of Section 6.13.
------------
SECTION 6.4. PLEDGE AGREEMENTS. The Administrative Agent shall have
received counterparts of each Pledge Agreement, duly executed by an Authorized
Representative of AGRI, Bema Bermuda or Bema U.S., as the case may be, together
with:
(a) documents and instruments (including, in the case of the Bema
U.S. Pledge Agreement, all share certificates evidencing the shares
charged or pledged thereby) required to be delivered to the Administrative
Agent pursuant thereto (including, to the extent relevant, stock powers
executed in blank); and
(b) evidence that all filings, stampings, registrations, recordings
and other actions necessary or, in the opinion of counsel to the Bank
Parties, advisable in order to create in favor of the Administrative Agent
(for the ratable benefit of the Bank Parties) a valid and perfected first-
priority Lien over all of the collateral purported to be covered by each
Pledge Agreement have been taken and are effective (including, in the case
of the AGRI Pledge Agreement and the Bema Bermuda Pledge Agreement,
evidence that the respective Liens created thereby have been recorded in
the Register of Encumbrances on Shares of the competent Registrar of Mines
in Chile).
SECTION 6.5. SECURITY AGREEMENTS.
(a) The Administrative Agent shall have received counterparts of the
Borrower Security Agreement (U.S. Assets), the AGRI Security Agreement and
the Bema Bermuda Security Agreement, duly executed by an Authorized
Representative of the relevant Obligor party thereto, together with
evidence that all filings, stampings, registrations, recordings and other
actions necessary or in the opinion of counsel to the Bank Parties,
advisable or desirable, in order to create in favor of the Administrative
Agent (for the ratable benefit of the Bank Parties) a valid and perfected
first-priority Lien over all of the Collateral (other than any Collateral
which the Required Banks determine is not material) purported to be
covered by (and/or as defined in) each such Security Agreement have been
taken and are effective.
(b) The Administrative Agent shall have received counterparts of the
Chilean Security Agreements, duly executed by the Bank Parties and an
Authorized Representative of the Borrower and, solely in the case of the
Conditional Assignment of Contract Rights (Foreign Investment Contract),
the Intermediate Owners, together with:
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<PAGE>
(i) in the case of the Conditional Assignment of Contract Rights
(Foreign Investment Contract), evidence of the prior notification of
the conditional assignment of rights under the Foreign Investment
Contract pursuant to the Conditional Assignment of Contract Rights
(Foreign Investment Contract) to the Central Bank and the Foreign
Investment Committee of Chile and notarization of the relevant public
deed thereof before a Chilean notary public;
(ii) in the case of the Mortgage Over Mining Concessions,
evidence of the notarization of the relevant public deed before a
Chilean notary public and the filing thereof in the Register of
Mortgages and Encumbrances of the relevant Registrar of Mines in
Copiapo, Chile;
(iii) in the case of the Mortgage Over Real Estate and the
Mortgage Over Water Rights, evidence of the notarization of the
relevant public deed before a Chilean notary public and the filing
thereof in the Register of Mortgages and Encumbrances of the
relevant Real Estate Registrar in Copiapo, Chile;
(iv) in the case of the Industrial Pledge, evidence of the
notarization of the relevant public deed before a Chilean notary
public and the registration thereof in the Special Industrial Pledge
Register of the relevant Real Estate Registrar in Copiapo, Chile;
(v) in the case of the Promise to Grant Pledges Without
Conveyance, evidence of the notarization of the relevant public deed
before a Chilean notary public;
(vi) in the case of the Promise to Grant Industrial Pledges,
evidence of the notarization of the relevant public deed before a
Chilean notary public;
(vii) in the case of each Conditional Assignment of Contract
Rights, evidence of the notarization of the relevant public deed
before a Chilean notary public and of acknowledgement and agreement
by all relevant counterparties to the conditional assignment of each
contract conditionally assigned pursuant to such Conditional
Assignment of Contract Rights;
(viii) in the case of the Promise to Grant Mortgages Over Real
Estate, evidence of the notarization of the relevant public deed
before a Chilean notary public; and
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<PAGE>
(ix) evidence that all filings, stampings, registrations,
recordings, notifications and other actions necessary or, in the
opinion of counsel to the Bank Parties, advisable or desirable, in
order to create in favor of the Bank Parties a valid and perfected
first-priority Lien over all of the Collateral purported to be
covered by (and as defined in) each Chilean Security Agreement have
been taken and are effective.
SECTION 6.6. SUBORDINATION AGREEMENTS, ETC. The Administrative Agent
shall have received:
(a) counterparts of (i) each Subordination Agreement, duly executed
by an Authorized Representative of each Obligor party thereto and by an
authorized signatory of each other party thereto (other than the
Administrative Agent), (ii) certified copies of the principal
documentation relating to the issue of the 1990 Secured Debentures and the
1994 Convertible Debentures (together with, in the case of the 1994
Debentures, evidence of the placement into escrow of funds representing
payment of interest for the first two years of the term of the 1994
Debentures) and (iii) the Agreement Regarding Trust Indenture, duly
executed by an Authorized Representative of Bema Gold; and
(b) evidence satisfactory to all the Banks (including an opinion in
form and substance satisfactory to all the Banks from counsel to Bema
Gold) that the obligations of Bema Gold under the 1990 Secured Debentures
have been cash collateralized in full by way of an irrevocable payment
into escrow.
SECTION 6.7. PROJECT DOCUMENTS; APPROVALS. The following conditions
shall have been met:
(a) all Project Documents referred to in clauses (a) and (b) of the
----------- ---
definition of such term shall have been executed and delivered by the
parties thereto, all Project Documents executed subsequent to the
Effective Date but on or prior to the Borrowing Date shall be satisfactory
in form and substance to all the Banks, and all of the foregoing Project
Documents shall be in full force and effect, and a copy thereof (certified
by an Authorized Representative of each relevant Obligor party thereto)
shall have been delivered to the Administrative Agent;
(b) the Administrative Agent shall have received a certificate of an
Authorized Representative of the relevant Obligor, to the effect that (i)
all Approvals of the nature referred to in the first sentence of clause
------
(a) of Section 7.16 have been obtained, (including, for the avoidance of
--- ------------
doubt all such Approvals which are listed on Part A of Item 1 ("Current
------ ------ -------
Material Approvals") of the
------------------
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<PAGE>
Disclosure Schedule and all such Approvals which are listed on Part B of
------
Item 1 ("Pending Material Approvals") of the Disclosure Schedule and which
------
are required pursuant to the terms of clause (b) of Section 8.1.3 to have
---------- -------------
been obtained prior to the Borrowing Date) and each such Approval is in
full force and effect as of the Borrowing Date and (ii) a true, correct
and complete copy of each such Approval is attached to such certificate;
and
(c) the Administrative Agent shall have received a certificate of an
Authorized Representative of the Borrower to the effect that attached
thereto is a copy of the Development Plan in the form supplied to the Bank
Parties' Chilean counsel in connection with the execution and delivery of
this Agreement by each party thereto and such copy shall be identical to
the form of the Development Plan actually received by the Bank Parties
prior to their execution and delivery of this Agreement (including any
amendments thereto consented to by the Bank Parties prior to such
execution and delivery).
SECTION 6.8. HEDGING AGREEMENTS. The Agents shall have received such
evidence as they shall require in connection with the implementation and
effectiveness on the Borrowing Date of Hedging Agreements which would be
required by Section 8.1.10 to be in effect for the two and one half year period
--------------
commencing on February 1, 1996.
SECTION 6.9. INSURANCE. The terms of and policies of insurance
required to be maintained by the Borrower pursuant to Section 8.1.7 (including
-------------
as to amount, risks covered and deductibles) shall be on terms satisfactory to
the Technical Agent (acting in consultation with the Required Banks) and the
Technical Agent shall have received a schedule detailing all policies of
insurance maintained in connection with the Refugio Project as at the Borrowing
Date. In addition, the Technical Agent shall have received copies of all
policies and binders or brokers' letters of undertaking regarding such policies.
The Technical Agent shall have also received (a) the Insurance Summary (which
shall be satisfactory in form and substance to the Banks), (b) the Insurance
Consultant's Certificate and (c) evidence satisfactory to all the Banks that all
premiums required to be paid in connection with such policies have been paid and
that all such policies are in full force and effect.
SECTION 6.10. POLITICAL RISK INSURANCE.
(a) Each of CIBC and Deutsche Bank shall have procured Political Risk
Insurance for the period commencing on the Borrowing Date and ending on
the eighth anniversary thereof and, without limiting the generality of the
definition of the term "Political Risk Insurance", such Political Risk
------------------------
Insurance shall provide for a "Maximum Price" (as set forth in the
Certificate of Cover attached to the relevant policy) per ounce of Gold of
not less than
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<PAGE>
150% of the London Price as in effect two Business Days prior to the
Borrowing Date.
(b) In the event Political Risk Insurance is required by any other
Bank, each Guarantor and the Borrower shall be assisting such Bank to
obtain Political Risk Insurance in the manner contemplated by Section
-------
8.1.16 and such Bank shall, in its reasonable opinion, have determined
------
that Political Risk Insurance is available, and will continue to be
available, to it.
SECTION 6.11. PROJECT ACCOUNTS. The Administrative Agent shall have
received:
(a) evidence that the Project Accounts have been established;
(b) counterparts of the Project Account Agreements duly executed by
each relevant Project Account Bank and an Authorized Representative of the
Borrower;
(c) a copy of irrevocable instructions duly executed by an Authorized
Representative of the Borrower in favor of the Project Account Bank (U.S.)
authorizing the Project Account Bank (U.S.) to submit all necessary
information to the Central Bank and take all necessary actions to ensure
compliance with the Foreign Investment Contract and all Applicable Laws;
and
(d) evidence that the Construction Account shall have been funded
with Capital Contributions and/or Approved Subordinated Indebtedness in an
amount aggregating not less than the Required Guarantor Contribution.
SECTION 6.12. PROCESS AGENT ACCEPTANCE. The Administrative Agent shall
have received a counterpart of the Process Agent Acceptance, duly executed by
the Process Agent.
SECTION 6.13. OPINIONS OF COUNSEL. The Administrative Agent shall have
received opinions addressed to the Bank Parties from:
(a) Milbank, Tweed, Hadley & McCloy, special New York counsel to the
Obligors, AGI Chile, Bema U.S. and Bema Chile substantially in the form of
Exhibit H-1 attached hereto;
-----------
(b) Philippi, Yrarrazaval, Pulido, Langlois & Brunner, Chilean
counsel to the Obligors, substantially in the form of Exhibit H-2 attached
-----------
hereto;
(c) Deborah Friedman, Esq., General Counsel of AGI and AGRI,
substantially in the form of Exhibit H-3 attached hereto;
-----------
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<PAGE>
(d) Ballard Spahr Andrews & Ingersoll, special Colorado counsel,
substantially in the form of Exhibit H-4 attached hereto;
-----------
(e) Smith, Lyons, Torrance, Stevenson & Mayer, Canadian counsel to
Bema Gold, Bema Bermuda, Bema Chile and Bema U.S. substantially in the
form of Exhibit H-5 attached hereto;
-----------
(f) Conyers, Dill & Pearman, Bermudian counsel to Bema Bermuda,
substantially in the form of Exhibit H-6 attached hereto;
-----------
(g) Woodburn and Wedge, special Nevada counsel to Bema U.S.,
substantially in the form of Exhibit H-7 attached hereto;
-----------
(h) Carey y Cia. Abogados, Chilean counsel to the Bank Parties, as to
general matters of Chilean law, substantially in the form of Exhibit H-8
-----------
attached hereto;
(i) Carey y Cia. Abogados, Chilean counsel to the Bank Parties, as to
property title matters, in a form satisfactory to all the Banks; and
(j) Mayer, Brown & Platt, counsel to the Bank Parties, substantially
in the form of Exhibit H-9 attached hereto.
-----------
The relevant Obligors hereby instruct counsel referred to in clauses (a)
-----------
to (g) to deliver the opinions referred to in such clauses to the Bank Parties.
---
SECTION 6.14. INDEPENDENT CONSULTANT'S CERTIFICATE. The Banks shall
have received counterparts of the Independent Consultant's Certificate.
SECTION 6.15. DOCLOC FACILITY AGREEMENT, ETC. The Banks shall have
received:
(a) a certified copy of the DOCLOC Facility Agreement, duly executed
by Cyprus Amax and AGI; and
(b) counterparts of the DOCLOC Support Agreement, duly executed by an
Authorized Representative of AGI, a senior financial officer of Cyprus
Amax and the Bank Parties.
SECTION 6.16. CLOSING COMMISSIONS, EXPENSES, ETC. The Administrative
Agent shall have received (including, to the extent necessary, from the proceeds
of the Loans) for its own account, or for the account of the relevant Bank
Parties, as the case may be, all commissions due and payable on or prior to the
Borrowing Date and all fees and expenses payable pursuant to Section 11.3 to the
------------
extent then invoiced.
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SECTION 6.17. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. The
representations and warranties of the Obligors set forth in Article 7 and those
---------
of each Obligor set forth in each other Loan Document to which it is a party
shall be true and correct as of the date initially made, and both immediately
before and immediately after the making of the 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.
Without limiting the generality of the foregoing, the Administrative Agent
shall have received a certificate from an Authorized Representative of each
Obligor to the effect that the representations and warranties of such Obligor
contained in Section 7.7 are true and accurate and, with respect to any
-----------
litigation concerning such Obligor disclosed in Item 6(a) ("Litigation
--------- ----------
(Borrower/Intermediate Owners)") or Item 6(b) ("Litigation (Guarantors")) of the
------------------------------ --------- ------------------------
Disclosure Schedule, attaching details of the status of such litigation as at
the Borrowing Date.
SECTION 6.18. BORROWING REQUEST. The Administrative Agent shall have
received the Borrowing Request. Each of the delivery of the Borrowing Request
and the acceptance by the Borrower of the proceeds of the Loans shall constitute
a representation and warranty by the Borrower on the Borrowing Date (both
immediately before and immediately after giving effect to such Loans and the
application of the proceeds thereof) the statements made in Section 6.17 are
------------
true and correct.
SECTION 6.19. INITIAL COMPLIANCE CERTIFICATE. The Administrative Agent
shall have received a Compliance Certificate calculated as of the Borrowing
Date, together with such information concerning the calculations and assumptions
used by the Borrower in delivering such Compliance Certificate as the
Administrative Agent shall have requested.
SECTION 6.20. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of any Person shall be satisfactory in
form and substance as to legal matters to the Bank Parties and their counsel and
the Administrative Agent shall have received all information, and such
counterpart originals or such certified or other copies of such Instruments
related to the conditions precedent described in this Article, as the
Administrative Agent or its counsel or any other Bank Party may reasonably
request.
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<PAGE>
ARTICLE 7. REPRESENTATIONS AND WARRANTIES
------------------------------------------
In order to induce the Bank Parties to enter into this Agreement and, in
the case of the Banks, to make, continue or convert Loans hereunder, each
Obligor, individually for itself and with respect to matters hereinafter
relating to it, represents and warrants unto each Bank Party as set forth in
this Article. The representations and warranties set forth in this Article
shall be made upon the delivery of the Borrowing Request and each
Continuation/Conversion Notice requesting a conversion from one type of Loan to
another; provided, however, that except as set forth in any other Loan Document
-------- -------
(and except in the case of any representation or warranty made in this Article 7
---------
in connection with any Operative Document which will continue in effect after
the Release Date), no Guarantor shall be deemed to have made any new
representation or warranty at any time following the Release Date.
SECTION 7.1. ORGANIZATION, POWER, AUTHORITY, ETC. The Borrower is a
contractual mining company (sociedad contractual minera) validly organized and
existing under the laws of Chile. Each of AGI and AGRI is a corporation validly
organized and existing and in good standing under the laws of the State of
Delaware. Bema Gold is a company validly organized and existing and in good
standing with respect to the filing of annual returns under the laws of the
Province of British Columbia. Bema Bermuda is a company validly organized and
existing and in good standing under the laws of Bermuda. Each Obligor 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 where the failure to so qualify
would have a Materially Adverse Effect with respect to such Obligor 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 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 and, in the case of the Borrower, to obtain
Loans hereunder.
SECTION 7.2. DUE AUTHORIZATION; NON-CONTRAVENTION. The execution and
delivery by each Obligor of this Agreement and each other Operative Document
executed or to be executed by it and the performance by each Obligor of its
obligations hereunder and thereunder, and the receipt of the Loans hereunder by
the Borrower, have been duly authorized by all necessary corporate action on its
part, do not and will not require any Approval (other than those Approvals
referred to in Part A and Part B of Item 1 ("Current Material Approvals" and
------ --------------------------
"Pending Material Approvals") of the Disclosure Schedule and (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 binding on it, and will not result in or
require the
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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).
SECTION 7.3. VALIDITY, ETC.
(a) This Agreement constitutes, and each other Operative Document
executed or to be executed by any Obligor 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 executed by or on
behalf of, or relating to, the Borrower or expressed to be governed by the
laws of Chile, is in proper form for enforcement in Chile.
(b) The DOCLOC Facility Agreement and the DOCLOC Support Agreement
have been duly executed and delivered by each party thereto. Each of the
DOCLOC Facility Agreement and the DOCLOC Support Agreement constitutes the
legal, valid, and binding obligations of each party thereto enforceable
against such party 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.
(c) Upon taking of the various actions described in Sections 6.3, 6.4
------------ ---
and 6.5, each Collateral Agreement will create in favor of the
---
Administrative Agent (for the ratable benefit of the Bank Parties) or in
favor of the Bank Parties (in the case of the AGRI Pledge Agreement, the
Bema Bermuda Pledge Agreement and the Chilean Security Agreements), a
valid and perfected first-priority Lien on all of the assets, properties,
rights and revenues purported to be covered thereby as security for the
relevant obligations expressed to be covered thereby, subject to no Liens,
except (i) for mandatory provisions of Applicable Law, (ii) as
specifically permitted by this Agreement and such Collateral Agreement,
(iii) for the specific exceptions set forth in the legal opinions
delivered pursuant to clauses (a), (b), (d), (e), (f) and (i) of Section
----------- --- --- --- --- --- -------
6.13 and (iv) with respect to any Collateral which all the Banks shall
----
have determined is non-material and shall have notified the Borrower of
such determination.
SECTION 7.4. LEGAL STATUS. Neither any Obligor 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 their
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respective obligations under any of the Loan Documents to which it is a party.
SECTION 7.5. FINANCIAL INFORMATION. All balance sheets and all other
financial information of the Obligors which have been furnished by or on behalf
of such Obligor 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, 1993, and the
related consolidated statements of operations, changes in capital stock,
paid-in capital and retained earnings and cash flows for the Fiscal Year
then ended, of AGI and its Subsidiaries certified by Coopers & Lybrand;
(b) the consolidated balance sheet at June 30, 1994, and the related
consolidated statements of operations, cash flows and changes in capital
stock, paid-in capital and retained earnings and cash flows for the Fiscal
Quarter then ended, of AGI and its Subsidiaries, certified by the
principal financial or accounting Authorized Representative of AGI;
(c) the consolidated balance sheet at December 31, 1993, and the
related consolidated statements of profit and loss and cash flows for the
Fiscal Year then ended, of Bema Gold and its Subsidiaries in respect of
which an opinion was given by Deloitte & Touche;
(d) the consolidated balance sheet at June 30, 1994, and the related
consolidated statements of profit and loss and cash flows for the Fiscal
Quarter then ended, of Bema Gold and its Subsidiaries, certified by two
directors of Bema Gold;
(e) the balance sheet at December 31, 1993 and related expenditure
breakdown for the twelve month period then ended, of the Borrower
certified by Langton Clarke y Cia Ltda.;
(f) the balance sheet at June 30, 1994, and the related development
expenditure report for the six month period then ended, of the Borrower,
certified by the principal financial or accounting Authorized
Representative of the Borrower;
(g) the balance sheet at December 31, 1993 and related statements of
operations and cash flows for the Fiscal Year then ended, of AGRI
certified by the principal financial or accounting Authorized
Representative of AGRI;
(h) the balance sheet at June 30, 1994, and the related statements of
operations and cash flows for the Fiscal Quarter then ended, of AGRI,
certified by the
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principal financial or accounting Authorized Representative of AGRI;
(i) the balance sheet at December 31, 1993 and related statements of
loss and deficit and changes in financial position for the Fiscal Year
then ended, of Bema Bermuda certified by Price Waterhouse & Co.; and
(j) the balance sheet at June 30, 1994, and the related statements of
loss and deficit and changes in financial position for the Fiscal Quarter
then ended, of Bema Bermuda, certified by two directors of Bema Bermuda,
have been prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein) and do present fairly the
financial position of such Obligor as at the dates thereof and the results of
its operations for the periods then ended. None of the Obligors has on the date
hereof any material Contingent Liability or liability for taxes, long-term
leases or unusual forward or long-term commitments which are not reflected in
its financial statements described in this Section or in the notes thereto.
SECTION 7.6. ABSENCE OF DEFAULT.
(a) The Borrower is not in default in the payment of (or in the
performance of any material obligation applicable to) any Indebtedness or
in default under any Project Document, any Requirement of Law or the terms
or conditions upon which any Approval has been granted.
(b) No other Obligor is in default in the payment of (or in the
performance of any material obligation applicable to) any material
Indebtedness or in default under any Project Document, or in default under
any material Requirement of Law or the terms or conditions upon which any
material Approval has been granted or in default under any Requirement of
Law relating to the Refugio Project or the terms or conditions upon which
any Approval relating to the Refugio Project has been granted.
SECTION 7.7. LITIGATION, ETC. Except as disclosed in Item 6(a)
---------
("Litigation (Borrower/Intermediate Owners)") or Item 6(b) ("Litigation
------------------------------------------- --------- ----------
(Guarantors)") of the Disclosure Schedule there is no pending or, to the
------------
knowledge of any Obligor, threatened labor controversy, litigation, arbitration
or governmental investigation or proceeding against such Obligor or to which any
of its business, operations, properties, assets (including, in the case of the
Borrower, the Mine), revenues or prospects is subject which, if adversely
determined, might have a Materially Adverse Effect with respect to such Obligor;
provided, however, that such representation and warranty shall not apply to any
-------- -------
labor controversy, litigation, arbitration or governmental investigation or
proceeding to which any Guarantor is subject if, in the reasonable opinion of
such Guarantor, there is no
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<PAGE>
reasonable likelihood of an adverse determination against such Guarantor being
made in connection therewith. In the case of any litigation described in Item
----
6(a) ("Litigation (Borrower/Intermediate Owners)") or Item 6(b) ("Litigation
---- ----------------------------------------- --------- ----------
(Guarantors)") of the Disclosure Schedule, there has been no development in such
------------
litigation which might have a Materially Adverse Effect with respect to the
relevant Obligor. All pending or threatened labor controversies, litigation,
arbitration and governmental investigations and proceedings against the Borrower
or either Intermediate Owner or to which any of its respective businesses,
operations, properties, assets (including, in the case of the Borrower, the
Mine) revenues or prospects is subject as of the Borrowing Date are disclosed in
Item 6(a) ("Litigation (Borrower/Intermediate Owners)") of the Disclosure
--------- ----------------------------------------
Schedule. All pending or threatened labor controversies, litigation,
arbitration and governmental investigations and proceedings relating to each
Guarantor of the nature referred to in the first sentence of this Section are
disclosed on Item 6(a) ("Litigation (Borrower/Intermediate Owners)") or Item
--------- ---------------------------- ----
6(b) ("Litigation (Guarantors)") of the Disclosure Schedule.
---- -----------------------
SECTION 7.8. MATERIALLY ADVERSE EFFECT. Since the date of each
relevant Obligor's most recent (and, in the case of each of Bema Gold and AGI
only, audited) financial statements referred to in Section 7.5, there have been
-----------
no occurrences which, individually or in the aggregate, have a Materially
Adverse Effect with respect to such Obligor.
SECTION 7.9. BURDENSOME AGREEMENTS. No Obligor is a party or subject
to any Contractual Obligation or Organic Document which has a Materially Adverse
Effect with respect to such Obligor.
SECTION 7.10. TAXES AND OTHER PAYMENTS.
(a) AGI has duly, timely and accurately, to the best of AGI's
knowledge, filed or caused to be filed all tax returns (including all
property tax returns and other tax returns relating to the Mine) and
reports required by Applicable Law to be filed and has paid or caused to
be paid all taxes shown on the returns as required to be paid or on any
assessment received by it (or with respect to taxes for the period prior
to January 1, 1992, by Amax Inc.) to the extent that such taxes have
become due, except (i) taxes the validity of which are being contested in
good faith by appropriate proceedings and with respect to which AGI shall
have set aside on its books such reserves as are required by GAAP, (ii)
taxes relating to any period prior to January 1, 1992, with respect to the
payment of which AGI has been indemnified by Amax Inc., or (iii) without
prejudice to clause (b), taxes (including property taxes) relating to the
----------
Mine from any period prior to November 18, 1992.
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<PAGE>
(b) Each other Obligor has filed all tax returns (including all
property tax returns and other similar tax returns applicable to the Mine)
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 (including, with respect to the Borrower, the
Refugio Project) and no claim for the same exists except as permitted
hereunder, except any such taxes, charges or amounts 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 relevant Obligor.
SECTION 7.11. MINING RIGHTS. The Borrower has acquired all Mining
Rights and has obtained such other surface and other rights as are necessary for
access rights, water rights, plant sites, waste dumps, ore dumps, abandoned
heaps or ancillary facilities which are required in connection with the Refugio
Project in accordance with the Development Plan (excluding, however, at any time
prior to the Non-Core Zone Property Rights Target Acquisition Date, the Non-Core
Zone Property Rights). All such Mining Rights and other rights are sufficient
in scope and substance for the development of the Refugio Project as
contemplated by the Development Plan and no part of the purchase price (other
than any royalty payments) payable by the Borrower in connection with its
acquisition of such Mining Rights and other rights remain unpaid.
SECTION 7.12. OWNERSHIP AND USE OF PROPERTIES; LIENS.
(a) The Borrower 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 to patents, trademarks, copyrights and
the like) except as permitted pursuant to Section 8.2.3 or, except with
-------------
respect to such claims only, at any time following the end of the Project
Period, as disclosed in Item 7 ("Assets; Properties") of the Disclosure
------ ------------------
Schedule.
(b) The Borrower owns no assets and properties other than those used
in connection with the Refugio Project and those incidental to the
operation of the Mine.
(c) The Borrower has complied with all Contractual Obligations
relating to any asset or property leased, operated, licensed or used (but
not owned) by the Borrower; all of the Borrower's 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 8.2.3 or, except with
-------------
respect to such claims only, at any time following the end of the Project
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<PAGE>
Period, as disclosed in Item 7 ("Assets; Properties") of the Disclosure
------ ------------------
Schedule; and all Instruments pursuant to which the Borrower is entitled
to lease, operate, licence or use such properties and assets are in full
force and effect.
SECTION 7.13. SUBSIDIARIES. The Borrower has no Subsidiaries. No other
Obligor has any Subsidiaries, except those Subsidiaries which are identified in
Item 8 ("Subsidiaries") of the Disclosure Schedule.
------ ------------
SECTION 7.14. INTELLECTUAL PROPERTY. Each Obligor owns and possesses
all such patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, service marks, service mark rights and copyrights as such
Obligor considers necessary for the conduct of the businesses of such Obligor as
now conducted without, individually or in the aggregate, any infringement upon
rights of other Persons which might have a Materially Adverse Effect with
respect to such Obligor, and there is no individual patent or patent license the
loss of which would have such a Materially Adverse Effect except as may be
disclosed in Item 9 ("Material Patents and Trademarks") of the Disclosure
------ -------------------------------
Schedule.
SECTION 7.15. TECHNOLOGY. The Borrower owns or has the right to use all
technologies and processes required to consummate the Refugio Project and
operate the Mine as contemplated by the Development Plan. There are no material
license agreements granting the Borrower or any other Person rights in any
patented process or the right to use technical or secret know-how that are
required for the consummation of the Refugio Project or the operation of the
Mine.
SECTION 7.16. APPROVALS; PROJECT DOCUMENTS.
(a) The Borrower or either Guarantor on behalf and for the benefit of
the Borrower has entered into all Instruments and obtained all Approvals
(other than (i) those identified in Part B of Item 1 ("Pending Material
------ ----------------
Approvals") of the Disclosure Schedule (which the Borrower and the
---------
Guarantors believe will be obtained as and when required) and (ii) those
of a non-material nature which the Borrower (or such Guarantor) expects
will be obtained as and when necessary in the course of the consummation
of the Refugio Project and the operation of the Mine (all such Approvals
of a non-material nature, collectively, "Non-Material Approvals") in each
----------------------
case which are scheduled to be obtained after the date of making of the
representation and warranty contained in this Section) required or
advisable to effect the Refugio Project and facilitate the operation of
the Mine in accordance with the Development Plan. All Approvals (other
than Non-Material Approvals) necessary or advisable to obtain in
connection with the consummation of the Refugio Project, in accordance
with the Development Plan and the execution
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<PAGE>
and delivery by any Obligor of, and the performance of obligations binding
on such Obligor contained in, any Operative Document are listed on Part A
and Part B of Item 1 ("Approvals") of the Disclosure Schedule.
------ ---------
(b) Each of the Project Documents is in full force and effect, is
enforceable against each relevant Obligor (and, to the best of the
knowledge and belief of such Obligor after due enquiry, by such Obligor
against 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, is in the form previously delivered
to the Administrative Agent pursuant to this Agreement, all material
performance required thereunder of each party thereto has occurred (except
performance required by the Project Documents to be performed at a later
date), and no default or event or condition which with notice, lapse of
time or both could constitute a default thereunder has occurred and is
continuing.
SECTION 7.17. DEVELOPMENT PLAN; FEASIBILITY STUDIES, ETC. The
statements contained in the Development Plan, based upon the assumptions stated
therein (which assumptions are reasonable in all the circumstances), are true
and correct in all material respects. The Development Plan contains summary
descriptions of the Refugio Project, the Project Assets and the construction and
operation of the Mine as proposed to be conducted throughout the Project Period.
The Environmental Review, the Technical Review, the Tax Review and the Insurance
Summary contain summary descriptions of the environmental, technical, taxation
and insurance aspects of the Refugio Project, the Project Assets and the
operation of the Mine as proposed to be conducted throughout the Project Period.
The financial projections, estimates and other expressions of view as to future
circumstances contained in the Development Plan (excluding, however, those
contained in Section 12 of the Feasibility Study referred to in clause (b) of
---------- ----------
the definition thereof) are fair and reasonable and, to the best of the
Borrower's knowledge, have been arrived at after reasonable inquiry and have
been made in good faith by the Persons responsible therefor.
SECTION 7.18. ENVIRONMENTAL WARRANTIES.
(a) All facilities and property (including underlying groundwater)
owned, operated, leased or utilized by any Project Party acting in
connection with the Project Assets and the Mine have been, and continue to
be, owned, operated, leased or utilized by such Project Party in
compliance with the standards set out in the Environmental Impact
Assessment (the "Environmental Review Standards"), and except to the
------------------------------
extent that the Environmental Review Standards require or permit
otherwise, in compliance with all Environmental Laws.
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<PAGE>
(b) There have been no past, and there are no pending or threatened:
(i) claims, complaints, notices or requests for information
received by any Project Party acting in connection with the Project
Assets and the Mine with respect to any alleged violation of any
Environmental Review Standards and/or Environmental Law, or
(ii) complaints, notices or inquiries to such Project Party
regarding potential liability under any Environmental Review Standard
and/or Environmental Law.
(c) There have been no releases or emissions of Hazardous Materials
at, on or under any property now or previously owned, operated or leased
by any Project Party in connection with the Project Assets and the Mine
that, singly or in the aggregate, have, or may reasonably be expected to
have, a Materially Adverse Effect with respect to any Obligor.
(d) Except as set forth in Item 10 ("Environmental Matters") of the
------- ---------------------
Disclosure Schedule, each Project Party has been issued, and is in
material compliance, with all Environmental Review Standards and/or
Approvals relating to environmental matters and necessary or advisable for
the Project Assets and the Mine.
(e) No property now or previously owned, operated or leased by any
Project Party in connection with the Project Assets and the Mine is listed
or proposed for listing on any governmental or regulatory list of sites
requiring investigation or clean-up.
(f) There are no underground or above-ground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property now
or previously owned, operated or leased by any Project Party in connection
with the Project Assets and the Mine that, singly or in the aggregate,
have, or may reasonably be expected to have, a Materially Adverse Effect
with respect to any Obligor.
(g) No Project Party has directly transported or directly arranged
for the transportation of any Hazardous Material in connection with the
Project Assets and the Mine to any location which is listed or proposed
for listing on any governmental or regulatory list which is the subject of
any enforcement action or other investigation which may lead to material
claims against any Obligor for any remedial work, damage to natural
resources or personal injury.
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<PAGE>
(h) There are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned, operated or leased by any
Project Party in connection with the Project Assets and the Mine that,
singly or in the aggregate, have, or may reasonably be expected to have, a
Materially Adverse Effect with respect to any Obligor.
(i) No conditions exist at, on or under any property now or
previously owned, leased, operated, licensed or used by any Project Party
in connection with the Project Assets and the Mine which, with the passage
of time, or the giving of notice or both, would give rise to liability
under any Environmental Review Standard and/or Environmental Law that,
individually or in the aggregate, has, or may reasonably be expected to
have, a Materially Adverse Effect with respect to any Obligor.
SECTION 7.19. PARI PASSU.
(a) The payment Obligations of the Borrower under this Agreement and
each other Loan Document to which it is a party rank at least pari passu
---- -----
in right of payment with all of the Borrower's other Indebtedness, other
than any such Indebtedness which is preferred by mandatory provisions of
Applicable Law.
(b) The payment Obligations of each other Obligor under this
Agreement and each other Loan Document to which it is a party 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
(and other than, in the case of Bema Gold, the prior payment of interest
for the first two years of the term of the 1994 Convertible Debentures and
the prior payment of principal, interest and redemption premium to be paid
in respect of the 1990 Secured Debentures).
ARTICLE 8. COVENANTS
---------------------
SECTION 8.1. CERTAIN AFFIRMATIVE COVENANTS. Each of the Borrower and
the Intermediate Owners agrees with each Bank Party that, until all Commitments
have terminated and all Obligations have been paid and performed in full, such
Obligor will perform its respective obligations set forth in this Section, and
each Guarantor agrees with each Bank Party that, at all times on or prior to the
Release Date (and, in the case of such Guarantor's obligations under clauses (h)
-----------
and (i) of Section 8.1.1, clause (a)(i) of Section 8.1.3, clause (a)(ii) of
--- ------------- ------------- ------------- --------------
Section 8.1.3 (to the extent of any Collateral Agreement to which such Guarantor
-------------
is a party and which remains in full force and effect after the Release Date)
and Sections 8.1.2, 8.1.3, 8.1.4, 8.1.16, 8.1.18 and 8.1.20 at all times after
-------------- ----- ----- ------ ------ ------
the Release Date), such
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Guarantor will perform its respective obligations set forth in this Section.
SECTION 8.1.1. FINANCIAL INFORMATION, ETC. The Obligors will furnish,
or will cause to be furnished, to the Administrative Agent copies (with
sufficient copies for each other Bank Party) of the following financial
statements, reports and information:
(a) each of the Obligors will furnish, promptly when available, and
in any event within 90 days after the close of each Fiscal Year of such
Obligor:
(i) in the case of AGI, the consolidated balance sheet at the
close of such Fiscal Year and the related consolidated statements of
operations, changes in capital stock, paid-in capital and retained
earnings and cash flows of AGI and its Subsidiaries;
(ii) in the case of Bema Gold, the consolidated balance sheet
at the close of such Fiscal Year and the related consolidated
statements of profit and loss and cash flows of Bema Gold and its
Subsidiaries; and
(iii) in the case of each other Obligor, its balance sheet at
the close of such Fiscal Year and its related statements of
operations and cash flows, loss and deficit, and changes in financial
position, as may be relevant,
in each case (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, together with a certificate from such accountants
to the effect that, in making the examination necessary for the signing of
such annual report by such accountants, they have not become aware of any
Default that has occurred and is continuing, or, if they have become so
aware, describing such Default and the steps, if any, being taken to cure
it;
(b) each of the Obligors will furnish, promptly when available, and
in any event within 45 days after the close of each of the first three
Fiscal Quarters of each Fiscal Year of such Obligor:
(i) in the case of AGI, the consolidated balance sheet at the
close of such Fiscal Quarter and the related consolidated statements
of operations, changes in capital stock, paid-in capital and retained
earnings and cash flows of AGI and its Subsidiaries;
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(ii) in the case of Bema Gold, the consolidated balance sheet at the close
of such Fiscal Quarter and the related consolidated statements of
profit and loss and cash flows of Bema Gold and its Subsidiaries; and
(iii) in the case of each other Obligor, its balance sheet at
the close of such Fiscal Quarter, and its related statements of
operations and cash flows, loss and deficit, and changes in financial
position, as may be relevant;
in each case, for such Fiscal Quarter and for the period commencing at the
close of the previous Fiscal Year and ending with the close 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 an
accounting or financial Authorized Representative of such Obligor;
(c) the Borrower will promptly furnish within 15 Business Days after
the close of each calendar quarter, and will furnish on the Mechanical
Completion Date, Project Completion Date and Release Date, a Compliance
Certificate prepared as of the last date of such calendar quarter or the
Mechanical Completion Date, the Project Completion Date or the Release
Date, as the case may be, together with such information concerning the
calculations and assumptions used by the Borrower in delivering such
Compliance Certificate as the Technical Agent may request;
(d) the Borrower will furnish promptly upon receipt thereof copies of
all detailed financial and management reports submitted to the Borrower by
an independent chartered accountant or certified public accountant, as the
case may be, in connection with each annual or interim audit made by such
independent chartered accountant or certified public accountant, as the
case may be, of the books of the Borrower;
(e) the Borrower will furnish within 15 days after (i) the end of
each calendar month occurring after the Effective Date and prior to the
Project Completion Date a Borrower's Report (Pre-Project Completion) with
copies to be furnished simultaneously to the Independent Consultant and
the Guarantors, and (ii) the end of each calendar month occurring after
the Project Completion Date a Borrower's Report (Post-Project Completion)
with copies to be furnished simultaneously to the Guarantors;
(f) the Borrower will furnish annually, on or before each anniversary
of the Borrowing Date, a memorandum prepared by the Borrower summarizing
the then outstanding insurance coverage with respect to the Mine
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and a certificate or certificates of insurance prepared by the Borrower
and acceptable in form and substance to the Insurance Consultant
confirming that: (i) all such insurance coverage is in full force and
effect and all premiums payable in connection therewith have been paid;
(ii) such insurance is sufficient for the purposes of the Mine and is
responsive to the requirements of Section 8.1.7; (iii) the Administrative
-------------
Agent is named as the first loss payee under all policies of property
insurance and as an additional insured under all policies of liability
insurance; and (iv) the insurers under such insurance policies have
undertaken in writing not to amend or terminate such policies without at
least 30 days' prior written notice thereof to the Administrative Agent
and have entered into such undertakings as are required pursuant to the
provisions of Section 8.1.7; it being agreed that such certificate shall
-------------
be conclusive as against the Borrower both as to the amount of insurance
required and the perils against which coverage is required and the
Borrower shall immediately insure in accordance with such certificate;
(g) the Borrower will furnish to the Technical Agent as promptly as
practicable details as to any: (i) material disputes with its insurance
carriers; (ii) failure by the Borrower to pay any insurance premium as and
when required that might result in the cancellation of the relevant
policy; (iii) material reduction in the amount of, or any other material
change in, insurance or reinsurance coverage maintained; (iv) failure to
comply with its obligations under Section 8.1.7, in each case stating the
-------------
reasons therefor, together with any other information concerning the
insurance and reinsurance coverage required to be maintained by it as the
Technical Agent shall have reasonably requested; (v) occurrence of any
actual or potential casualty or loss which is covered by the terms of any
policy of insurance maintained by or on behalf of the Borrower; (vi)
notices received from any of its insurance carriers with respect to the
cancellation of or proposed cancellation of any policy of insurance; and
(vii) occurrence of any event which to the Borrower's knowledge is of the
nature described in and covered by an existing policy of Political Risk
Insurance as held by any Political Risk Bank;
(h) each of the Obligors will furnish promptly upon the occurrence
thereof a detailed report of any material change or (without prejudice to
the provisions of Sections 8.2.14, 8.2.15 or 9.1.8) modification to any
--------------- ------ -----
Project Document to which it is a party (and, in the case of AGI, the
DOCLOC Support Agreement and the DOCLOC Facility Agreement);
(i) each of the Obligors will furnish notice of the occurrence of any
default or event of default (however
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<PAGE>
denominated) by any party under, or any other material change in or
circumstance affecting, any of the Project Documents to which it is a
party (and, in the case of AGI, the DOCLOC Support Agreement and the
DOCLOC Facility Agreement) which, either singularly or cumulatively with
any other such default or event of default, shall, or is likely to be,
material;
(j) the Borrower will furnish, on or prior to the date which is 30
days prior to each Payment Date, semi-annual (and, if so requested by the
Required Banks on a more frequent basis, promptly upon request) forecasts
of mining production, ore grades, recovery rates, operating costs, on-
going capital expenditures, water uses and sources and all other technical
information reasonably requested by the Technical Agent (including any
progress schedules or work account reports or similar reports or schedules
supplied to the Borrower pursuant to the Mining Contract);
(k) as soon as possible and in any event within three Business Days
after the occurrence of any Default the Borrower will furnish a statement
of its chief financial Authorized Representative setting forth details of
such Default and the action which the relevant Obligor has taken and
proposes to take with respect thereto. The Borrower will immediately
furnish a copy of each such statement to each Guarantor;
(l) as soon as possible and in any event within three Business Days
after (i) the occurrence of any adverse development with respect to any
labor controversy, litigation, arbitration or governmental investigation
or proceeding described in Section 7.7 which could have a Materially
-----------
Adverse Effect with respect to such Obligor or (ii) the commencement of
any labor controversy, litigation, arbitration or governmental
investigation or proceeding of the type described in Section 7.7, the
-----------
relevant Obligor will furnish notice thereof and copies of all
documentation relating thereto;
(m) each Obligor will furnish notice of the occurrence as soon as
possible and in any event within three Business Days after such Obligor
knows or has reason to know of any circumstance which has a reasonable
likelihood of having a Materially Adverse Effect with respect to such
Obligor;
(n) not more than five Business Days prior to the close of each
calendar month, the Borrower shall deliver to the Technical Agent and the
Independent Consultant a Liabilities Certificate. Each Liabilities
Certificate shall be consistent with the Approved Budget and/or the Cash
Flow Schedule, as the case may be (unless waived by the Technical Agent
and the Required Banks);
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(o) ten Business Days after the end of each calendar month, the Borrower
shall deliver to the Technical Agent a statement showing in detail all
credits to, debits from, and balances standing to the credit of the
Project Accounts for such calendar month and copies of all documents
submitted by the Borrower to the Central Bank or any other Governmental
Authority in connection with the Project Accounts;
(p) (i) AGI will furnish, promptly after the sending or filing
thereof, copies of all reports that AGI sends to its public shareholders
and copies of registration statements and material filings made with the
U.S. Securities Exchange Commission or any national securities exchange;
and (ii) each other Obligor will furnish copies of each material filing
and report or document made to or filed with, or received from, any
securities exchange, any securities commission or any Governmental
Authority, and of each communication from such Obligor to shareholders or
creditors generally, in each case promptly upon the making, filing or
receipt thereof;
(q) the Borrower will immediately notify the Technical Agent upon
becoming aware of any fact or circumstance giving rise to (or likely to
give rise to) any cost overrun which might oblige AGI to make a
contribution pursuant to Section 3.1 of the AGI Support Agreement. Such
-----------
notice shall include information in reasonable detail as to the amount of
such cost overrun, the circumstances giving rise thereto and any further
possible cost overruns as may then be likely to occur;
(r) the Borrower will furnish the Technical Agent with copies of all
material Instruments entered into by or in connection with the Refugio
Project or the operation of the Mine, in each case promptly upon having
entered into the same and will immediately notify the Technical Agent of
its intention to enter into any such Instrument (it being understood that
(i) any equipment lease or equipment financing contract assumed by the
Borrower pursuant to clause (c)(iii) of Section 8.2.2 and (ii) any payment
--------------- -------------
or performance bond provided by the Mining Contractor pursuant to the
Mining Contract shall, in each such case, constitute a material Instrument
for purposes of this clause);
(s) each Intermediate Owner will furnish copies of minutes of
meetings of the Board of Directors and the Technical Committee of the
Borrower together with all other material items of information and/or
documentation produced pursuant to the Shareholders Agreement (including
copies of each Adopted Program and Budget and each Program (in each case
as defined in the Shareholders Agreement)); and
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(t) each Obligor will furnish such other information with respect to
the financial condition, business, property, assets, revenues and
operations of such Obligor as either Agent or any Bank (acting through
such Agent) may from time to time reasonably request.
SECTION 8.1.2. COMPLIANCE WITH LAWS. Each Obligor will comply in all
material respects with all Applicable Laws relating to the Refugio Project
(including the Mine and any Project Assets) and any Operative Document
(including the performance of all obligations evidenced thereby).
SECTION 8.1.3. APPROVALS.
(a) Each Obligor will obtain, maintain in full force and effect, and
comply in all respects with, all Approvals (including those identified in
Item 1 ("Approvals") of the Disclosure Schedule) as may be required or
------ ---------
advisable 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 and (iii) in the case of the Borrower, own, lease, use or
licence the Project Assets in which it holds any interest and operate the
Mine in accordance with sound mining and business practice.
(b) Without limiting the foregoing clause (a), each Obligor will
----------
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 and will use its best efforts to obtain all
Non-Material Approvals as and when it deems it reasonably prudent to do
so.
(c) Each Intermediate Owner will, at all times, comply with its
obligations under and take all actions necessary to maintain in good
standing the Foreign Investment Contract. Without limiting the generality
of the foregoing each Intermediate Owner hereby undertakes as set forth in
Section 2.6 of the Shareholders Agreement as if the same were set forth
herein in full.
(d) Each Guarantor shall ensure that all Investments made by such
Guarantor or any of its Affiliates in the Borrower by way of Approved
Subordinated Indebtedness shall only be made directly by an entity which
is an Institucion Financiera Extranjera Registrada con el Banco Central
under the laws of Chile.
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SECTION 8.1.4. MAINTENANCE OF CORPORATE EXISTENCE. Except as may be
permitted pursuant to Section 8.2.9, each Obligor will do and will cause to be
-------------
done at all times all things necessary to maintain and preserve its corporate
existence.
SECTION 8.1.5. FOREIGN QUALIFICATION. Each Obligor will do and cause
to be done at all times all things necessary 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 makes such
qualification necessary.
SECTION 8.1.6. PAYMENT OF TAXES, ETC. Each Obligor 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 any Obligor to pay or discharge any such
tax, assessment, fee, charge, levy or claim 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.
SECTION 8.1.7. INSURANCE.
(a)(i) The Borrower will maintain, or ensure that the Construction
Contractors and/or the Mining Contractor maintain, with responsible
insurance companies satisfactory to the Required Banks (and subject
as set forth in clause (a)(ii)) in their reasonable discretion: (x)
--------------
insurance as required under this Agreement (including that referred
to in the Insurance Summary), the Collateral Agreements and/or any
other Operative Document, and (y) such other insurance (including
business interruption insurance) with respect to the properties and
business of the Borrower 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 such other insurance as may
be required by any Applicable Law and the Borrower will, upon request
of the Technical Agent, furnish to the Technical Agent at reasonable
intervals a certificate of an Authorized Representative of the
Borrower setting forth the nature and extent of all insurance
maintained by the Borrower in accordance with this Section. The
Technical Agent shall (unless otherwise consented to by the Banks)
solicit the services of the Insurance Consultant to assess the
adequacy and sufficiency of the insurance coverage required to be
maintained by the Borrower hereunder and evaluate the contents of the
foregoing certificate. The Borrower will immediately notify the
Technical Agent of any
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proposed change of any insurance company providing insurance coverage
of the nature referred to in this Section, and any such change shall
require the consent of the Technical Agent (acting in consultation
with the Required Banks) which consent shall not be unreasonably
withheld. The Borrower will ensure that the Insurance Summary is
complete and accurate at all times and will from time to time provide
the Technical Agent with amendments thereto when necessary to ensure
that the Insurance Summary is so complete and accurate, together with
copies of all insurance policies as in effect from time to time.
(ii) The Borrower shall ensure that all policies of insurance
maintained in connection with the Refugio Project are maintained, and
that re-insurance in connection with such policies is effected, in a
manner satisfactory to the Agents which is consistent with the
practice followed in the case of similarly located and structured
projects to the Refugio Project which are financed by bank syndicates
from the international banking community.
(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 Administrative Agent (for the ratable benefit
of the Bank Parties) as an additional insured (in all cases, other
than with respect to any such insurance taken out by any Construction
Contractor under the relevant Construction Contract) and as a loss
payee (in all cases other than in the case of any liability insurance
(excluding, however, with respect to any such insurance taken out by
any Construction Contractor under the relevant Construction
Contract)), and certain such endorsements in favor of the
Administrative Agent as the Administrative Agent shall require;
(ii) not be cancellable (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 Administrative
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 Administrative
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
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Administrative Agent by reason of any action or failure to act of the
Borrower 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 the
Borrower, and shall provide that all amounts payable by reason of
loss or damage to any of the Project Assets shall be payable to the
Administrative Agent for replacement;
(iv) provide for payments of claims thereunder in U.S. Dollars;
and
(v) otherwise be in form and substance satisfactory to the
Technical Agent (acting in consultation with the Required Banks).
(c) The Borrower will cause proceeds of all insurances (excluding,
for the avoidance of doubt, any Political Risk Insurance) maintained with
respect to the Refugio Project and the Mine to be applied as follows:
(i) all amounts received in respect of (x) the partial or total
nationalization, expropriation, compulsory purchase or requisition of
the Mine or the Project Assets, or any interest therein, (y) any
release, inhibition, modification, suspension or extinguishment of
any Mining Rights, or the imposition of any restriction affecting the
Mine or the Project Assets or the grant of any Mining Right and (z)
the suspension or material modification of any Approval required or
advisable in connection with the Refugio Project or the operation of
the Mine shall be applied to make a mandatory prepayment of the
Principal Amount of the Loans then outstanding pursuant to clause (f)
----------
of Section 3.1;
-----------
(ii) prior to an Enforcement Event, all amounts received in
respect of any liability insurance may be paid directly to the Person
entitled thereto and after an Enforcement Event all such amounts, to
the extent received in a currency other than Pesos, shall be
deposited into the Proceeds Sub-Account (Collateral Collections) or
Proceeds Sub-Account (Other Collections), as may be required pursuant
to clause (a) of Section 4.2 (it being understood that, without
---------- -----------
prejudice to clause (b)(iv) or any other provision of this Agreement,
--------------
all proceeds denominated in Pesos shall be deposited into the
Proceeds Sub-Account (Chile));
(iii) all amounts received in respect of any business
interruption insurance or delay in start-up
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insurance shall be deposited into the Proceeds Sub-Account (Other
Collections); and
(iv) prior to an Enforcement Event, all proceeds from casualty
or property insurance received for any single repair, replacement or
restoration costing less than U.S.$5,000,000 (or the equivalent
thereof in any other currency) may be applied to the repair,
replacement or restoration of the assets in respect of which the
relevant proceeds were received or for reimbursement of the Person
which effected such repair, replacement or restoration and after an
Enforcement Event all such proceeds, to the extent received in a
currency other than Pesos, shall be deposited into the Proceeds
Account Sub-Account (Collateral Collections) or Proceeds Sub-Account
(Other Collections) as may be required pursuant to clause (a) of
----------
Section 4.2 (it being understood that, without prejudice to clause
----------- ------
(b)(iv) or any other provision of this Agreement, all proceeds
-------
denominated in Pesos shall be deposited into the Proceeds Sub-Account
(Chile)). All such proceeds received for any such single repair,
etc. costing an amount which is equal to or in excess of
U.S.$5,000,000 (or the equivalent thereof in any other currency)
shall, with the consent of the Required Banks (which consent shall be
granted within 10 Business Days unless a Default shall have then
occurred and be continuing or the Required Banks determine in good
faith that repair, replacement or restoration of the asset in
question would not be economical or that the insurance proceeds,
together with funds available from other sources, are insufficient to
repair, replace or restore such asset) be applied to the prompt
payment of the cost of the repair, replacement or restoration of such
damaged or destroyed asset. In the event that the consent of the
Required Banks shall not be granted pursuant to the provisions of the
immediately preceding sentence, then all such proceeds shall be
applied to make a mandatory prepayment of the Principal Amount of the
Loans pursuant to clause (f) of Section 3.1.
---------- -----------
SECTION 8.1.8. BOOKS AND RECORDS. Each Obligor will keep financial
records and statements reflecting all of its business affairs and transactions
in accordance with GAAP. The Borrower will permit the Independent Consultant,
the Insurance Consultant, the Agents and the Banks or any of their respective
representatives to inspect any and all of its properties and operations and to
visit all of its offices or any other location where relevant personnel or
records are located. Each Obligor will permit the Independent Consultant, the
Insurance Consultant, the Agents or the Banks or any of their respective
representatives to discuss its financial matters with its officers, banks and
independent chartered accountants and
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<PAGE>
certified public accountants, as the case may be, (and hereby authorizes such
banks and 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 representative of such Obligor
is present) and to examine (and photocopy extracts from) any of its books or
other corporate records or any of the Project Documents. Without limiting the
generality of the foregoing, the relevant Obligor or Obligors shall provide all
relevant and necessary assistance to the Independent Consultant, the Insurance
Consultant and the Agents in connection with the performance of the duties of
the Independent Consultant, the Insurance Consultant and the Agents contemplated
hereby (including the preparation of each Quarterly Report and Monthly Report by
the Independent Consultant). The Borrower shall, subject to the provisions of
clause (b) of Section 11.3, pay any fees of such chartered accountant or
---------- ------------
certified public accountant and the Independent Consultant, the Agents and the
Insurance Consultant incurred in connection with the exercise of their rights
pursuant to this Section. It is expressly understood that none of the
Independent Consultant, the Insurance Consultant or any Bank Party assumes any
obligation to any Obligor or any other party in respect of the operation,
development, exploration and production of the Mine in accordance with the
Development Plan or otherwise.
SECTION 8.1.9. PROJECT COMPLETION AND MANAGEMENT. The Borrower will
use its best efforts to consummate the Refugio Project in accordance with the
Development Plan, Applicable Laws and sound mining and business practice, and
will ensure that the Mine is constructed, developed, operated and maintained and
that Project Output is produced and processed, all substantially in accordance
with the Development Plan, Applicable Laws and sound mining and business
practice and will use its best efforts so as to achieve Mechanical Completion no
later than June 30, 1996 and Project Completion no later than June 30, 1997.
The Borrower will use its best efforts to (and, in the case of Item 9 (Material
------ --------
Patents and Trademarks) of the Disclosure Schedule, Bema Gold will cause Bema
----------------------
Chile to use its best efforts to) obtain all those assets and rights referred to
in paragraph 1 of Items 7 (Assets; Properties) and in Item 9 (Material Patents
------- ------ ---------- ------ ----------------
and Trademarks) of the Disclosure Schedule by no later than the Non-Core Zone
--------------
Property Rights Target Acquisition Date and, if such assets or rights are not
obtained by such date, shall provide evidence satisfactory to the Banks that
failure to obtain such assets or rights does not have a Materially Adverse
Effect, and in any event, shall continue to use its best efforts to obtain such
assets and rights.
SECTION 8.1.10. HEDGING AGREEMENTS. At all times on and after the
Borrowing Date, the Borrower shall provide evidence to the Banks to the effect
that it has directly entered into (or AGI and/or Bema Gold have entered into and
duly transferred the benefit (but not any obligation) to the Borrower in a
manner satisfactory to all the Banks (including with respect to the
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obtaining of any Approvals from the Central Bank)), and the Administrative Agent
(for the ratable benefit of the Bank Parties) shall have been granted a first
priority perfected Lien in respect of the Borrower's rights under, net forward
sale, call options, spot deferred sales, or other contracts reasonably
acceptable to the Agents, providing for a binding commitment to sell Gold (the
"Committed Hedging Agreements") or put options or other similar uncommitted
-----------------------------
transactions with respect to the sale of Gold (together with the Committed
Hedging Agreements, collectively, the "Hedging Agreements") which are in effect
------------------
with counterparties (the "Hedging Counterparties") satisfactory to all the Banks
----------------------
such that the proceeds thereof (both as to the amount and to the timing) are
sufficient to discharge in full all Project Costs (excluding, however, Project
Costs scheduled to be incurred in connection with the construction of the Mine
prior to February 1, 1996) for the two and one half calendar year period (or
such shorter period ending on the date which is 12 calendar months after the
then scheduled Final Maturity Date) commencing at such time (such Project Costs,
the "Hedged Project Costs"); provided, however, that:
-------------------- -------- -------
(a) any repayment of the Gold Loans to be made at any date pursuant
to clause (b) of Section 3.1 shall for purposes of clause (c) of Section
---------- ----------- ---------- -------
2.3, Section 6.8 and this Section be treated as a Committed Hedging
--- -----------
Agreement requiring delivery on such date of a number of ounces of Gold
equal to such repayment at the Loan Base Price; and
(b) (i) for each 12 month period commencing on any February 1
(commencing on February 1, 1996), the sum of the number of ounces of Gold
required to be delivered during such 12 month period under Committed
Hedging Agreements (excluding any payment of Gold Loans) shall not exceed
an amount equal to eighty percent (80%) of Production (Hedging Adjusted)
for such 12 month period; and (ii) for any period commencing on or after
February 1, 1996 and ending on the date which is 12 calendar months after
the then scheduled Final Maturity Date, the sum of the number of ounces of
Gold required to be delivered during such period under Committed Hedging
Agreements (excluding any payment of Gold Loans) shall not exceed an
amount equal to seventy five percent (75%) of Production (Hedging
Adjusted) for such period.
SECTION 8.1.11. INTEREST RATE PROTECTION AGREEMENTS. For so long as any
Dollar Loans are outstanding (excluding, however, any Dollar Loans made on the
Borrowing Date prior to their conversion on such date to Gold Loans pursuant to
the provisions of the final paragraph of Section 2.2), the Borrower shall have
-----------
implemented (or AGI and/or Bema Gold shall have implemented and shall have duly
transferred the benefit (but not any obligation) to the Borrower in a manner
satisfactory to all the Banks and, in each such case, the Administrative Agent
(for the ratable benefit of the Bank Parties) shall have been granted a first
priority perfected Lien in respect of) confirmations and/or other
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interest rate protection agreements pursuant to documentation (including any
required Approvals from the Central Bank) satisfactory in form and substance to
all the Banks (each such confirmation or agreement, individually, an "Interest
--------
Rate Protection Agreement") with counterparties (individually, an "Interest Rate
------------------------- -------------
Protection Counterparty") satisfactory to all the Banks, and providing for
-----------------------
protection to the Borrower against payment of interest hereunder on such Dollar
Loans which is in excess of the sum of (a) the LIBO Rate for an Interest Period
of twelve months calculated on the date which is two Business Days prior to the
date on which such Dollar Loans are converted from Gold Loans, (b) two percent
(2%) per annum, plus (c) the percentage rate per annum referred to in clause (a)
---- ----------
of the definition of the term Applicable Margin as then in effect.
SECTION 8.1.12. PROCEEDS; PROJECT ACCOUNTS. The Borrower shall apply
the proceeds of the Loans strictly in accordance with this Agreement and,
without limiting the foregoing, deposit such proceeds and proceeds of Capital
Contributions and/or Approved Subordinated Indebtedness aggregating not less
than the Required Guarantor Contribution to the Construction Account for
application to the payment of those Project Costs reflected in the Approved
Budget. The Borrower will deposit or cause to be deposited all gross revenues
of, and all other payments received with respect to, the Refugio Project or the
Mine to the relevant Project Account referred to in Article 4, and will not make
---------
any disbursements out of any Project Account except as permitted by Article 4.
---------
SECTION 8.1.13. PROVISION OF STAFF. The Borrower shall ensure that
there are sufficient competent technical and management employees engaged in
connection with the Mine and the Refugio Project in order to enable the
occurrence of Mechanical Completion and Project Completion as and when scheduled
and the construction, operation, development and maintenance of the Mine
substantially in accordance with the Development Plan.
SECTION 8.1.14. ENVIRONMENTAL COVENANT.
(a) The Borrower will, and will ensure that each other Project Party
will, use and operate the Mine, the Project Assets and all of its
facilities and properties related thereto in material compliance with,
keep all Approvals relating to environmental matters in effect and remain
in material compliance with and handle all Hazardous Materials in material
compliance with the Environmental Review Standards and, except to the
extent the Environmental Review Standards require or permit otherwise,
with all applicable Environmental Laws;
(b) The Borrower will immediately notify the Agents and provide
copies upon receipt of all written claims, complaints, notices or
inquiries relating to the condition of its facilities and properties or
compliance with the Environmental Review Standards and/or Environmental
Laws,
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and shall promptly cure and have dismissed with prejudice any actions and
proceedings relating to compliance with the Environmental Review Standards
and/or Environmental Laws; and
(c) The Borrower will provide such information and certifications
which either Agent may reasonably request from time to time to evidence
compliance with this Section.
SECTION 8.1.15. MAINTENANCE OF PROJECT ASSETS. The Borrower will
maintain, preserve, protect and keep:
(a) all of its ownership, lease, use, licence and other interests in
the Project Assets (including all Mining Rights) as are necessary or
advisable for the Borrower to be able to operate the Mine substantially in
accordance with sound mining and business practice and in a manner such
that the requirements of, and projections contained in, the Development
Plan, can be achieved; 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 such Project Assets is no longer necessary or economically
desirable for the operation of the Mine, such operation to be
substantially in accordance with sound mining and business practice.
SECTION 8.1.16. POLITICAL RISK INSURANCE.
(a) Each Guarantor and the Borrower will assist each Bank which
requires Political Risk Insurance in procuring the same on or prior to the
Release Date and thereafter each Guarantor will (without prejudice to the
provisions of Section 9.1.12) assist each Political Risk Bank in procuring
--------------
substitute Political Risk Insurance in the event that any such Political
Risk Insurance is discontinued or the benefit thereof is otherwise removed
other than due to any default on the part of such Political Risk Bank
(excluding, however, any such default caused by a default by either
Guarantor or the Borrower in the performance of their respective
obligations referred to in clause (b)). Without limiting the generality
----------
of the foregoing any Political Risk Bank shall be entitled to select and
take out Political Risk Insurance at then prevailing market rates in the
event that any prior Political Risk Insurance shall have been
discontinued, etc. Each Obligor hereby acknowledges and agrees that each
Political Risk Bank may furnish copies of all Instruments (including the
Operative Documents), documents, notices and other information furnished
to and received by such Political Risk Bank pursuant to this
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Agreement or any other Loan Document to the provider of the Political Risk
Insurance taken out by such Political Risk Bank.
(b) Each Guarantor and the Borrower will render all necessary
assistance (not requiring the outlay of funds) to each Political Risk Bank
in connection with the maintenance of any Political Risk Insurance (and
full coverage thereunder) and the collection of any claim thereunder.
(c) Each Obligor shall act, and each Guarantor shall cause the
Borrower to act, in a manner so as to ensure that an exclusion from
liability in respect of any claim of any Political Risk Bank under any
policy of Political Risk Insurance does not arise as a result of any
action or any inaction of any Obligor.
SECTION 8.1.17. PARI PASSU.
(a) The Borrower will ensure that its payment Obligations under this
Agreement and each other Loan Document to which it is a party rank at
least pari passu in right of payment with all of the Borrower's other
---- -----
Indebtedness other than any such Indebtedness which is preferred by
mandatory provisions of Applicable Law.
(b) Each other Obligor will ensure that its payment obligations under
this Agreement and each other Loan Document to which it is a party 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 (and other
than, in the case of Bema Gold, the prior payment of interest for the
first two years for the term of the 1994 Convertible Debentures and the
prior payment of principal, interest and redemption premium to be paid in
respect of the 1990 Secured Debentures).
SECTION 8.1.18. AFTER-ACQUIRED COLLATERAL. Upon the acquisition (or, in
the case of inventory, production) of any Project Assets (excluding any Project
Documents) of the type over which any Lien has been granted pursuant to any
Collateral Agreement but in respect of which no Lien has been granted pursuant
to any such Collateral Agreement and which either constitute (a) Non-Core Zone
Property Rights or Non-Core Zone Statutory Easements, or (b) assets having an
aggregate fair market value of U.S.$500,000 (in the case of inventory) or
U.S.$250,000 (in all other cases) (or, in each such case, the equivalent thereof
in any other currency), the relevant Obligor shall, to the extent permitted by
Applicable Law, (x) enter into Instruments similar to the relevant Collateral
Agreement, (y) simultaneously therewith, effect all relevant notarizations and
registrations or obtain the acknowledgement and agreement of all
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relevant counterparties, as the case may be, and (z) take all other actions
necessary or advisable or, in the reasonable opinion of counsel to the Bank
Parties, desirable in order to (i) create in favor of the Bank Parties a valid
and perfected first-priority Lien over all of such newly acquired or produced
Project Assets, and (ii) evidence the creation of such Lien (including opinions
of counsel). In addition, if during any three month period, ending on any of
March 31, June 30, September 30 or December 31, the relevant Obligor shall
acquire or produce any Project Asset and such Project Asset shall not be
encumbered pursuant to any Agreement on the last day of any such period, the
relevant Obligor shall take the steps described in the previous sentence with
respect to such Project Asset.
Each Obligor will ensure that, promptly upon the effectiveness of any
Project Document of the nature described in clauses (b), (c) and (d) of the
----------- --- ---
definition thereof to which such Obligor is a party, the Bank Parties shall be
granted a conditional assignment of rights and/or, as may be relevant, a
commercial pledge (in the case of any Project Document expressed to be governed
by the laws of Chile) and/or, as the case may be, a first priority perfected
Lien over such Obligor's rights thereunder as security for the Obligations of
the Borrower and/or such Obligor, as the case may be.
Each Intermediate Owner will ensure that, promptly upon any acquisition by
such Intermediate Owner of any interest in the share capital of the Borrower
after the Borrowing Date, the Bank Parties shall be granted a first priority
perfected Lien over such share capital pursuant to documentation similar to the
AGRI Pledge Agreement or the Bema Bermuda Pledge Agreement, as the case may be.
SECTION 8.1.19. ACCURACY OF INFORMATION. All factual information
hereafter furnished by or on behalf of any Obligor in writing to any Bank Party
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.
SECTION 8.1.20. AGI'S CONTROL OF THE REFUGIO PROJECT. AGI shall:
(a) exercise, and shall cause AGRI to exercise, its rights under the
Shareholders Agreement and each other relevant Project Document in a
prudent and businesslike manner and so as to ensure (to the extent such
rights permit) the direction of all operational and production aspects of
the Mine and the Refugio Project; and
(b) ensure that each of the President of the Shareholder's Meeting,
Chairman of the Board of Directors and the Chairman of the Technical
Management Committee of
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the Borrower has been appointed as proposed by AGI or is otherwise
satisfactory to AGI.
SECTION 8.1.21. MINING CONCESSIONS. Without prejudice to the provisions
of Section 9.1.21 the Borrower shall use its best efforts to acquire the mining
--------------
concessions referred to in paragraphs 1 and 2 of Item 7 ("Assets; Properties")
------------ - ------ ------------------
of the Disclosure Schedule on or prior to the date which is one year after the
Effective Date and will ensure that, promptly upon the acquisition thereof, each
such mining concession is mortgaged to the Bank Parties pursuant to the
provisions of the Promise to Grant Mortgage over Mining Concessions.
SECTION 8.1.22. SALE OF PRODUCTION. The Borrower shall ensure that all
dore and similar products produced at the Mine are refined by, and all dore and
similar products are sold and exported to, Persons located outside Chile.
SECTION 8.1.23. SUPPLEMENTAL NOTES. Upon, and as a condition to the
effectiveness of the occurrence of, the Release Date, the Borrower shall deposit
into the Proceeds Sub-Account (Debt Service Reserve - Stamp Duty) an amount
equal to the Required Stamp Duty Amount as at the Release Date. The Borrower
will ensure that at all times after the Release Date the balance standing to the
credit of the Proceeds Sub-Account (Debt Service Reserve - Stamp Duty) is not
less than the Required Stamp Duty Amount as at such time.
SECTION 8.2. CERTAIN NEGATIVE COVENANTS. Each of the Borrower and
each Intermediate Owner agrees with each Bank Party that, until all Commitments
have terminated and all Obligations have been paid and performed in full, such
Obligor will perform its respective obligations set forth in this Section and
each Guarantor agrees with each Bank Party that, at all times on or prior to the
Release Date (and, in the case of such Guarantor's obligations under Section
-------
8.2.9, clause (b) of Section 8.2.12 and Sections 8.2.13, 8.2.14 and 8.2.15 at
----- ---------- -------------- --------------- ------ ------
all times after the Release Date), such Guarantor will perform its respective
obligations set forth in this Section.
SECTION 8.2.1. BUSINESS ACTIVITIES; PLACE OF BUSINESS; ORGANIC
DOCUMENTS; FISCAL YEAR.
(a) The Borrower will not:
(i) engage in any business activity other than the consummation
of the Refugio Project and the operation of the Mine and any activity
incidental thereto;
(ii) maintain any place of business in the United States or
elsewhere (other than the location of the Mine, Copiapo or Santiago,
Chile) without first taking (to the satisfaction of the
Administrative Agent) all actions necessary to
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protect the Lien granted pursuant to the relevant Collateral
Agreements;
(iii) except as required pursuant to clause (a)(iii) of
---------------
Section 6.2, amend its Organic Documents or change its corporate
-----------
name; or
(iv) change its Fiscal Year.
(b) Neither AGRI nor Bema Bermuda will engage in any business
activity other than in its capacity as a shareholder of the Borrower.
SECTION 8.2.2. INDEBTEDNESS. The Borrower will not create, incur,
assume, or suffer to exist or otherwise become or be liable in respect of any
Indebtedness other than:
(a) Indebtedness in respect of the Loans and other Obligations;
(b) Indebtedness in respect of Hedging Agreements or Interest Rate
Protection Agreements entered into directly by the Borrower in accordance
with Sections 8.1.10 or 8.1.11, respectively and in each case on terms and
---------------
conditions satisfactory to all the Banks;
(c) 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 of the Borrower which constitute Project
Costs (and excluding, for the avoidance of doubt, Indebtedness incurred
through the borrowing of money or Contingent Liabilities), (ii)
Indebtedness not in excess of U.S.$500,000 (or the equivalent thereof in
any other currency) incurred to suppliers of equipment constituting
Project Capital Costs (other than pursuant to the Construction Contracts)
in respect of the deferred purchase price of such equipment and on terms
and conditions acceptable to the Required Banks, and (iii) Indebtedness
evidenced by the Project Documents as in effect on the Effective Date
(including Indebtedness in respect of the assumption of obligations under
equipment leases or equipment financing contracts originally entered into
by the Mining Contractor and following a termination of the Mining
Contract in circumstances which do not constitute an Event of Default
pursuant to Section 9.1.14 and to be assumed by the Borrower in
--------------
circumstances in which the Borrower shall have provided evidence
(including evidence as to the availability of financial resources)
satisfactory to all the Banks that following such assumption the Borrower
shall be capable of ensuring the development of the Refugio Project in
accordance with the Development Plan);
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(d) Indebtedness in respect of taxes, assessments or governmental
charges, and Indebtedness in respect of claims for labor, materials or
supplies incurred by way of Project Costs 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 8.1.6;
-------------
(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 10 days, which do not, in the aggregate, exceed
U.S.$100,000 (or the equivalent thereof in any other currency);
(f) Approved Subordinated Indebtedness; and
(g) Indebtedness (other than Indebtedness of the nature referred to
in clauses (a), (b), (c), (e), (f) and (g) of the definition of such term)
----------- --- --- --- --- ---
in an aggregate principal amount not in excess of U.S.$250,000 (or the
equivalent thereof in any other currency) at any one time outstanding.
SECTION 8.2.3. LIENS. The Borrower will not 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 the Administrative Agent (for the ratable
benefit of the Bank Parties) or in favor of the Bank Parties granted
pursuant to any Loan Document;
(b) Liens in respect of deferred IVA relating to imported goods
constituting Project Assets;
(c) Liens for taxes, assessments or other governmental charges or
levies (excluding, however, deferred IVA relating to goods referred to in
clause (b)) 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;
(d) 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;
(e) 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
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(other than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds;
(f) judgment Liens in existence less than 10 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;
(g) Liens securing Indebtedness permitted to be incurred pursuant to
clause (c)(ii) of Section 8.2.2; provided, however, that any such Lien
-------------- ------------- -------- -------
shall attach only to the equipment in respect of which such Indebtedness
is incurred;
(h) Liens (ranking (as provided in documentation satisfactory in form
and substance to all the Banks) in priority junior in all respects to any
Lien granted by the Borrower to the Bank Parties pursuant to any
Collateral Agreement to which the Borrower is a party) securing
obligations not in excess of an aggregate amount of U.S.$250,000 at any
one time outstanding; and
(i) any other Lien disclosed in Item 11 ("Liens") of the Disclosure
------- -----
Schedule, provided, however, that such Lien shall be limited to the right
-------- -------
of specific performance with respect to the transfer of certain of the
Refugio Project Properties after the end of the Project Period and shall
not in any way grant any Person any rights of any nature whatsoever in
respect of any of the Refugio Project Properties at any time prior thereto
and shall not in any event restrict the ability of the Borrower to deal
with the Refugio Project Properties (including the right to grant any Lien
in favor of the Bank Parties over any of the Refugio Project Properties or
any Mining Rights in respect thereof pursuant to the Chilean Security
Agreements or otherwise).
SECTION 8.2.4. FINANCIAL CONDITION OF BORROWER. The Borrower will not
permit:
(a) the Cash Flow Ratio (calculated on the date of preparation of
each Compliance Certificate with respect to each consecutive six-month
period commencing on all Calculation Dates which are Payment Dates
scheduled to occur on or after such date of preparation (and, in the case
of a Calculation Date which is the Project Completion Date or the Release
Date, calculated with respect to the period commencing on such date and
ending on the next succeeding scheduled Calculation Date which is a
Payment Date)), to be less than one hundred and twenty-five percent
(125%);
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<PAGE>
(b) the Loan Life Ratio (calculated on the date of preparation of
each Compliance Certificate with respect to all Calculation Dates
scheduled to occur on or after such date of preparation), to be less than
or equal to one hundred and fifty percent (150%);
(c) the Project Life Ratio (calculated as set forth in clause
--- ------
(b)), to be less than or equal to two hundred percent (200%);
---
(d) the Current Ratio to be at any date following the Release Date
less than 100%;
(e) Tangible Net Worth to be at any date less than U.S.$50,000,000;
(f) the Reserves to be at any date less than thirty percent (30%) of
the Reserves as at the Effective Date; and
(g) the Reserves to be at any date less than six hundred percent
(600%) of the outstanding Principal Amount of all Loans on such date (and,
if any of such Loans are Dollar Loans, such Loans shall be converted into
an amount of Gold calculated at the average of the London Price as in
effect on the dates which are one, two, three, four, five and six months
prior to such date).
SECTION 8.2.5. CAPITAL EXPENDITURES. The Borrower will not make or
commit to make any Capital Expenditures other than those which are identified in
the Development Plan (subject to any permitted acceleration of any such
expenditure in the manner described in, and permitted pursuant to, the provisos
to clause (c) of each of Sections 4.1 and 4.2) and shall not make or commit to
---------- ------------ ---
make any such Capital Expenditures if, at the time, or as a consequence of,
incurring any such item of expenditure any Default shall have occurred and be
continuing; provided, however, that (a) if a Default shall have occurred and be
-------- -------
continuing and no Enforcement Event shall then have occurred and be continuing,
the Borrower may only make (i) prior to the Project Completion Date, Capital
Expenditures constituting Required Completion Expenditures and (y) subsequent to
the Project Completion Date, Capital Expenditures constituting Required
Maintenance Expenditures, and (b) subject to clause (a), with the consent of the
----------
Technical Agent (acting in consultation with the Independent Consultant and the
Required Banks) the Borrower may, in any period identified in the Cash Flow
Schedule, make Capital Expenditures referred to in any subsequent period
identified in the Cash Flow Schedule as a result of accelerated construction in
connection with the Refugio Project. Without limiting the generality of the
foregoing the Borrower will not consent to any Change Order other than any
Change Order (x) resulting in an increase in the Contract Price which is not in
excess of U.S.$100,000 (or the equivalent thereof in any other currency), and
(y) which, together with all other Change Orders previously
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<PAGE>
implemented pursuant to this Section, does not result in an increase in the
Contract Price which is in excess of an aggregate amount of U.S.$500,000 (or the
equivalent thereof in any other currency).
SECTION 8.2.6. INVESTMENTS. The Borrower will not acquire all or
substantially all of the assets of any other Person or form or suffer to exist
any Subsidiary and will not make, incur, assume or suffer to exist any
Investment in any other Person, except Cash Equivalent Investments permitted to
be made with balances standing to the credit of the Project Accounts pursuant to
Article 4 to the extent permitted pursuant to the terms and conditions of the
---------
Foreign Investment Contract.
SECTION 8.2.7. RESTRICTED PAYMENTS, ETC. The Borrower will not:
(a) declare, pay or make any dividend or distribution (in cash,
property or obligations) on any shares of any class of capital stock (now
or hereafter outstanding) of the Borrower or on any warrants, options,
convertible securities or other rights with respect to any shares of any
class of capital stock (now or hereafter outstanding) of the Borrower or
apply any of its funds, property or assets to the purchase, redemption or
other retirement of any shares of any class of capital stock (now or
hereafter outstanding) of the Borrower, or warrants, options, convertible
securities or other rights with respect to any shares of any class of
capital stock (now or hereafter outstanding) of the Borrower;
(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;
provided, however, that (d) the Borrower may make any payment or take any other
-------- -------
action for any of the foregoing purposes (excluding, however, any payment in
respect of the IVA Advance) so long as: (i) no Default shall have occurred and
be continuing or would result from any such payment or other action, (ii) the
balance of the Proceeds Account and the Proceeds Sub-Account (Debt Service
Reserve) shall not be less than the Required CapEx Balance and the Required Debt
Service Reserve Balance, respectively, and (iii) any such payment or other
action is taken only (x) during any period commencing on the date which is five
Business Days following any Payment Date occurring after the Release Date and
ending on the date which is fifteen Business Days following such Payment Date
and (y) after giving effect to all payments required to be made on, or in
relation to, such Payment Date pursuant to Section 3.1 and 3.2 (including any
----------- ---
amount required to be deposited into the Proceeds Sub-Account (Debt Service
Reserve-Prepayment Proceeds) pursuant to clause (d)
----------
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<PAGE>
of Section 3.1), (e) the Borrower may repay amounts owing in respect of the IVA
-----------
Advance to Bema Bermuda or Bema Chile at any time when no Default shall then
have occurred and be continuing to the extent that the Borrower has actually
received payment by way of a refund of amounts of IVA relating to the IVA
Advance, and (f) the Borrower may not make any such payment from the proceeds of
any amounts transferred to the Proceeds Account and/or the Proceeds Sub-Account
(Chile) pursuant to clause (d) of Section 4.1 (or, to the extent such transfer
---------- -----------
is not permitted to be effected pursuant to Applicable Law, from the similar
amounts remaining in the Construction Account and/or the Construction Sub-
Account (Chile), as the case may be) until after the Release Date; and provided,
--------
further, however, that the Borrower may not make any payment or take any other
------- -------
action for any of the foregoing purposes (excluding, however, any payment
pursuant to clause (e)) at any time when the balance standing to the credit of
----------
the Proceeds Sub-Account (Debt Service Reserve) shall be less than the Required
Debt Service Reserve Balance or the balance standing to the credit of the
Proceeds Account shall be less than the Required CapEx Balance.
SECTION 8.2.8. TAKE OR PAY CONTRACTS. Except as set forth in Item 12
-------
("Take or Pay Contracts") of the Disclosure Schedule, 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 the Borrower 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 the
Borrower from entering into any Hedging Agreement or Interest Rate Protection
Agreement.
SECTION 8.2.9. CONSOLIDATION, MERGER, ETC. No Obligor will liquidate
or dissolve, consolidate with, or merge into or with, any other corporation, or
(except in the case of the Guarantors) purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division thereof);
provided, however, that either Guarantor may consolidate or merge as aforesaid
-------- -------
if, in connection therewith, the surviving entity shall continue to be bound by,
and in compliance with, each Operative Document to which it is a party.
SECTION 8.2.10. ASSET DISPOSITIONS, DEPOSITS WITH REFINERIES, ETC. The
Borrower will not sell, transfer, lease or otherwise dispose of any of, or grant
options, warrants or other rights with respect to, any of its assets (including
accounts receivable) to any Person, unless:
(a) such disposition is made in the ordinary course of business and
consists of finished goods inventories (which may consist of gold-bearing
concentrates, gold-bearing ore, refined gold or other product forms
customarily sold as end products in the mining industry);
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(b) such disposition is of obsolete or replaced assets, which are no
longer used or useful to the Borrower; or
(c) the net book value of all assets disposed of by the Borrower
(excluding, however, assets disposed of pursuant to clauses (a) and (b))
----------- ---
in the same Fiscal Year does not exceed U.S.$150,000 (or the equivalent
thereof in any other currency) and fair value in cash is received
therefor;
provided, however, that nothing herein shall prohibit any disposition of Gold to
-------- -------
the Administrative Agent or the Banks in direct repayment of any Obligation
denominated in Gold hereunder.
The Borrower shall not deposit any dore or other unrefined inventory with
any Person other than with a refiner and pursuant to refining agreements, in
form and substance reasonably satisfactory to the Required Banks and only if the
refiner thereunder expressly acknowledges the Lien of the Administrative Agent
(for the ratable benefit of the Bank Parties and in form and substance
reasonably satisfactory to the Administrative Agent), (i) on such dore or other
unrefined inventory or (ii) on each account or other contract right of the
Borrower with or against such refiner with respect to dore or other inventory
deposited for refining, and, in each such case, the parties thereto have taken
all action required to maintain such Lien as a first priority perfected Lien in
favor of the Administrative Agent.
SECTION 8.2.11. TRANSACTIONS WITH AFFILIATES. The Borrower will not
enter into, or cause, suffer or permit to exist:
(a) any arrangement or contract pursuant to which any Indebtedness is
extended by the Borrower to any Affiliate as obligor;
(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 (including contracts for
the provision of services of the nature contemplated by Section 3.4 of the
Shareholders Agreement) or arrangements relating to the allocation of
revenues, taxes and expenses or otherwise) requiring any payments to be
made by the Borrower to any Affiliate unless such arrangement is fair and
equitable to the Borrower; and
(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 the Borrower with, or which is on terms which are less
favorable to the Borrower than are obtainable from, any Person which is
not one of its Affiliates.
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SECTION 8.2.12. RESTRICTIVE AGREEMENTS, ETC.
(a) The Borrower will not 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 the Borrower to amend or otherwise
modify this Agreement or any other Operative Document.
(b) No other Obligor will enter into any agreement of the type
described in clause (a) which prohibits the creation of any Lien of the
----------
nature granted or purported to be granted pursuant to any Collateral
Agreement to which such Obligor is a party.
SECTION 8.2.13. INCONSISTENT AGREEMENTS. No Obligor will enter into any
agreement containing any provision which would be violated or breached by the
Loans hereunder or by the performance by such Obligor of its obligations
hereunder or under any Loan Document.
SECTION 8.2.14. PROJECT DOCUMENTS. No Obligor will (a) in any material
respect amend, modify or waive, or (b) terminate or replace, any Project
Document (and, in the case of AGI, the DOCLOC Support Agreement and the DOCLOC
Facility Agreement unless consent thereto shall have been granted by all the
Banks) to which it is a party, except as expressly permitted pursuant to any
Loan Document or with the prior written consent of the Required Banks. AGI will
not grant, or permit to be outstanding, any Lien in favor of any party over its
rights under the DOCLOC Facility Agreement.
SECTION 8.2.15. ACTIONS UNDER PROJECT DOCUMENTS.
(a) No Obligor will take or refrain from taking any action under any
of the Project Documents which would have a material adverse effect on (i)
the ability of the Borrower to consummate the Refugio Project and operate
the Mine in accordance with the Development Plan and achieve Mechanical
Completion and Project Completion, (ii) any collateral subject to any
Collateral Agreement and the perfection and priority of the Liens granted
or purported to be granted therein, or (iii) the ability of such Obligor
to pay and perform its Obligations.
(b) Bema Gold shall not, and shall not permit Bema Bermuda to,
exercise any of its rights under the Refugio Shareholders' Agreement and
each other relevant Project Document in a manner which is in any way
inconsistent with the obligations of AGI set forth in clause (b) of
----------
Section 8.1.20.
--------------
SECTION 8.2.16. BANK ACCOUNTS. The Borrower shall not open any bank
account or maintain any similar deposit arrangement
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or maintain any balance in any bank account or in respect of such arrangement
other than (a) the Project Accounts, and (b) two bank accounts maintained with
the branch of Banco Santander in Copiapo in relation to payroll expenses and
other Project Costs denominated in Pesos; provided, however, that the amounts
-------- -------
standing to the credit of the accounts referred to in clause (b) shall at no
----------
time exceed (i) in the case of the account relating to payroll expenses,
expected payroll expenses of the Borrower for the immediately succeeding four
week period, and (ii) in respect of the account relating to such other Project
Costs, the Peso equivalent of expected Project Costs (other than Project Costs
relating to payments due and arising under the Construction Contracts or the
Mining Contract) for the immediately succeeding five Business Day period.
SECTION 8.2.17. ROYALTY AGREEMENTS. The Borrower will not enter into
any agreement relating to the granting of royalties or net profits interests in
connection with the Refugio Project other than as set forth in the royalty
agreements listed in Item 13 ("Royalty Agreements") of the Disclosure Schedule.
------- ------------------
ARTICLE 9. EVENTS OF DEFAULT
-----------------------------
SECTION 9.1. EVENTS OF DEFAULT. The term "Event of Default" shall
----------------
mean any of the events set forth in this Section.
SECTION 9.1.1. NON-PAYMENT OF OBLIGATIONS. The Borrower (or either
Guarantor):
(a) shall default in the payment or prepayment when due of any
Principal Amount of or interest on any Loan or shall default in the
provision of collateral pursuant to an election made pursuant to clause
------
(c)(2) of Section 3.1 (and such default shall continue unremedied for a
------ -----------
period of two Business Days); or
(b) shall default in the payment when due of any other Obligation
(and such default shall continue unremedied for a period of eight Business
Days).
SECTION 9.1.2. NON-PERFORMANCE OF CERTAIN COVENANTS. Any Obligor shall
default in the due performance and observance of any of its obligations under
(a) Section 8.1.4, 8.1.7, 8.1.12, 8.1.17 or 8.2 (other than Section 8.2.4, and,
------------- ----- ------ ------ --- -------------
to the extent such default shall have arisen as a result of any action or event
beyond the control of any Obligor or any of their respective Affiliates, Section
-------
8.2.2 or 8.2.3), (b) Section 3.1, 3.2 or 3.3 of the AGI Support Agreement, (c)
----- ----- ----------- --- ---
Section 3.1 or 8.3 of the Bema Gold Support Agreement, or (d) Section 2.6 of the
----------- --- -----------
Subordination Agreement (CMM).
SECTION 9.1.3. NON-PERFORMANCE OF OTHER OBLIGATIONS. Any Obligor shall
default in the due performance or observance of any term, condition, covenant or
agreement contained herein
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or in any other Operative 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
------------- -----
(including, in the case of a default by either Guarantor any cure or remedy
effected by the other Guarantor), such default shall continue unremedied for a
period of 10 Business Days after notice thereof shall have been given to such
Obligor by the Administrative Agent.
SECTION 9.1.4. BREACH OF REPRESENTATION OR WARRANTY. Any
representation or warranty of any 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 Bank Party for the purposes of or in connection with this
Agreement or any such Loan Document is or shall be incorrect when made (a) (in
the case of any representation or warranty made on the Borrowing Date) in any
material respect or (b) (in the case of any other representation or warranty)
and such incorrectness shall have a material adverse effect on any of:
(i) such Obligor's business or financial condition;
(ii) the effectiveness, perfection or priority of any Lien
(other than on any Project Assets the Required Banks deem to be non-
material) granted or purported to be granted by such Obligor pursuant
to any Collateral Agreement or the enforceability of any other
material obligation contained in any Loan Document; or
(iii) the ability of such Obligor to make any payment or
perform any other material obligation required under any Operative
Document to which it is party or, in the case of the Borrower, to
develop and operate the Mine in accordance with the Development Plan.
SECTION 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 otherwise, of any Indebtedness (other than Indebtedness
described in Section 9.1.1) of any Obligor having a principal amount,
-------------
individually or in the aggregate, in excess of U.S.$100,000, U.S.$10,000,
U.S.$500,000 and U.S.$1,000,000 (or the equivalent thereof in any other
currency), with respect to the Borrower, the Intermediate Owners and Bema Gold
and AGI, respectively, 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 Required Banks, 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
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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.
SECTION 9.1.6. BANKRUPTCY, INSOLVENCY, ETC. Any Obligor (and, at any
time on or prior to the Release Date, Cyprus Amax) 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 Obligor (or
Cyprus Amax), 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 Obligor (or Cyprus Amax) 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 Obligor hereby expressly authorizes the
Administrative Agent and each Bank to appear in any court conducting any
relevant proceeding during such 60-day period to preserve, protect and
defend their rights under the Loan Documents;
(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 Obligor (or Cyprus Amax) and, if
such case or proceeding is not commenced by such Obligor (or Cyprus Amax),
such case or proceeding shall be consented to or acquiesced in by such
Obligor (or Cyprus Amax) or shall result in the entry of an order for
relief or shall remain for 60 days undismissed, provided that each Obligor
hereby expressly authorizes the Administrative Agent and each Bank to
appear in any court conducting any relevant proceeding during such 60-day
period to preserve, protect and defend their rights 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.
SECTION 9.1.7. HEDGING AGREEMENTS; INTEREST RATE PROTECTION AGREEMENTS.
Any default shall occur under any of the
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Hedging Agreements or Interest Rate Protection Agreements or any of the Hedging
Agreements or Interest Rate Protection Agreements shall terminate or cease in
whole or in part to be the legal, valid and binding obligation of the Hedging
Counterparty or Interest Rate Protection Counterparty thereunder, as the case
may be, or the assignment by either Guarantor of any of the Hedging Agreements
or Interest Rate Protection Agreements, as the case may be, to the Borrower
shall terminate or cease in whole or in part to transfer the benefits of such
Hedging Agreements or Interest Rate Protection Agreements, as the case may be,
to the Borrower; provided, however, that in the event that the Borrower shall
-------- -------
have made arrangements within five Business Days after such default, termination
or cessation satisfactory to the Required Banks with respect to the replacement
of any such Hedging Agreement or Interest Rate Protection Agreement in
accordance with Section 8.1.10 or 8.1.11, as the case may be, and on
-------------- ------
substantially similar economic terms and benefits (or on such other terms or
benefits as may be satisfactory to the Required Banks) then no Event of Default
shall be deemed to have occurred pursuant to this Section.
SECTION 9.1.8. PROJECT DOCUMENTS, ETC.
(a) Any of the Project Documents shall terminate or for any reason
cease to be in full force and effect, except if such termination or
cessation is capable of cure or remedy by any Obligor, in which case if
such termination or cessation is not remedied within ten Business Days
after the occurrence thereof.
(b) A default under any of the Project Documents (excluding, however,
to the extent referred to in Section 9.1.14 or 9.1.15, the Construction
-------------- ------
Contracts, the Construction Contracts Guaranty and the Mining Agreement)
shall occur, and such default is, in the reasonable opinion of the
Required Banks, likely to have a Materially Adverse Effect with respect to
any Obligor and such default, if capable of cure or remedy, is not
remedied within ten (10) Business Days after notification to the Borrower
from the Administrative Agent that the Required Banks are of the opinion
that such default is likely to have a Materially Adverse Effect as
aforesaid.
SECTION 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 or any other party shall, directly or indirectly, contest
in any manner such effectiveness, validity, binding nature or enforceability; or
any Lien securing (or intended to secure) any Obligation shall, in whole or in
part, cease to be a perfected Lien which, except as permitted by Section 8.2.3,
-------------
ranks first in priority.
SECTION 9.1.10. ABANDONMENT, MINING RIGHTS.
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(a) The Borrower shall abandon all or any significant portion of its
interest in the Mine or the Project Assets or surrender, cancel or
release, or suffer any termination or cancellation of any of its rights,
right or interest in the Mine or the Project Assets, other than as
specifically permitted by this Agreement and each other Loan Document or
other than as the Borrower shall have evidenced to all the Banks are not
required in connection with the Refugio Project.
(b) Any Person other than the Borrower shall acquire Mining Rights in
respect of all or any portion of the Refugio Project Properties
(excluding, in the case of the Access Zone, any such Mining Right which
does not adversely affect the rights of access of the Borrower thereover
to the Mine).
SECTION 9.1.11. JUDGMENTS. Any judgment or order for the payment of
money in excess of U.S.$100,000, U.S.$10,000, U.S.$500,000 and U.S.$1,000,000
(or the equivalent thereof in any other currency) with respect to the Borrower,
the Intermediate Owners and Bema Gold and AGI, respectively, shall be rendered
against such Obligor 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 10 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.
SECTION 9.1.12. POLITICAL RISK INSURANCE, ETC.
(a) Due to any action, inaction or misrepresentation of any Obligor,
either (i) any Political Risk Insurance previously obtained by any
Political Risk Bank shall cease to be in full force and effect, or (ii)
the political risk insurer thereunder shall not be liable to pay a claim
thereunder which it would otherwise have been liable to pay.
(b) Any risk or event covered by any Political Risk Insurance then in
effect shall occur.
(c) Any Governmental Agency or other Person purporting to be, or
acting as, any Governmental Agency (i) condemns, nationalizes, seizes or
otherwise expropriates all or any substantial part of the property or
other assets of the Borrower or of its share capital, or assumes custody
or control of such property or other assets or of the business or
operations of the Borrower if such action (together with any prior similar
action) would prevent the Borrower from carrying on its obligations under
the Operative Documents where, in the case of any
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such property, or assets, the same cannot be replaced by equivalent
property or assets, or (ii) condemns, nationalizes, seizes or otherwise
expropriates all or any substantial part of the property or other assets
of the Borrower or its share capital, or assumes custody or control of
such property or other assets or of the business or operations of the
Borrower if such action (together with any prior similar action) would
prevent the Borrower from carrying on its obligations under the Operative
Documents where, in the case of property or assets, the same can be
replaced by equivalent property or assets, and, in any such case, such
condemnation, nationalization, seizure, expropriation, assumption or
action is not withdrawn, rescinded, reversed, or in the case of any such
action with respect to property or assets, the same are not replaced with
equivalent property or assets within thirty days.
SECTION 9.1.13. CHANGE IN CONTROL. Any Change in Control shall occur.
SECTION 9.1.14. DEFAULT, ETC. BY MINING CONTRACTOR. The Mining
Contractor shall default in the performance of any of its obligations under the
Mining Contract and the Mining Contractor shall not have remedied such default
within the time prescribed under the Mining Contract; provided, however, that in
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the event that the Mining Contractor shall be so unable to perform such
obligations or the Borrower shall have so terminated the services of the Mining
Contractor then no Event of Default shall be deemed to have occurred pursuant to
this Section if either (a) the Borrower shall have provided evidence (including
evidence as to the availability of financial resources) satisfactory to all the
Banks that either it or AGI shall be capable of operating the Mine without any
adverse effect on the development of the Refugio Project as contemplated by the
Development Plan, or (b) the Borrower shall have made provision for the
appointment of a substitute Mining Contractor, acceptable to the Required Banks
in their reasonable discretion within sixty (60) Business Days of the occurrence
of such inability to perform or termination.
SECTION 9.1.15. DEFAULT, ETC BY CONSTRUCTION CONTRACTORS. Either
Construction Contractor shall default in the performance of any of its
obligations under the relevant Construction Contract or Fluor Corporation shall
default in the performance of any of its obligations under the Construction
Contracts Guaranty and the relevant Construction Contractor or, as the case may
be, Fluor Corporation shall not have remedied such default within the time
prescribed under the relevant Project Document.
SECTION 9.1.16. FAILURE TO ACHIEVE MECHANICAL COMPLETION AND PROJECT
COMPLETION. The Mechanical Completion Date shall not have occurred on or prior
to September 30, 1996 or the Project Completion Date shall not have occurred on
or prior to December 31, 1997.
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SECTION 9.1.17. APPROVALS. Any Approval which is material to the Refugio
Project or the Mine or otherwise material to the conduct of the business of the
Borrower or the performance of any Obligor's obligations under any Operative
Agreement executed by it shall be denied or withdrawn or shall cease to remain
in full force and effect or shall otherwise be materially impaired and, if such
Approval is obtainable or renewable in the ordinary course, such Approval is not
obtained or renewed within 30 days.
SECTION 9.1.18. MATERIALLY ADVERSE EFFECT. Any event shall occur or
condition shall exist which constitutes a Materially Adverse Effect with respect
to any Obligor.
SECTION 9.1.19. CEASE TO CARRY ON BUSINESS. The Borrower ceases, is
restrained from or threatens to cease to carry on in the ordinary course the
Refugio Project, its business or a substantial part thereof, and in the case of
any restraint caused by a Person other than the Borrower, the Borrower does not
recommence its business as aforesaid within 30 days.
SECTION 9.1.20. RELEASE DATE. The Release Date shall not have occurred
on or prior to the date which is six months after the Project Completion Date;
provided, however, that no Event of Default shall occur pursuant to this Section
-------- -------
in the event that the Release Date shall not have occurred on or prior to the
date specified herein solely due to failure of the Borrower to satisfy the
condition to the occurrence of the Release Date referred to in clause (a)(ii) of
--------------
the definition thereof.
SECTION 9.1.21. FAILURE TO ACQUIRE CERTAIN PROPERTY RIGHTS. The
Borrower shall not have acquired the Non-Core Zone Property Rights on or prior
to the Non-Core Zone Property Rights Target Acquisition Date; provided, however,
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that in the event the Borrower shall not have acquired the Non-Core Zone
Property Rights within the required period as aforesaid then no Event of Default
shall be deemed to have occurred pursuant to this Section if the Borrower shall
have provided evidence (including, in the case of clause (b), as to the
----------
availability of financial resources) satisfactory to the Administrative Agent to
the effect that:
(a) the Borrower has initiated appropriate court proceedings in Chile
with a view to obtaining the Non-Core Zone Statutory Easements, and
(b) notwithstanding such failure to obtain the Non-Core Zone Property
Rights the Borrower shall be capable of developing the Refugio Project and
operating the Mine as contemplated by the Development Plan.
SECTION 9.2. ACTION IF BANKRUPTCY. If any Event of Default described
in Section 9.1.6 shall occur, the Commitments (if not theretofore terminated)
-------------
shall automatically terminate, without notice, and if any Event of Default
defined in Section
-------
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9.1.6 with respect to the Borrower shall occur the outstanding Principal Amount
-----
of all outstanding Loans and all other Obligations (excluding, however, unless
express instructions to the contrary are received from the relevant Bank,
Obligations in respect of any Hedging Agreement or Interest Rate Protection
Agreement to which any Bank is a party) shall automatically be and become
immediately due and payable, without notice or demand.
SECTION 9.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of
Default (other than any Event of Default described in Section 9.1.6 with respect
-------------
to the Borrower) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Administrative Agent may (acting with the consent of the
Required Banks), and upon the direction of the Required Banks, shall, upon
notice or demand to the Borrower (with a copy to each Guarantor), 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 Bank, Obligations in
respect of any Hedging Agreement or Interest Rate Protection Agreement to which
any Bank 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 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, the Commitments shall
terminate.
SECTION 9.4. DEFAULT AFTER RELEASE DATE. No Default shall have, or
shall be deemed to have, occurred in the event that any of the events referred
to in Sections 9.1.5, 9.1.6, 9.1.11 or 9.1.18 shall have occurred with respect
-------------- ----- ------ ------
to either Guarantor at any time on or after the Release Date.
SECTION 9.5. CURE BY GUARANTORS. In the event that any Event of
Default with respect to either Guarantor (or the Intermediate Owner which is a
Subsidiary of such Guarantor) shall have occurred (excluding however, any Event
of Default referred to in Section 9.1.6) then the Banks shall not be entitled to
-------------
exercise any of their remedies under Section 9.3 for a period of ten (10)
-----------
Business Days from the date of occurrence of such Event of Default if (a) the
other Guarantor shall have notified the Administrative Agent promptly (and, in
any event, within two (2) Business Days) upon the occurrence of such Event of
Default of its intent to cure such Event of Default and the steps it intends to
take to implement such cure and (b) the Administrative Agent shall not have
notified CMM that, in the opinion of the Required Banks, such Event of Default
is not capable of being cured by such other Guarantor. In the event that the
relevant Event of Default shall have been cured by either Guarantor pursuant to
the terms of this Section within the ten (10) Business Day period referred to
herein, then, for the avoidance of doubt, no Event of Default shall be
continuing and the Banks shall not be entitled to enforce any remedy under
Section 9.3 or otherwise in connection therewith.
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ARTICLE 10. THE AGENTS
-----------------------
SECTION 10.1. ACTIONS. Each Bank authorizes each Agent to act on
behalf of such Bank under this Agreement and each other Loan Document and, in
the absence of other written instructions from the Required Banks 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.
Each Bank agrees (which agreement shall survive any termination of this
Agreement) to indemnify each Agent, pro rata according to such Bank'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 such Agent
for all out-of-pocket expenses (including attorneys' fees and expenses on a full
indemnity basis) incurred by such Agent hereunder or in connection herewith or
with any other Loan Document or in enforcing the Obligations of any Obligor
under this Agreement or any other Loan Document, in all cases as to which such
Agent is not reimbursed by an Obligor; provided, however, that no Bank shall be
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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 such Agent's gross negligence or wilful misconduct.
Without limiting the generality of the foregoing, each Bank Party hereby
authorizes:
(a) the Administrative Agent to act on behalf of such Bank to execute
and accept on its behalf the Collateral Agreements (other than the Chilean
Security 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 Bank Parties thereunder; and
(b) the Technical Agent to (i) approve (x) in consultation with the
Banks, the Development Plan, the Insurance Summary and the Technical
Review and (y) in consultation with the Administrative Agent, the Banks
and the Independent Consultant, any engineering studies prepared in
connection with the Refugio Project (other
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than the Feasibility Studies) and the criteria for Mechanical Completion
and Project Completion; 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.
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 Banks 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.
SECTION 10.2. FUNDING RELIANCE, ETC. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Bank by 5:00
p.m., London time, on the day prior to the proposed Borrowing Date that such
Bank will not make available the amount which would constitute its Percentage of
the Loans to be made by all the Banks on such date, the Administrative Agent may
assume that such Bank 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 Bank shall not have made
such amount available to the Administrative Agent, such Bank 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.
SECTION 10.3. EXCULPATION. Neither Agent nor any of its directors,
officers, employees or agents shall be liable to any Bank 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 of the Loan Documents, 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.
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SECTION 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 Banks. If
either Agent at any time shall resign, the Required Banks may appoint (subject,
as long as no Default shall have occurred and be continuing, to the prior
written consent of the Borrower, such consent not to be unreasonably withheld or
delayed) another Bank 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 Banks, appoint (subject, as long as no Default shall
have occurred and be continuing, to the prior written consent of the Borrower,
such consent not to be unreasonably withheld or delayed) a relevant successor
Agent, which shall be one of the Banks 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.
SECTION 10.5. LOANS BY ROTHSCHILD AND DEUTSCHE BANK. Each of
Rothschild and Deutsche Bank shall have the same rights and powers with respect
to the Loans made by it or any of its Affiliates as any Bank and may exercise
the same as if it were not the Administrative Agent or the Technical Agent, as
the case may be, hereunder. Each of Rothschild, Deutsche Bank and the
Affiliates of either 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 Rothschild were not the Administrative Agent hereunder or Deutsche Bank
were not the Technical Agent.
SECTION 10.6. ROTHSCHILD AS THE ADMINISTRATIVE AGENT. In acting as
Administrative Agent for the Banks, the Treasury Division of Rothschild shall be
treated as a separate entity from any other division of Rothschild (or similar
units of Rothschild in any subsequent reorganization) or Affiliates and, without
detracting from the generality of the foregoing, in the event that any of
Rothschild's divisions (or similar units) or Affiliates should act for the
Borrower, any other Obligor, or any Subsidiary of any Guarantor (the "Group") in
-----
an advisory capacity in relation to any other matter, any information given by
any member of the Group to such divisions (or similar units) or Affiliates for
the purpose of obtaining advice shall be treated as confidential and shall not
be available to the other Bank Parties without the consent of the Borrower or,
as the case may be, such Obligor or Subsidiary; and notwithstanding anything to
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the contrary expressed or implied herein and without prejudice to the generality
of the foregoing, Rothschild shall not as between itself and the other Bank
Parties be bound to disclose to any Bank Party or other Person any information
supplied by any member of the Group to Rothschild in its capacity as the
Administrative Agent hereunder which is identified by such member at the time of
supply as being unpublished price sensitive information relating to a proposed
transaction by a member of the Group and supplied solely for the purpose of
evaluating in consultation with Rothschild in such capacity whether such
transaction might require a waiver or amendment to any of the provisions
contained herein or in any other Loan Document. Before undertaking any work of
the nature described above the Administrative Agent, on behalf of Rothschild,
shall notify the Banks in writing of the general nature of such work and shall
confirm in writing that in so acting it shall not be in conflict with its duties
as Administrative Agent hereunder.
SECTION 10.7. CREDIT DECISIONS. Each Bank acknowledges that it has,
independently of the Agents and each other Bank, and based on the financial and
other information referred to in Sections 7.5 and 7.17 and such other documents,
------------ ----
information and investigations as it has deemed appropriate, made its own credit
decision to extend its Commitment. Each Bank also acknowledges that it will,
independently of the Agents and each other Bank, 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.
SECTION 10.8. COPIES, ETC. Each Agent shall give prompt notice to
each Bank 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 other Loan
Document. Each Agent will distribute to each Bank each Instrument received for
its account (including any item of documentation delivered by any Obligor or any
Affiliate thereof pursuant to Article 6 (but excluding, for the avoidance of
---------
doubt, any commission letter referred to in Section 3.3.3)) and copies of all
-------------
other communications received by such Agent from any Obligor for distribution to
the Banks by such Agent in accordance with the terms of this Agreement or any
other Loan Document.
ARTICLE 11. MISCELLANEOUS
--------------------------
SECTION 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 Obligors, the Administrative Agent and the Required Banks;
provided, however, that no such amendment, modification or waiver which would:
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(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 Banks or by the Required Banks shall be
effective unless consented to by each Bank;
(b) modify this Section, change the definition of "Required Banks,"
increase the Total Commitment Amount or the Percentage of any Bank or
otherwise subject any Bank to any additional obligation, reduce any
commissions described in Section 3.3.1 or 3.3.2, modify Section 2.3 or
------------- ----- -----------
9.1.16 or any provision of this Agreement or any other Loan Document
------
expressly relating to the DOCLOC Facility Agreement or the DOCLOC Support
Agreement or waive any condition precedent referred to in Article 6 shall
---------
be made without the consent of each Bank;
(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 other amount
payable hereunder or under any other Loan Document shall be made without
the consent of each Bank;
(d) modify the conditions under which amounts may be disbursed from
the Project Accounts shall be made without the consent of each Bank;
(e) reduce any commissions described in Section 3.3.3 or affect the
-------------
interests, rights or obligations of the Administrative Agent or the
Technical Agent qua the Administrative Agent or Technical Agent, as the
---
case may be, shall be made without consent of such Agent;
(f) modify any provision of this Agreement or any other Loan Document
related to Political Risk Insurance without the consent of all the
Political Risk Banks;
(g) authorize or effect the release of any of the Collateral which is
the subject of any Lien granted or purported to be granted in favor of the
Administrative Agent (for the ratable benefit of the Bank Parties) or in
favor of the Bank Parties pursuant to any relevant Collateral Agreement
shall be made without the consent of all the Banks; or
(h) 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 Hedging
Agreement or any Interest Rate Protection Agreement to which any Bank is a
party shall be made without the consent of such Bank.
No failure or delay on the part of any Bank Party in exercising any power or
right under this Agreement or any other Loan
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Document 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
any Obligor in any case shall entitle it or any other Obligor to any notice or
demand in similar or other circumstances. No waiver or approval by any Bank
Party under this Agreement or any other Loan Document 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.
SECTION 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 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 the
relevant Loan Document or a notice to the other parties. Any notice, if mailed
and properly addressed with postage prepaid, shall be deemed given when
received; any notice, 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).
SECTION 11.3. COSTS AND EXPENSES.
(a) The Borrower agrees to pay on demand all expenses (inclusive of
United Kingdom Value Added Tax or any other similar tax) of each Bank
Party 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 to either Agent on a full indemnity basis 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 Bank Parties (including reasonable fees and expenses of
counsel to either Agent on a full indemnity basis and any stamp or other
taxes (including stamp tax (impuesto de timbres) payable in connection
with the Supplemental Notes)) 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.
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<PAGE>
(b) The Borrower agrees to pay on demand all reasonable expenses of
each Bank Party's officers or agents in connection with its annual on-site
inspections of the Mine and all fees and reasonable expenses of the
Independent Consultant for the preparation of each Quarterly Report and
each Monthly Report, the fees and reasonable expenses of the independent
chartered accountants and certified public accountants in connection with
the performance of their duties described in Section 8.1.8, the
-------------
certification of each Compliance Certificate and each Completion
Certificate or any other matter relating to the Refugio Project and the
Mine, and all fees and reasonable expenses of the Insurance Consultant,
and the Technical Agent and the Project Account Banks in connection with
the performance of their respective duties referred to herein; provided,
--------
however, that the obligation of the Borrower to pay any fees and expenses
-------
of the Independent Consultant of the nature referred to in this clause
shall not exceed in the aggregate (i) in the case of any such fees and
expenses falling due during any calendar year which is on or prior to the
calendar year in which the Project Completion Date occurs, U.S.$475,000
per annum, and (ii) in the case of any other calendar year, U.S.$100,000,
per annum; and provided, further, however that the foregoing limitation
-------- ------- -------
shall not apply to, and shall be exclusive of, any such fees or expenses
incurred at, or in respect of, any time when any Default shall have
occurred and be continuing.
(c) The Borrower agrees to reimburse each Bank Party upon demand for
all reasonable out-of-pocket expenses (including attorneys' fees and
expenses on a full indemnity basis and inclusive of United Kingdom Value
Added Tax or any other similar tax) incurred by such Bank 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 Obligations.
SECTION 11.4. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by each Bank Party and the extension of the
Commitments, each of the Borrower (in the case of clauses (a) to (d)) and the
----------- ---
Guarantors (in the case of clauses (c) and (d) but without prejudice to the
----------- ---
other obligations of the Guarantors pursuant to the relevant Support Agreement)
hereby indemnifies, exonerates and holds each Bank Party and each of its
Affiliates, officers, directors, shareholders, employees and agents (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, including reasonable attorneys' fees and disbursements on
a full indemnity basis (the "Indemnified Liabilities"), incurred by the
-----------------------
Indemnified Parties or any of them as a result of, or arising out of, or
relating to:
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<PAGE>
(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 (including any action
brought by or on behalf of any Obligor as the result of any determination
by the Banks pursuant to Article 6 not to fund any borrowing);
---------
(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 the Borrower or either
Guarantor of any Hazardous Material in connection with the Refugio
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 the Borrower 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, the
Borrower or either Guarantor,
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, each Obligor hereby jointly and
severally agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities for which it is liable
hereunder and which is permissible under Applicable Law; provided, however,
-------- -------
that:
(e) nothing herein shall affect the obligations of the Borrower and
the Guarantors described in the letters, dated August 2, 1994, from the
Borrower and each Guarantor to the Banks (collectively, the "Indemnity
---------
Letters"); and
-------
(f) the obligation of either Guarantor in connection with any
Indemnified Liability for which it is liable hereunder shall not exceed an
amount which is equivalent to such Guarantor's Ownership Percentage
(calculated at the date of incurrence of such Indemnified Liability) of
such Indemnified Liability.
SECTION 11.5. SURVIVAL. The obligations of the Borrower under
Sections 3.3, 5.2, 5.3, 5.4, 5.6, 11.3 and 11.4 and the obligations of the Banks
------------ --- --- --- --- ---- ----
under Section 10.1, shall, in each case, survive any termination of this
------------
Agreement. The
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<PAGE>
representations and warranties made by each Obligor 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.
SECTION 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.
SECTION 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.
SECTION 11.8. COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
executed by the Obligors 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 Obligors, the
----
Technical Agent and each Bank (or notice thereof satisfactory to the
Administrative Agent) shall have been received by the Administrative Agent.
SECTION 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) Except with respect to the Indemnity Letters, 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 (including
the Compania Minera Maricunga Summary Indicative Terms and Conditions, dated
July 8, 1994).
SECTION 11.10. SUCCESSORS 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) no Obligor may assign or transfer its rights or obligations
hereunder without the prior written consent of the Administrative Agent
and all the Banks; and
(b) the rights of sale, assignment, and transfer of the Banks are
subject to Section 11.11.
-------------
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<PAGE>
SECTION 11.11. SALE AND TRANSFER OF LOANS; PARTICIPATIONS IN LOANS. Each
Bank may assign, or sell participations in, its Loans and Commitments to one or
more other Persons in accordance with this Section.
SECTION 11.11.1. ASSIGNMENTS. Any Bank, with notice to the Borrower and
the other Banks, may assign and delegate to any of its Affiliates or to any
other Bank or to one or more commercial banks or other financial institutions
recognized as foreign "registered financial institutions" by the Central Bank at
the time of the proposed assignment and delegation (excluding any Obligor or any
Affiliate of any Obligor (including, for the purposes of this Section, either
Guarantor at all times after the Release Date)) or, in the case of any Political
Risk Bank, to the provider of any Political Risk Insurance maintained for the
benefit of such Political Risk Bank (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 Bank" or "Assignee Bank", respectively), all or any
------------- -------------
fraction of such Bank's total Loans and Commitment (which assignment and
delegation shall include the transfer of the Notes corresponding to such Bank's
total Loans (and, to the extent any Assignee Bank shall so request and shall
undertake to pay any stamp duty or similar tax in connection therewith, the
execution of any new promissory notes in substitution or replacement thereof)
and shall be of a constant, and not a varying, percentage of all the Assignor
Bank's Loans and Commitment) in a minimum aggregate amount of U.S.$5,000,000 (or
the Gold equivalent thereof calculated on the effective date of the proposed
assignment and delegation); provided, however, that the minimum aggregate amount
-------- -------
referred to above shall not apply in the case of any Assignee Bank which is the
provider of Political Risk Insurance; provided, however, that any transfer by
-------- -------
any Bank of any Commitment shall require the consents (not to be unreasonably
withheld or delayed) of the other Banks and (as long as no Default shall have
occurred and be continuing) the Borrower; and provided, further, however, that,
-------- ------- -------
the Borrower, each other Obligor and each Agent shall be entitled to continue to
deal solely and directly with the Assignor Bank in connection with the interests
so assigned and delegated to an Assignee Bank until:
(a) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee Bank, shall have been given to the Borrower and the
Administrative Agent by such Assignor Bank and such Assignee Bank,
(b) such Assignee Bank shall have executed and delivered to the
Borrower and the Administrative Agent a Bank Assignment Agreement, which
shall have been accepted by the Administrative Agent,
(c) the Administrative Agent shall have been provided with certified
copies of relevant Approvals from
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<PAGE>
the Central Bank and such other 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.
From and after the date that the Administrative Agent accepts such Bank
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), (x) the Assignee Bank 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 Bank in connection with such Bank Assignment Agreement, shall have the
rights and obligations of a Bank hereunder and under the other Loan Documents,
(y) the Assignor Bank, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Bank Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents, and (z) the Notes and the Collateral Agreements expressed to be
governed by the laws of Chile 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 Bank, and
accrued fees in respect thereof, shall be paid as provided in the Bank
Assignment Agreement. Except in the case where any such Assignee Bank is an
Affiliate of such Assignor Bank, such Assignor Bank or such Assignee Bank shall
also pay a processing fee to the Administrative Agent upon delivery of any Bank
Assignment Agreement in the amount of U.S.$1500. Any attempted assignment and
delegation not made in accordance with this Section shall be null and void.
In the event that any provider of Political Risk Insurance shall become a
Bank pursuant to the foregoing provisions of this Section then nothing in any
Loan Document or otherwise shall in any way affect the independent right of such
provider to effect recovery under the relevant policy of Political Risk
Insurance in respect of any loss suffered by the Bank insured by such provider
thereunder through agreements between, or arrangements or procedures with, any
Governmental Agency of Chile or under any other agreements or procedures without
any obligation to share the proceeds thereof with any other Bank Party;
provided, however, that, for the avoidance of doubt, no such provider shall have
-------- -------
any rights to take any independent action under any Loan Document and the rights
of such provider under each such Loan Document shall be strictly limited to its
rights in its capacity as a Bank thereunder.
SECTION 11.11.2. PARTICIPATIONS. Any Bank may at any time sell to one or
more commercial banks or other Persons (excluding
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<PAGE>
any Obligor or any Affiliate of any Obligor (including, for purposes of this
Section, either Guarantor at all times after the Release Date)) or, in the case
of any Political Risk Bank to the provider of any Political Risk Insurance for
the benefit of such Political Risk Bank (each of such commercial banks and other
Persons (including a provider of Political Risk Insurance) being herein called a
"Participant") participating interests in any of the Loans, Commitments or other
-----------
interests of such Bank hereunder; provided, however, that:
-------- -------
(a) no participation contemplated in this Section shall relieve such
Bank from its Commitment or its other obligations hereunder or under any
other Loan Document;
(b) such Bank shall remain solely responsible for the performance of
its Commitment and such other obligations;
(c) the Obligors and each Agent shall continue to deal solely and
directly with such Bank in connection with such Bank'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
Bank, or is itself a Bank, shall be entitled to require such Bank to take
or refrain from taking any action hereunder or under any other Loan
Document, except that such Bank may agree with any Participant that such
Bank will not, without such Participant's consent, take any actions of the
type described in clause (b) or (c) of Section 11.1; 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 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 Bank.
SECTION 11.12. OTHER TRANSACTIONS. Without prejudice to the provisions
of Section 10.5, nothing contained herein shall preclude any Bank 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.
SECTION 11.13. FORUM 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 BANKS OR THE OBLIGORS MAY BE BROUGHT AND MAINTAINED
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<PAGE>
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 OBLIGORS MAY BE
FOUND, INCLUDING THE COMPETENT COURTS OF THE COMUNA OF SANTIAGO, CHILE. EACH
OBLIGOR 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 OR (IN THE CASE OF THE BORROWER ONLY BUT SUBJECT,
IN THE CASE OF EACH OTHER OBLIGOR, TO THE PROVISIONS OF EACH OTHER LOAN
DOCUMENT) OF THE COMPETENT COURTS OF THE COMUNA OF SANTIAGO, CHILE FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH
OBLIGOR 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 (HEREIN WITH RESPECT TO EACH OBLIGOR, ITS "PROCESS
-------
AGENT"). SERVICE OF PROCESS MAY BE MADE UPON ANY OBLIGOR 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 OBLIGOR 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.
IN ADDITION, THE BORROWER HEREBY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN CHILE ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT BY THE NOTIFICATION BY A CLERK OF A COMPETENT COURT
TO THE MANAGER OR ANOTHER AUTHORIZED REPRESENTATIVE OF THE BORROWER AT ITS
ADDRESS FOR NOTICES SET FORTH BELOW ITS SIGNATURE HERETO, IN THE MANNER
PRESCRIBED BY APPLICABLE LAW. EACH OBLIGOR 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 ANY OBLIGOR 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.
SECTION 11.14. WAIVER OF JURY TRIAL. THE AGENTS, THE BANKS, THE
GUARANTORS, THE INTERMEDIATE OWNERS 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 BANKS, THE GUARANTORS, THE INTERMEDIATE OWNERS OR THE
BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE BANKS
ENTERING INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT.
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<PAGE>
SECTION 11.15. ENGLISH LANGUAGE.
(a) This Agreement and the other Loan Documents have been negotiated
in English and, other than the Notes, the Chilean Security Agreements, the
AGRI Pledge Agreement, the Bema Bermuda Pledge Agreement and the Notes
Operating Procedure 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 manifest
error, control the meaning and interpretation of the matters set forth
therein.
(b) The unofficial Spanish translation of this Agreement, initialled
for identification by the Chilean counsel to the Obligors referred to in
clause (b) of Section 6.13 and by the Chilean counsel to the Bank Parties
---------- ------------
described in clause (h) of Section 6.13 and, upon delivery thereof as soon
---------- ------------
as practicable following the Effective Date, the official Spanish
translation of this Agreement, as prepared by an official translator of
the Chilean Ministry of Foreign Affairs and approved by Chilean counsel to
the Bank Parties described as aforesaid, shall be the agreed Spanish
translation hereof for all purposes of this Agreement and each other Loan
Document. The parties agree that the Borrower shall as soon as
practicable after the Effective Date procure the translations referred to
in this clause. No Spanish translation of this Agreement (other than as
described in this clause) may be filed in any public registry in Chile or
used for any purpose before any competent court of Chile. The English
language version of this Agreement shall be the original Instrument hereof
and, in case of any conflict in interpretation between the English
language version and the Spanish translation hereof, the English language
version shall control.
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.
COMPANIA MINERA MARICUNGA,
as the Borrower
By:____________________________________
Title:______________________________
Address
for Notices:
Nueva de Lyon 72
Oficina 1801
Santiago
Chile
Facsimile No.: 562-234-1077
Attention: President
with a copy to:
Amax Gold Inc.
9100 East Mineral Circle
Englewood
Colorado 80112
U.S.A.
Facsimile No.: 1-303-643-5507
Telex: 216910
(Answerback: CMCO UR)
Attention: General Manager
AMAX GOLD INC.
as a Guarantor
By:____________________________________
Title:______________________________
Address
for Notices:
9100 East Mineral Circle
Englewood
Colorado 80112
U.S.A.
Facsimile No.: 1-303-643-5507
Telex: 216910
(Answerback: CMCO UR)
Attention: President
BEMA GOLD CORPORATION/1/,
as a Guarantor
By:____________________________________
Title:______________________________
Address
for Notices:
1400-510 Burrard Street
Vancouver, B.C.
V6C 3A8, Canada
Facsimile No.: ______________
Telex: ______________
(Answerback: ______________)
Attention: _______________________
----------
/1/ Complete administrative details (Bema Gold).
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<PAGE>
AMAX GOLD REFUGIO, INC.,
as an Intermediate Owner
By:____________________________________
Title:______________________________
Address
for Notices:
c/o Amax Gold Inc.
9100 East Mineral Circle
Englewood
Colorado 80112
U.S.A.
Facsimile No.: 1-303-643-5507
Telex: 216910
(Answerback: CMCO UR)
Attention: President
BEMA GOLD (BERMUDA) LTD./2/
as an Intermediate Owner
By:____________________________________
Title:______________________________
Address
for Notices:
Clarendon House
P.O. Box HM 666
Church Street
Hamilton HM CX
Bermuda
Facsimile No.: ______________
Telex: ______________
(Answerback: ______________)
Attention: _______________________
Commitment Amount
-----------------
U.S.$17,000,000 per pro N M ROTHSCHILD & SONS LIMITED,
individually as a Bank and as
the Administrative Agent
By:____________________________________
Title:______________________________
By:____________________________________
Title:______________________________
Address
for Notices:
New Court
St. Swithin's Lane
London EC4P 4DU
England
Telex No.: 888031
Facsimile No.: 44-71-280-5139
Attention: Dr. Michael A. Price
Gold Lending
Office: New Court
St. Swithin's Lane
London EC4P 4DU
England
Telex No.: 888031
Facsimile No.: 44-71-280-5139
Attention: Mark Turner
Dollar Lending
Office: Chase Manhattan Bank N.A.
1 Chase Manhattan Plaza
New York, New York
U.S.A.
For the account of:
N M Rothschild & Sons Limited
A/C No.: 001-1-948262
Telex No.: 888031
Facsimile No.: 44-71-280-5139
Attention: Mark Turner/Frankie Petts
----------
/2/ Complete administrative details (Bema Gold).
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<PAGE>
DEUTSCHE BANK AG, New York Branch,
as the Technical Agent
By:____________________________________
Title:______________________________
Address
for Notices:
31 West 52nd Street
New York, NY 10019
U.S.A.
Facsimile No.: 1-212-474-8256
Telex: AT&T 429166
Attention: Gregory J. Moroney
Commitment Amount
-----------------
DEUTSCHE BANK AG, Los Angeles and/or
U.S.$17,000,000 Cayman Islands Branches, individually as
a Bank
By: __________________________
Title:____________________
Address
for Notices:
300 South Grand Ave.
Suite 3950
Los Angeles, CA 90071
U.S.A.
Telex No.: N/A
Facsimile No.: 213-627-9779
Attention: Michael F.G. Pepe (Credit)
Anne F. Norwood
(Operations)
Gold Lending
Office:
Deutsche Bank Sharps Pixley Inc.
31 W. 52nd Street
New York, NY 10019
U.S.A.
Telex No.: AT&T 429166
Facsimile No.: 212-474-6919
Attention: Jeffrey R. Stufsky
Dollar Lending
Office:
Deutsche Bank AG,
Cayman Islands Branch
c/o Deutsche Bank AG,
New York Branch
31 W. 52nd Street
New York, NY 10019
U.S.A.
Commitment Amount
-----------------
CANADIAN IMPERIAL BANK OF COMMERCE
U.S.$17,000,000
By: __________________________
Title:____________________
Address
for Notices:
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
U.S.A.
Facsimile No.: 1-404-319-4950
Attention: Sherry Smith
with a copy to:
200 West Madison Street
Suite 2300
Chicago, IL 60606
U.S.A.
Facsimile No.: 1-312-726-8884
Attention: John W. Kunkle
Gold Lending
Office:
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
U.S.A.
Facsimile No.: 1-404-319-4950
Attention: Sherry Smith
Dollar Lending
Office:
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
U.S.A.
Facsimile No.: 1-404-319-4950
Attention: Sherry Smith
Commitment Amount
-----------------
CREDIT LYONNAIS
U.S.$8,500,000
By: __________________________
Title:____________________
Address
for all Notices:
Department des Financements de
Projets et D'Equipements - DFS
2, Rue Des Italiens
75009 Paris, France
Telex No.: 285 043 F, 285 028 F
Facsimile No.: 33-1-4295-6977
Attention: Bertrand Cousin
Secteur Energie-Mines
Additional Address
for notices relating to payments in Gold:
Credit Lyonnais Rouse Ltd.
Bullion Settlements Department
Broadwalk House
5 Appold Street
London EC2A 2DA
Telex No.: 8950831 CLR
Facsimile No.: 44-71-638-0327
Attention: David Blair
Additional Address
for notices relating to payments in Dollars:
Credit Lyonnais Paris
DFS/DIFAC - MTC - FDC No. 2
1, Rue Des Italiens
75009 Paris, France
Telex No.: 285028F
Facsimile No.: 33-1-4295-2665
Attention: Madame Laniece
Gold Lending
Office:
Credit Lyonnais Rouse Ltd.
- 145 -
<PAGE>
Bullion Settlements Department
Broadwalk House
5 Appold Street
London EC2A 2DA
Telex No.: 8950831 CLR
Facsimile No.: 44-71-638-0327
Attention: David Blair
Dollar Lending
Office:
Credit Lyonnais New York
1301 Avenue of the Americas
New York, NY 10019
Telex No.: __________________________/3/
Facsimile No.: ______________________
Attention: __________________________
Commitment Amount
-----------------
CREDIT LYONNAIS CANADA
U.S.$8,500,000
By: __________________________
Title:____________________
Address
for Notices:
One Financial Place
Suite 2505
One Adelaide St. East
Toronto, Ontario
Canada M5C 2V9
Telex No.: 06-23968
Facsimile No.: 1-416-947-9471
Attention: Michael Manion
Additional Address
for notices relating to payments in Gold:
Credit Lyonnais Rouse Ltd.
Bullion Settlements Department
Broadwalk House
5 Appold Street
London EC2A 2DA
Telex No.: 8950831 CLR
Facsimile No.: 44-71-638-0327
Attention: David Blair
Additional Address
for notices relating to payments in Dollars:
Credit Lyonnais Paris
DFS/DIFAC - MTC - FDC No. 2
1, Rue Des Italiens
75009 Paris, France
Telex No.: 285028F
Facsimile No.: 33-1-4295-2665
Attention: Madame Laniece
Gold Lending
Office:
Credit Lyonnais Rouse Ltd.
----------
/3/ Complete administrative details (Credit Lyonnais).
- 146 -
<PAGE>
Bullion Settlements Department
Broadwalk House
5 Appold Street
London EC2A 2DA
Telex No.: 8950831 CLR
Facsimile No.: 44-71-638-0327
Attention: David Blair
Dollar Lending
Office:
Credit Lyonnais New York
1301 Avenue of the Americas
New York, NY 10019
/4/
Telex No.: __________________________
Facsimile No.: ______________________
Attention: __________________________
Commitment Amount
-----------------
U.S. 17,000,000 INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION
By: ________________________
Title: _____________________
Address
for Notices:
135 East 57th Street
8th Floor
New York, NY 10022-2101
U.S.A.
Facsimile No.: 1-212-832-3616
Attention: Zivia Flomenhaft
with a copy to:
135 East 57th Street
8th Floor
New York, NY 10022-2101
U.S.A.
Facsimile No.: 1-212-832-3616
Attention: John C. Catchpole
Gold Lending
Office:
135 East 57th Street
8th Floor
New York, NY 10022-2101
U.S.A.
Facsimile No.: 1-212-832-3616
Attention: Zivia Flomenhaft
Dollar Lending
Office:
135 East 57th Street
8th Floor
New York, NY 10022-2101
U.S.A.
Facsimile No.: 1-212-832-3616
Attention: Zivia Flomenhaft
----------
/4/ Complete administrative details (Credit Lyonnais).
- 147 -
<PAGE>
EXECUTION COPY
N M ROTHSCHILD & SONS LIMITED
NEW COURT
ST. SWITHIN'S LANE
LONDON EC4P 4DU
ENGLAND
as of February 7, 1995
To: Compania Minera Maricunga
Nueva de Lyon 72
Oficina 1801
Santiago
Chile
and to each of the
Guarantors and the
Intermediate Owners party
to (and as defined in)
the Loan Agreement
referred to below
Re: Loan Agreement, dated as of November 23, 1994 (the "Loan
----
Agreement"), among Compania Minera Maricunga, as the
---------
Borrower, Amax Gold Refugio, Inc. and Bema Gold (Bermuda)
Ltd., as the Intermediate Owners, Amax Gold Inc. and Bema
Gold Corporation, as the Guarantors, the various financial
institutions referred to therein as the Banks, and Deutsche
Bank AG, New York Branch, and N M Rothschild & Sons Limited,
as the Technical Agent and the Administrative Agent,
respectively, for the Banks.
Dear Sirs:
As you are aware, Section 2.1 of the Loan Agreement contemplates that
-----------
on the Borrowing Date the Banks will make Loans to the Borrower in an
aggregate amount equal to the Dollar equivalent of the Base Gold Amount.
Such Dollar equivalent is to be calculated by reference to the London Price
as in effect two Business Days prior to the Borrowing Date. Section 2.2 of
-----------
the Loan Agreement contemplates that the Dollar Loans to be made on the
Borrowing Date will be converted immediately into Gold Loans in an
aggregate principal amount equivalent to the Base Gold Amount.
You have requested that (a) the Dollar equivalent of the Base Gold
Amount for purposes of determining the aggregate principal amount of Dollar
Loans to be advanced on the Borrowing Date be determined as if the price of
U.S. $380 per ounce of Gold (the "Forward Price") was inserted in clause
------
(b) of Section 1.6 of the Loan Agreement, (b) the Base Gold Amount
--- -----------
<PAGE>
be determined as if the Loan Base Price was the Forward Price, and (c)
clause (a) of the definition of "Loan Base Price" be amended to refer to
---------- ---------------
the Forward Price. Subject to:
(x) the submission of the Borrowing Request on or prior to February
10, 1995; and
(y) the sale on the Borrowing Date by each Bank to N M Rothschild &
Sons Limited, pursuant to documentation acceptable to each Bank
in its absolute discretion, of such Bank's Percentage of the Base
Gold Amount (determined as set forth in sub-paragraph (b) above)
-----------------
at a price equal to the Forward Price in the manner set forth in
Schedule A attached hereto (including, without limitation, the
----------
final sentence of the paragraph headed "Borrowing Date - 2
days"),
and subject to the other terms and conditions of this letter agreement, and
as of the date of this letter agreement, the Bank Parties hereby agree to
such requested amendment.
You have requested that the Bank Parties consent to the amendment of
(a) Part B of Item 1 ("Pending Material Approvals") of the Disclosure
------ ------ --------------------------
Schedule by (i) adding the phrase "to providers of insurance policies
outside Chile" after the word "premiums" appearing in the second column of
paragraph 6 thereof, and (ii) deleting paragraph 7 thereof and substituting
the words [INTENTIONALLY LEFT BLANK] therefor, (b) Item 2 ("Mortgaged
------ ---------
Mining Concessions") of the Disclosure Schedule to read in full as set
------------------
forth in Exhibit A attached hereto, (c) Item 3 ("Mortgaged Real Estate") of
--------- ------ ---------------------
the Disclosure Schedule by substituting the number "1,622.41" for the
number "4,000" appearing therein, (d) Item 13 ("Royalty Agreements") of the
------- ------------------
Disclosure Schedule by deleting the footnote thereto, and (e) Exhibits F-1,
------------
H-2, H-4 and H-8 to the Loan Agreement and Exhibit A to the Borrower
--- --- --- ---------
Security Agreement (U.S. Assets) to read in full as set forth in Exhibits
--------
B, C, D, E and F attached hereto, respectively. Upon and subject to the
- - - -
terms and conditions of this letter agreement, and as of the date of this
letter agreement, the Bank Parties hereby agree to such requested
amendments.
You have also requested that the Bank Parties consent to the following
amendments to the Loan Agreement and certain other Loan Documents:
(a) Insertion of a new definition of a term "Builders' Risk Delay
--------------------
Cover" in appropriate alphabetical order in Section 1.1 of the
----- -----------
Loan Agreement reading as set forth below:
"Builders' Risk Delay Cover" means insurance cover for loss
--------------------------
of revenue arising as a result of delay in start up of
production at the Project for the period up until the
Mechanical
-2-
<PAGE>
Completion Date and of the nature described in Appendix I to
----------
the Insurance Summary;
(b) Deletion of the phrase ", the United States Federal National
Mortgage Association or the United States Federal Home Loan
Mortgage Corporation" appearing in the definition of "Cash
----
Equivalent Investment (U.S.)" contained in Section 1.1 of the
---------------------------- -----------
Loan Agreement;
(c) Substitution of the phrase "Construction Contracts" appearing in
the fourth line of the definition of "Construction Contracts
----------------------
Guaranty" contained in Section 1.1 of the Loan Agreement with the
-------- -----------
phrase "Construction Contracts referred to in clauses (b) and (c)
----------- ---
of the definition thereof".
(d) Substitution of the phrase "the Bank Parties' Chilean counsel in
connection with the execution and delivery of this Agreement by
each party thereto" appearing in the definition of "Development
-----------
Plan" contained in Section 1.1 of the Loan Agreement with the
---- -----------
phrase "each Bank by the Borrower under cover of letters, dated
November 22, 1994 and January 31, 1995";
(e) Substitution of the phrase "clause (b)" appearing in the
----------
definition of "Insurance Summary" contained in Section 1.1 of the
----------------- -----------
Loan Agreement with the phrase "clause (a)";
----------
(f) Deletion of the phrase "the Republic of" appearing in the fourth
line of the definition of "Foreign Investment Contract" contained
---------------------------
in Section 1.1 of the Loan Agreement;
-----------
(g) Substitution of the phrase "Final Maturity Date" appearing in
clause (a) of the definition of "Loan Life Ratio" contained in
---------- ---------------
Section 1.1 of the Loan Agreement with the phrase "tenth Payment
-----------
Date" and the making of the appropriate conforming amendment to
the first paragraph of Attachment 2 to the Compliance
------------
Certificate;
(h) Insertion of a new definition of a term "Guarantor PRI Advance"
---------------------
in appropriate alphabetical order in Section 1.1 of the Loan
-----------
Agreement reading as set forth below:
"Guarantor PRI Advance" means, with respect to either
---------------------
Guarantor, the Dollar equivalent (calculated in such manner
as the Administrative Agent shall reasonably determine) of
the aggregate amounts, if any, advanced by such Guarantor to
the Political
-3-
<PAGE>
Risk Banks for payments on the Borrowing Date of any premium
due and owing in connection with any policy of Political
Risk Insurance taken out by any Political Risk Bank;
(i) Amendment in full of the definition of "Non-Core Zone Property
----------------------
Rights Target Acquisition Date" contained in Section 1.1 of the
------------------------------ -----------
Loan Agreement to read as set forth below:
"Non-Core Zone Property Rights Target Acquisition Date"
-----------------------------------------------------
means the date which is three months after the Borrowing
Date;
(j) Substitution of the phrase "Construction Sub-Account (Chile) and
the Proceeds Sub-Account" appearing in the definition of "Project
-------
Account Bank (Chile)" contained in Section 1.1 of the Loan
-------------------- -----------
Agreement with the phrase "Project Accounts";
(k) Substitution of the phrase "Construction Account, the Proceeds
Sub-Account (Debt Service Reserve), the Proceeds Sub-Account
(Debt Service Reserve -Prepayment Proceeds), the Proceeds Sub-
Account (Debt Service Reserve - Stamp Duty) and the Proceeds
Account" appearing in the definition of "Project Account Bank
--------------------
(U.S.)" contained in Section 1.1 of the Loan Agreement with the
------ -----------
phrase "Project Accounts (U.S.)";
(l) Insertion of the phrase "(ii) the Borrower shall have acquired
the Second Level Mining Concessions and the Administrative Agent
shall have received (with a copy for each Bank) the opinion
referred to in the last sentence of Section 8.1.24," before the
--------------
word "and" appearing in the sixth line of the definition of
"Release Date" contained in Section 1.1 of the Loan Agreement and
------------- -----------
the consequential renumbering of clause (a)(ii) of such
--------------
definition as clause (a)(iii);
---------------
(m) Amendment in full of the definition of "Required Guarantor
------------------
Contribution" contained in Section 1.1 of the Loan Agreement to
------------ -----------
read as set forth below:
"Required Guarantor Contribution" means the excess, if any,
-------------------------------
of (a) the sum of (i) U.S.$42,000,000, plus (ii) the excess,
if any, of (x) the total Commitment Amount, less (y) the
Initial Loan Amount less (b) the sum of (i) the aggregate of
all amounts expended by the Borrower in respect of Capital
Expenditures during the period commencing on June 1, 1994
and ending on the Borrowing Date which were reasonably
required to be incurred in order to
-4-
<PAGE>
develop the Refugio Project in accordance with the
Development Plan, plus (ii) free Peso cash balances
maintained by the Borrower as at the Borrowing Date and
deposited into the Construction Sub-Account (Chile) pursuant
to clause (b) of Section 4.1, plus (iii) the Guarantor PRI
---------- -----------
Advances, plus (iv) an amount (not in excess of the Chilean
Peso equivalent of U.S.$295,000) in respect of which Bema
Gold shall have provided evidence to the Administrative
Agent to the effect that such amount has previously been
advanced by Bema Gold to the Borrower and is to be applied
by the Borrower in purchase of certain properties required
for the Project;
(n) Insertion of a new definition of a term "Second Level Mining
-------------------
Concessions" in appropriate alphabetical order in Section 1.1 of
----------- -----------
the Loan Agreement reading as set forth below:
"Second Level Mining Concessions" means second level mining
-------------------------------
concessions ranking immediately after each of those mining
concessions referred to in Item 2 ("Mortgaged Mining
------ ----------------
Concessions") of the Disclosure Schedule;
-----------
(o) Insertion of the phrase "(or either Guarantor on its behalf)"
after the word "Borrower" appearing in the second line of the
final paragraph of Section 3.2.3 of the Loan Agreement and
-------------
insertion of the phrase "(and/or either or both Guarantors)"
after the word "Borrower" appearing in the seventh line of such
paragraph;
(p) Insertion of the phrase "(excluding, however, any such cash
balances relating to any amount of the nature referred to in
clause (b)(iv) of the definition of "Required Guarantor
-------------- ------------------
Contribution")" after the phrase "Borrowing Date" appearing in
------------
the eighth line of clause (b) of Section 4.1;
---------- -----------
(q) Insertion of the phrase ", Bema U.S." after the word "Obligor"
appearing in the line which is three lines from the end of
Section 6.2 of the Loan Agreement;
-----------
(r) Insertion of the phrase "and, in the case of the AGRI Pledge
Agreement and the Bema Bermuda Pledge Agreement, by the Bank
Parties" after the phrase ", as the case may be," appearing in
the fourth line of Section 6.4 of the Loan Agreement;
-----------
(s) Insertion of the phrase "and the Promise to Grant Mortgages Over
Mining Concessions" after the word
-5-
<PAGE>
"Estate" appearing in the second line of clause (b)(viii) of
----------------
Section 6.5 of the Loan Agreement;
-----------
(t) Deletion of the phrase "the 1990 Secured Debentures and" and of
the phrase ", in the case of the 1994 Debentures" contained in
the sixth and seventh lines and on the eight line, respectively,
of Clause (a) of Section 6.6 of the Loan Agreement;
---------- -----------
(u) Amendment of clause (b) of Section 6.6 of the Loan Agreement in
---------- -----------
full to read as set forth below:
"(b) evidence satisfactory to the Administrative Agent that
Bema Gold is under no further payment obligation under the
1990 Secured Debentures.";
(v) Deletion of clause (c) of Section 6.7 of the Loan Agreement;
---------- -----------
(w) Deletion of the final paragraph of Section 6.17 of the Loan
------------
Agreement;
(x) Addition of a new Section 6.20 of the Loan Agreement immediately
------------
following Section 6.19 thereof (and the consequential re-
------------
numbering of the current Section 6.20 as Section 6.21) reading as
------------ ------------
set forth below:
SECTION 6.20. SECOND LEVEL MINING CONCESSIONS. The
Administrative Agent shall have received such evidence as it
shall reasonably request to the effect that the applications
for the Second Level Mining Concessions referred to in the
last paragraph of paragraph 1(b) of the opinion of Carey y
--------------
Cia. Abogados, furnished pursuant to clause (i) of Section
---------- -------
6.13, have been made and are being diligently pursued and
----
that such applications have been made by Mr. Albert Brantley
for the benefit of the Borrower;
(y) Addition of a new Section 7.20 of the Loan Agreement immediately
------------
following Section 7.19 thereof reading as set forth below:
------------
SECTION 7.20. MINING CONCESSIONS. The mining concessions
referred to in sub-paragraph 1(b)(i) through 1(b)(v) of the
--------------------- -------
opinion of Carey y Cia. Abogados, furnished pursuant to
clause (i) of Section 6.13 are located in the Buffer Zone.
---------- ------------
No construction of any plant is scheduled to be made on, and
no access route (whether in respect of road transport, water
access or otherwise) is scheduled to be required across, any
land, property or other Mining Right to which such mining
concessions
-6-
<PAGE>
relate (other than, in the case of the mining concessions
referred to in sub-paragraphs 1(b)(i), (ii), (iv) and (v) of
---------------------------------- ---
such opinion, the construction of the water pipeline, the
access road to the water pipeline, the radio antenna and a
portion (not exceeding forty metres in length) of the leach
pad), in each case as reflected in the Refugio Project Map
or in the Development Plan. None of the matters referred to
in such sub-paragraphs 1(b)(i) through 1(b)(v) have, or are
---------------------- -------
likely to have, a Materially Adverse Effect with respect to
the Borrower;
(z) Substitution of the word "certain" contained in the eleventh line
of clause (b)(i) of Section 8.1.7 with the word "contain";
------------- -------------
(aa) Addition of a new clause (d) to Section 8.1.7 of the Loan
---------- -------------
Agreement immediately following clause (c) thereof and reading as
----------
set forth below:
(d) Notwithstanding anything to the contrary set forth in the
foregoing provisions of this Section it is hereby
acknowledged and agreed by each party hereto that the
Borrower shall not be required to procure Builders' Risk
Delay Cover until March 10, 1995; provided, however, that
-------- -------
the Borrower undertakes to use its best efforts to procure
Builders' Risk Delay Cover on terms and conditions
satisfactory to the Agents and the Insurance Consultant as
soon as possible and in any event on or prior to March 10,
1995; and provided, further, however, that the Borrower
-------- ------- -------
shall be under no obligation to obtain Builders' Risk Delay
Cover at any time in the event that it shall have provided
evidence satisfactory to the Agents and the Insurance
Consultant that the annual premium cost of obtaining such
Builders' Risk Delay Cover will exceed U.S.$500,000.
(ab) Substitution of the phrase "8.1.18 and 8.1.20" appearing in the
------ ------
thirteenth line of Section 8.1 of the Loan Agreement with the
-----------
phrase "8.1.18, 8.1.20 and 8.1.25".
------ ------ ------
(ac) Insertion of the phrase "(or, in the case of AGI, AGRI or Amax
Precious Metals Inc., a Delaware corporation, or, in the case of
Bema Gold, Bema Bermuda)" after the phrase "Bema Gold" appearing
on the fourth line of Section 8.1.10 of the Loan Agreement;
--------------
-7-
<PAGE>
(ad) Addition of new Sections 8.1.24 and 8.1.25 of the Loan Agreement
--------------- ------
immediately following Section 8.1.23 thereof reading as set forth
--------------
below:
SECTION 8.1.24. SECOND LEVEL MINING CONCESSIONS. The
Borrower will ensure that the applications for the Second
Level Mining Concessions referred to in Section 6.20 are
------------
diligently pursued in accordance with applicable principles
of Chilean law (and without limitation of the foregoing will
ensure that such applications do not lapse at any time) and
upon the granting of the Second Level Mining Concessions
will cause the Second Level Mining Concessions to be
formally transferred to the Borrower. The Borrower shall
provide such information with respect to the status of such
applications as the Required Banks shall request from time
to time and, upon the granting and transfer of the Second
Level Mining Concessions as aforesaid, shall provide an
opinion of Chilean counsel satisfactory to the Required
Banks with respect to such issues relating thereto as the
Required Banks shall reasonably require.
SECTION 8.1.25 POLITICAL RISK CAPITAL CONTRIBUTIONS.
Promptly upon reimbursement by any Political Risk Bank to
either Guarantor (pursuant to any arrangements entered into
between such Political Risk Bank and such Guarantor) of any
amount advanced by such Guarantor as a Guarantor PRI
Advance, such Guarantor shall cause the Construction Account
(or, at any time following the Project Completion Date, the
Proceeds Sub-Account (Other Collections)) to be funded with
Capital Contributions to the Borrower and/or Approved
Subordinated Indebtedness in an amount equivalent to the
amount of such reimbursement. Each Guarantor and each
Political Risk Bank will give prompt notice to the
Administrative Agent of the making of any arrangements, and
the making of any reimbursement, referred to in this
Section;
(ae) Addition of a new clause (g) to Section 8.2.2 of the Loan
---------- -------------
Agreement immediately following clause (f) thereof (and the
----------
consequential re-designation of the current clause (g) as clause
---------- ------
(h)) reading as set forth below:
---
(g) Indebtedness to Banco BICE in an aggregate principal
amount not in excess of the Peso equivalent (determined
in such manner as
-8-
<PAGE>
the Administrative Agent shall reasonably select) of
U.S.$1,020,000 incurred in respect of a short term loan
to be advanced by Banco BICE on or prior to the
Borrowing Date in order to fund payment of the stamp
tax referred to in clause (c)(i) of Section 6.1 and to
------------- -----------
be repaid by the Borrower on the Borrowing Date with
the proceeds of the Loans; and
(af) (i) Substitution of the phrase "(and, in the case of a
Calculation Date which is the Project Completion Date or the
Release Date, calculated with respect to the period
commencing on such date and ending on the next succeeding
scheduled Calculation Date which is a Payment Date)"
appearing in clause (a) of Section 8.2.4 of the Loan
---------- -------------
Agreement with the phrase "(and, in the case of a
Calculation Date which is the Project Completion Date or the
Release Date, calculated with respect to the six-month
period ending on the next succeeding scheduled Calculation
Date which is a Payment Date (and, in calculating Future Net
Cash Flow in connection with the determination of the Cash
Flow Ratio for any such period, such calculation shall be
made on the first day of such period and the Dollar
equivalent of any Gold from Production actually sold during
the portion of such period commencing on the first day of
such period and ending on the Project Completion Date or the
Release Date, as the case may be, shall be the amount of
Dollars actually realized from such sale))"; and
(ii) The making of the appropriate conforming amendments to sub-
---
paragraph (af)(i) above to Attachment 1 to the Compliance
----------------- ------------
Certificate;
(ag) Substitution of the phrase "clause (a)(ii)" appearing in the
--------------
final line of Section 9.1.20 of the Loan Agreement with the
--------------
phrase "clause (a)(iii)";
---------------
(ah) Addition of a new Section 7.4 to the AGI Support Agreement
-----------
immediately following Section 7.3 thereof reading as set forth
-----------
below:
SECTION 7.4. DOCLOC SUPPORT AGREEMENT. Negotiations with
respect to the terms and conditions of the DOCLOC Support
Agreement took place predominantly in the State of Colorado
and the DOCLOC Support Agreement was executed by AGI in the
State of Colorado; and
-9-
<PAGE>
(ai) Deletion of references to the Borrower in Paragraph 5 of Exhibit
-------
H-3 to the Loan Agreement.
---
Upon and subject to the terms of this letter agreement, and as of the date
of this letter agreement, the Bank Parties hereby agree to such requested
amendments.
Certain notice details omitted from the signature pages of the Loan
Agreement as originally executed are to be deemed to be incorporated into
such signature pages to the extent such details appear below the signature
of the relevant parties to this letter agreement.
You have also asked that the Bank Parties waive any requirement of
clause (c), (e), or (n) of Section 8.1.1 of the Loan Agreement that any
---------- --- --- -------------
Compliance Certificate, Borrower's Report (Pre-Project Completion) or
Liabilities Certificate, respectively, be provided during the period prior
to the date hereof. Upon and subject to the terms of this letter
agreement, and as of the date of this letter agreement, the Bank Parties
hereby waive such requirements.
Finally, and pursuant to clause (c) of Section 4.2 of the
---------- -----------
Subordination Agreement (CMM), the Administrative Agent hereby notifies you
(and also requests that you notify each of Bema Chile and AGI Chile) of its
request that all promissory notes or other instruments evidencing Junior
Liabilities (as defined in the Subordination Agreement (CMM)), be indorsed
without recourse to the Administrative Agent and be delivered in pledge to
the Administrative Agent, in each case as collateral security for the
Senior Liabilities (as so defined) upon such terms and conditions as the
Administrative Agent may from time to time notify to you.
Terms for which meanings are provided in the Loan Agreement are,
unless otherwise defined in this letter agreement, used in this letter
agreement with such meanings. Except as hereby amended or otherwise varied
the Loan Agreement shall continue in full force and effect and references
in the Loan Agreement and each other Loan Document to the Loan Agreement
shall be to the Loan Agreement as amended hereby. This letter agreement is
a Loan Document and shall be interpreted in accordance with the Loan
Agreement, including Section 1.11 thereof.
------------
-10-
<PAGE>
Please sign this letter agreement in the appropriate spaces indicated
below and return the same to the Administrative Agent as evidence of your
agreement to the terms and conditions hereof.
Yours sincerely,
per pro N M ROTHSCHILD & SONS LIMITED,
individually as a Bank and as the
Administrative Agent
By: _______________________________
Title: _______________________________
By: _______________________________
Title: _______________________________
DEUTSCHE BANK AG, New York Branch, as the
Technical Agent
By: _______________________________
Title: _______________________________
DEUTSCHE BANK AG, Los Angeles and/or Cayman
Islands Branches, individually as a Bank
By: _______________________________
Title: _______________________________
CANADIAN IMPERIAL BANK OF COMMERCE
By: _______________________________
Title: _______________________________
-11-
<PAGE>
CREDIT LYONNAIS
By: _______________________________
Title: _______________________________
Dollar Lending Office:
Telex No.: 62410
Facsimile No.: 1-212-459-3170
CREDIT LYONNAIS CANADA
By: _______________________________
Title: _______________________________
Dollar Lending Office:
Telex No.: 62410
Facsimile No.: 1-212-459-3170
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION
By: _______________________________
Title: _______________________________
ACCEPTED AND AGREED as of
the date first hereinabove
written
COMPANIA MINERA MARICUNGA
By: _______________________________
Title: _______________________________
AMAX GOLD INC.
By: _______________________________
Title: _______________________________
-12-
<PAGE>
BEMA GOLD CORPORATION
By: _______________________________
Title: _______________________________
Facsimile No.: 1-604-681-6209
Attention: Clive Johnson
AMAX GOLD REFUGIO, INC.
By: _______________________________
Title: _______________________________
BEMA GOLD (BERMUDA) LTD.
By: _______________________________
Title: _______________________________
Facsimile No.: 1-809-292-4720
Telex: 3213
(Answerback): CODAN BA
Attention: The Secretary
-13-
<PAGE>
SCHEDULE A
TO
LETTER AGREEMENT
FUNDING MECHANICS
B = Borrowing Date
B-2 = 2 days before Borrowing Date
<TABLE>
<CAPTION>
<S> <C> <C>
Gold Market
-------------------------
Step One (B-2)
----------------------
Banks collectively
borrow in the market
223,684.211 ounces
Banks
-------------------------
Step Two (B-2) Step Three (B)
---------------------- -----------------------------
Banks collectively Rothschild pays CMM
sell 223,684.211 US$85 million
ounces to Rothschild
@ US$380/oz
Rothschild Borrower
as (CMM)
Admin. Agent
-------------------------
Amax Gold Inc.
-------------------------------
Offsetting sales and purchases
of 223,684.211 ounces
@ US$380/oz = US$85mm
--------------------------------
</TABLE>
Please note that as this is a two-day settlement market, the gold sales
contracts will be entered into two days prior to the Borrowing Date (i.e. one
day after the Borrowing Request has been issued) and that the movement of gold
ounces and US Dollars will occur simultaneously on the Borrowing Date.
From a timeline perspective the steps will therefore be as follows:
BORROWING DATE - 3 DAYS - CMM issues Borrowing Request advising of the interest
-----------------------
period selected and the number of ounces attributable to each Bank based on the
fixed drawdown/conversion price.
BORROWING DATE - 2 DAYS - The interest rate will be fixed basis LIBOR-GOFO plus
-----------------------
the margin and advised to each Bank. The Banks each borrow their share of the
gold ounces in the market and sell them to Rothschild for spot settlement (2
days) at the fixed drawdown/conversion price,
<PAGE>
with instructions to pay the proceeds to the CMM Construction Account.
Rothschild will use those ounces to close out the hedge contracts which it has
in place with AGI at the fixed drawdown/conversion price. The obligation of
Rothschild to purchase the gold from the Banks will be conditional upon
performance by AGI of its obligations in respect of such hedge contracts. In
the event that such hedge contracts are not closed out, Rothschild will return
the gold to the Banks without any further obligation to the Banks, the sale of
such gold by the Banks to Rothschild will not take place and the Borrowing will
not occur.
BORROWING DATE
--------------
Rothschild will receive (Loco London) each Bank's share of the gold ounces and
upon receipt will advance the US$85,000,000 to the CMM Construction Account as
Dollar Loans pursuant to the Loan Agreement. Such Dollar Loans will then be
converted as set forth in the second paragraph of Section 2.2 of the Loan
-----------
Agreement into Gold Loans in an aggregate Principal Amount of 223,684.211
ounces.
<PAGE>
EXHIBIT A
TO
LETTER AGREEMENT
Item 2 Mortgaged Mining Concessions (Section 1.1
----------------------------
("Mortgage Over Mining Concessions"))
<TABLE>
<CAPTION>
First Layer
------------------
<S> <C> <C>
Refugio 1 through 112
Maricunga 1 through 40
Maricunga 81 through 100
Maricunga 113 through 167
Maricunga 171 through 177
Maricunga 181 through 187
Maricunga 191 through 197
Maricunga 201
Maricunga 221 through 223
Maricunga 241 through 280
Amparo Uno 45 through 60
Amparo Dos 25 through 26
Amparo Seis 31 through 32
Amparo Once 5 through 30
Amparo Once 35 through 60
Amparo Doce 1 through 36
Anillo Seis 3 through 15
Anillo Seis 18 through 30
Anillo Siete 1 through 5
Anillo Siete 11 through 14
Anillo Ocho 1 through 2
Anillo Ocho 6 through 7
Anillo Ocho 11 through 12
Anillo Ocho 16
Anillo Trece 8 through 10
Anillo Trece 20
Anillo Catorce 1 through 17
Anillo Quince 1 through 2
Anillo Dieciseis 10 through 11
</TABLE>
<PAGE>
EXHIBIT B
TO
LETTER AGREEMENT
EXHIBIT F-1
TO
LOAN AGREEMENT
PROJECT ACCOUNT AGREEMENT (U.S.)
--------------------------------
<PAGE>
EXHIBIT C
TO
LETTER AGREEMENT
EXHIBIT H-2
TO
LOAN AGREEMENT
[LETTERHEAD OF PHILIPPI, YRARRAZAVAL,
PULIDO, LANGLOIS & BRUNNER]
<PAGE>
EXHIBIT D
TO
LETTER AGREEMENT
EXHIBIT H-4
TO
LOAN AGREEMENT
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
<PAGE>
EXHIBIT E
TO
LETTER AGREEMENT
EXHIBIT H-8
TO
LOAN AGREEMENT
[LETTERHEAD OF CAREY Y CIA. ABOGADOS]
<PAGE>
EXHIBIT F
TO
LETTER AGREEMENT
EXHIBIT A-1
TO
BORROWER SECURITY AGREEMENT
(U.S. ASSETS)
FORM OF COUNTERPARTY NOTICE
(AGI AFFILIATE)
<PAGE>
EXHIBIT A-2
TO
BORROWER SECURITY AGREEMENT
(U.S. ASSETS)
FORM OF COUNTERPARTY NOTICE
(BEMA GOLD AFFILIATE)
<PAGE>
EXECUTION COPY
N M ROTHSCHILD & SONS LIMITED
NEW COURT
ST. SWITHIN'S LANE
LONDON EC4P 4DU
ENGLAND
as of February 14, 1995
To: Compania Minera Maricunga
Nueva de Lyon 72
Oficina 1801
Santiago
Chile
and to each of the Guarantors and
the Intermediate Owners party to
(and as defined in) the Loan
Agreement referred to below
Re: Loan Agreement, dated as of November 23, 1994 (as amended by the
letter agreement, dated as of February 7, 1995, the "Loan
----
Agreement"), among Compania Minera Maricunga, as the Borrower,
---------
Amax Gold Refugio, Inc. and Bema Gold (Bermuda) Ltd., as the
Intermediate Owners, Amax Gold Inc. and Bema Gold Corporation, as
the Guarantors, the various financial institutions referred to
therein as the Banks, and Deutsche Bank AG, New York Branch, and
N M Rothschild & Sons Limited, as the Technical Agent and the
Administrative Agent, respectively, for the Banks.
Dear Sirs:
As you are aware, Section 6.9 of the Loan Agreement provides that, as a
-----------
condition precedent to the borrowing of the Loans, the Technical Agent shall
have received certain items of documentation and evidence relating to the terms
and conditions of, and forms of, policies of insurance relating to the Refugio
Project. In addition, the Insurance Summary provides that all policies of
insurance referred to therein be subject to notices of assignment, loss payable
endorsements and undertakings in the forms attached as Appendices 4, 5 and 6 to
------------ - -
the Insurance Summary, respectively. The Technical Agent, the Insurance
Consultant, the Borrower and insurance advisers to Fluor Corporation have spent
considerable time in negotiating to arrive at an insurance package for the
Refugio Project which is acceptable to the Banks. As a result of these
discussions the form of the Insurance Summary has been agreed (although, as set
forth therein, certain of the details of the various coverages remain to be
determined
<PAGE>
to the satisfaction of the Technical Agent (acting in consultation with the
Required Banks)). You have requested that (a) provision of the documentary
conditions precedent contained in Section 6.9 of the Loan Agreement, and (b)
-----------
provision of notices of assignment, loss payable endorsements and undertakings
required to be delivered under the Insurance Summary in connection with
insurance coverage required to be in place on the Borrowing Date be, in each
such case, waived. Subject to:
(i) receipt by the Technical Agent on or prior to the date hereof of a
signed copy of a certificate from the Insurance Consultant in the form
of Exhibit A attached hereto (or such other form as may be agreed to
---------
by the Required Banks); and
(ii) receipt by the Technical Agent on or prior to March 10, 1995 of (x)
evidence to the effect that such matters as remain to be determined
and agreed pursuant to Appendix 1 to the Insurance Summary have been
----------
determined and agreed to the satisfaction of the Agents (acting in
consultation with the Required Banks), (y) the items of documentation
referred to in Section 6.9 of the Loan Agreement (excluding, however,
-----------
the Insurance Consultant's Certificate but including, in place
thereof, an opinion of the Insurance Consultant with respect to the
insurances referred to in the Insurance Summary in form and substance
satisfactory to the Agents (acting in consultation with the Required
Banks)), and (z) notices of assignment, loss payable endorsements and
undertakings of the nature required by the Insurance Summary in
connection with insurances then in effect,
and subject to the other terms and conditions of this letter agreement, and as
of the date of this letter agreement, the Bank Parties hereby agree to such
requested waivers. It is hereby expressly agreed by the parties hereto that
failure to provide the evidence and items of documentation referred to in
paragraph (ii) above on or prior to March 10, 1995 shall constitute an immediate
Event of Default.
You have also requested that the Bank Parties consent to the following
amendments to the Loan Agreement:
(a) Amendment in full of the definition of "Builders' Risk Delay Cover"
--------------------------
contained in Section 1.1 of the Loan Agreement to read as set forth
-----------
below:
"Builders' Risk Delay Cover" means insurance cover for holding
--------------------------
costs arising as a result of delay in start up of production at
the Refugio Project for the period up until the Mechanical
Completion Date and of the nature described in Appendix I to the
----------
Insurance Summary;
-2-
<PAGE>
(b) Amendment in full of the definition of "Guarantor PRI Advance"
---------------------
contained in Section 1.1 of the Loan Agreement to read as set forth
-----------
below:
"Guarantor PRI Advance" means, with respect to either Guarantor,
---------------------
the Dollar equivalent (calculated in such manner as the
Administrative Agent shall reasonably determine) of the aggregate
amounts, if any, advanced by such Guarantor to the Political Risk
Banks (or by the Guarantor to the issuer of the relevant policy
of Political Risk Insurance on behalf of the Political Risk
Banks) for payments on the Borrowing Date of any premium due and
owing in connection with any policy of Political Risk Insurance
taken out by any Political Risk Bank;
(c) Amendment in full of the definition of "Required Guarantor
------------------
Contribution" contained in Section 1.1 of the Loan Agreement to read
------------ -----------
as set forth below:
"Required Guarantor Contribution" means the excess, if any, of
-------------------------------
(a) the sum of (i) U.S.$42,000,000, plus (ii) the excess, if any,
of (x) the total Commitment Amount, less (y) the Initial Loan
Amount less (b) the sum of (i) the aggregate of all amounts
expended by the Borrower in respect of Capital Expenditures
during the period commencing on June 1, 1994 and ending on the
Borrowing Date which were reasonably required to be incurred in
order to develop the Refugio Project in accordance with the
Development Plan, plus (ii) free Peso cash balances maintained by
the Borrower as at the Borrowing Date and deposited into the
Construction Sub-Account (Chile) pursuant to clause (b) of
----------
Section 4.1, plus (iii) the Guarantor PRI Advances, plus (iv) an
-----------
amount (not in excess of the Chilean Peso equivalent of
U.S.$295,180) in respect of which the Borrower shall have
provided evidence to the Administrative Agent to the effect that
such amount has previously been advanced by Bema Bermuda and/or
AGI Chile to the Borrower and is to be applied by the Borrower in
purchase of certain properties required for the Project;
Upon and subject to the terms of this letter agreement, and as of the date
of this letter agreement, the Bank Parties hereby agree to such requested
amendments.
Terms for which meanings are provided in the Loan Agreement are, unless
otherwise defined in this letter agreement, used in this letter agreement with
such meanings. Except as hereby amended or otherwise varied the Loan Agreement
shall continue in full force and effect and references in the Loan Agreement and
-3-
<PAGE>
each other Loan Document to the Loan Agreement shall be to the Loan Agreement as
amended hereby. This letter agreement is a Loan Document and shall be
interpreted in accordance with the Loan Agreement, including Section 1.11
------------
thereof.
Please sign this letter agreement in the appropriate spaces indicated below
and return the same to the Administrative Agent as evidence of your agreement to
the terms and conditions hereof.
Yours sincerely,
per pro N M ROTHSCHILD & SONS LIMITED,
individually as a Bank and as the Administrative
Agent
By: _________________________________
Title: _________________________________
By: _________________________________
Title: _________________________________
DEUTSCHE BANK AG, New York Branch, as the
Technical Agent
By: _________________________________
Title: _________________________________
DEUTSCHE BANK AG, Los Angeles and/or Cayman
Islands Branches, individually as a Bank
By: _________________________________
Title: _________________________________
CANADIAN IMPERIAL BANK OF COMMERCE
By: _________________________________
Title: _________________________________
-4-
<PAGE>
CREDIT LYONNAIS
By: _________________________________
Title: _________________________________
CREDIT LYONNAIS CANADA
By: _________________________________
Title: _________________________________
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION
By: _________________________________
Title: _________________________________
ACCEPTED AND AGREED as of
the date first hereinabove
written
COMPANIA MINERA MARICUNGA
By:________________________
Title:_____________________
AMAX GOLD INC.
By:________________________
Title:_____________________
BEMA GOLD CORPORATION
By:________________________
Title:_____________________
AMAX GOLD REFUGIO, INC.
By:________________________
Title:_____________________
BEMA GOLD (BERMUDA) LTD.
By:________________________
Title:_____________________
-5-
<PAGE>
EXHIBIT A
TO
LETTER AGREEMENT
INSURANCE CONSULTANT'S CERTIFICATE
Deutsche Bank AG, February __, 1995
New York Branch,
as the Technical Agent
under the Loan Agreement
referred to below and each
of the other Bank Parties
now or hereafter party to
such Loan Agreement
c/o Deutsche Bank AG,
New York Branch
31 West 52nd Street
New York, New York 10019
U.S.A.
Attention: Greg Moroney
RE: COMPANIA MINERA MARICUNGA
-------------------------
Dear Sirs:
This Certificate (this "Certificate") is delivered to you pursuant to the
-----------
Letter Agreement, dated as of February 14, 1995 (the "Letter Agreement"), among
----------------
Compania Minera Maricunga (the "Borrower"), Amax Gold Refugio, Inc. and Bema
--------
Gold (Bermuda) Ltd., as the Intermediate Owners, Amax Gold Inc. and Bema Gold
Corporation, as the Guarantors, Canadian Imperial Bank of Commerce, Credit
Lyonnais, Credit Lyonnais Canada, Deutsche Bank AG, Los Angeles and/or Cayman
Islands Branches, Internationale Nederlanden (U.S.) Capital Corporation and N M
Rothschild & Sons Limited, as the Banks, Deutsche Bank AG, New York Branch, as
the Technical Agent for the Banks (the "Technical Agent"), and N M Rothschild &
---------------
Sons Limited, as the Administrative Agent for the Banks. Unless otherwise
defined herein or the context otherwise requires, terms used herein have the
meanings provided in, and shall be interpreted in accordance with, the Letter
Agreement.
The Insurance Consultant acknowledges that the Banks will be making Loans
to the Borrower to finance the Refugio Project in reliance on this Certificate
and the Insurance Summary. The Insurance Consultant has reviewed the Insurance
Summary and is familiar with the insurance requirements stated therein.
Attached to the Insurance Summary as Appendices 1 and 2 is an outline of the
------------ -
principal insurance coverages relating to the
<PAGE>
Refugio Project which, following discussions with the Borrower, Fluor
Corporation and their respective insurance advisers, the Insurance Consultant
understands to have been obtained or applied for. The Insurance Consultant is
of the opinion that the insurance coverages outlined in the Insurance Summary
are reasonable in current market conditions for a project of the size and scope
of the Refugio Project.
The Insurance Consultant has caused this Certificate to be made by its duly
authorized representative this ____ day of February, 1995.
BARTON CONSULTING LIMITED
By: ___________________
Title:_______________
ACCEPTED this ___ day of
February, 1995
DEUTSCHE BANK AG,
New York Branch,
as the Technical Agent
By:______________________
Title:_________________
-2-
<PAGE>
EXECUTION COPY
DOCLOC SUPPORT AGREEMENT
February 14, 1995
N M Rothschild & Sons Limited, as the
Administrative Agent under the Loan
Agreement, dated as of November 23, 1994 and
amended by letter agreements, dated as of
February 7 and 14, 1995 (as so amended, the
"Loan Agreement"), with Compania Minera
--------------
Maricunga, as the Borrower and to the Technical
Agent and each of the Banks under (and as
defined in) such Loan Agreement and to each of
their respective successors and assigns
(including any such successor or assign of the
Administrative Agent)
New Court
St. Swithin's Lane
London, England EC4P 4DU
Amax Gold Inc.
9100 East Mineral Circle
Englewood, Colorado 80112
U.S.A.
Gentlemen:
We understand that, on the date hereof, each of the Banks and the Agents
are entering into a Loan Agreement providing for the making of loans in an
initial aggregate principal amount not to exceed U.S.$85,000,000 or the gold
equivalent thereof, for the purpose of financing the development of the Refugio
gold project in Chile. We further understand that pursuant to the AGI Support
Agreement of even date, Amax Gold Inc. ("AGI") has, inter alia, agreed to
guarantee, on a several basis, the obligations of the Borrower under the Loan
Agreement based upon its percentage ownership interest in the Borrower from time
to time.
As you are aware, Cyprus Amax Minerals Company ("Cyprus Amax") and AGI
have entered into a Revolving Credit Agreement dated April 15, 1994 (the
"Current DOCLOC").
The AGI Support Agreement provides, inter alia, that AGI may discharge
certain of its obligations thereunder by ensuring that a portion of the Current
DOCLOC (or any replacement thereof satisfying the conditions set forth below) in
excess of
<PAGE>
U.S.$25,000,000 shall be available to be drawn by AGI at all times prior to the
Release Date (as defined in the Loan Agreement) in support of AGI's obligations
under certain provisions of the AGI Support Agreement.
Cyprus Amax hereby undertakes that notwithstanding any provisions of the
Current DOCLOC (or, in the case of clause (b), the DOCLOC Replacement) to the
contrary, unless AGI shall be discharging its obligations pursuant to Section
3.2 of the AGI Support Agreement in full through the deposit of cash collateral
and not through the reliance upon the availability of any portion of the Current
DOCLOC (or any Replacement DOCLOC):
(a) if the Release Date has not occurred on or before April 30,
1997, on or before such date it will either extend the expiration date of
the Current DOCLOC to, or at its option will provide a facility of at
least U.S.$35,000,000 (the "DOCLOC Replacement") with a final expiration
date no earlier than, the Release Date (as defined in the Loan Agreement).
The terms and conditions of the DOCLOC Replacement may or may not involve
the issuance of AGI stock and may involve different financial terms and
maturities to those contained in the Current DOCLOC, but otherwise the
DOCLOC Replacement will be made available on substantially similar terms
and conditions to the Current DOCLOC; and
(b) a portion of the Current DOCLOC or the DOCLOC Replacement, in an
amount of not less than U.S.$25,000,000 will be available at all times to
be drawn by AGI prior to the Release Date (as defined in the Loan
Agreement), for the sole purpose of meeting certain of AGI's obligations
under the AGI Support Agreement as set forth therein; provided that
nothing herein shall affect Cyprus Amax's right to exercise the Lender's
Purchase Option as defined in the Current DOCLOC.
For CYPRUS AMAX MINERALS COMPANY
By: ______________________________
Name Printed: ____________________
Title: ___________________________
-2-
<PAGE>
ACKNOWLEDGED AND AGREED as of the
date first hereinabove written:
AMAX GOLD INC.
By: ______________________________
Name Printed: ____________________
Title: ___________________________
per pro N M ROTHSCHILD & SONS LIMITED,
as the Administrative Agent and as a Bank
By: ______________________________
Name Printed: ____________________
Title: ___________________________
By: ______________________________
Name Printed: ____________________
Title: ___________________________
DEUTSCHE BANK AG, New York Branch, as
the Technical Agent
By: ______________________________
Name Printed: ____________________
Title: ___________________________
DEUTSCHE BANK AG, Los Angeles and/or
Cayman Islands branches, individually as a Bank
By: ______________________________
Name Printed: ____________________
Title: ___________________________
-3-
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE
By: ______________________________
Name Printed: ____________________
Title: ___________________________
CREDIT LYONNAIS
By: ______________________________
Name Printed: ____________________
Title: ___________________________
CREDIT LYONNAIS CANADA
By: ______________________________
Name Printed: ____________________
Title: ___________________________
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: ______________________________
Name Printed: ____________________
Title: ___________________________
-4-
<PAGE>
EXECUTION COPY
AGI SUPPORT AGREEMENT
---------------------
THIS SUPPORT AGREEMENT, dated as of February 14, 1995 (this
"Agreement"), between AMAX GOLD INC., a Delaware corporation ("AGI"), and N M
--------- ---
ROTHSCHILD & SONS LIMITED, a company organized and existing under the laws of
England ("Rothschild"), in its capacity as the administrative agent for the Bank
----------
Parties (in such capacity, the "Administrative Agent").
--------------------
W I T N E S S E T H:
WHEREAS, pursuant to a Loan Agreement, dated as of November 23, 1994,
as amended by letter agreements, dated as of February 7, 1995 and February 14,
1995 (as so amended, the "Loan Agreement"), among (1) Compania Minera Maricunga,
--------------
a contractual mining company (sociedad contractual minera) organized and
existing under the laws of Chile (the "Borrower"), (2) Amax Gold Refugio, Inc.,
--------
a Delaware corporation ("AGRI"), and Bema Gold (Bermuda) Ltd., a company
----
organized and existing under the laws of Bermuda, (3) AGI and Bema Gold
Corporation, a company organized and existing under the laws of the Province of
British Colombia ("Bema Gold"), (4) Canadian Imperial Bank of Commerce, Credit
---------
Lyonnais, Credit Lyonnais Canada, Deutsche Bank AG ("Deutsche Bank"), Los
-------------
Angeles and/or Cayman Islands Branches, Internationale Nederlanden (U.S.)
Capital Corporation and Rothschild (collectively, the "Banks"), (5) Deutsche
-----
Bank, New York Branch, as the Technical Agent for the Banks, and (6) Rothschild,
as the Administrative Agent for the Banks, the Banks have extended Commitments
to make Loans to the Borrower;
WHEREAS, AGI owns 100% of the issued and outstanding share capital of
AGRI and AGRI owns 100% of the Class B CMM Shares;
WHEREAS, in consideration of the Banks agreeing to extend the
Commitments to make the Loans to the Borrower under the Loan Agreement, AGI has
agreed to enter into its guarantee and other obligations set forth in this
Agreement; and
WHEREAS, this Agreement is the AGI Support Agreement referred to in
the Loan Agreement, and it is a condition precedent to the obligation of the
Banks to make their Loans that AGI execute and deliver this Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged by AGI, AGI undertakes and agrees, for
the ratable benefit of each Bank Party, as follows:
<PAGE>
ARTICLE 1. DEFINITIONS; INTERPRETATION
---------------------------------------
SECTION 1.1. LOAN AGREEMENT TERMS; INTERPRETATION. Capitalized
terms used but not defined herein (including in the preamble and recitals) have
the meanings provided in the Loan Agreement. This Agreement is a Loan Document,
and shall be interpreted and construed in accordance with the terms and
provisions of the Loan Agreement (including Sections 1.4 and 1.11 thereof).
------------ ----
SECTION 1.2. DEFINED TERMS. In this Agreement (including its
preamble and recitals), the following capitalized terms shall have the following
meanings:
"Account Bank" is defined in clause (a) of Section 3.2.
------------ ---------- -----------
"Adjusted Consolidated Current Assets" means, at any time, the current
------------------------------------
assets of AGI and its consolidated Subsidiaries (including (to the extent
classified as current assets) (a) the aggregate principal amount of the
Available DOCLOC Facility, but excluding (b) the principal amount of the
--- ---------
balances standing to the credit of the Deposit Account and/or the principal
amount of the DOCLOC Refugio Portion, (c) the aggregate principal amount of
Indebtedness outstanding under the Bema Gold/AGI Subordinated Note and under any
Construction Overrun Loan made pursuant to (and defined in) the Shareholders
Agreement, and (d) any Project Asset (including any balance outstanding to the
credit of any Project Account) calculated at such time).
"Adjusted Consolidated Current Liabilities" means, at any time, the
-----------------------------------------
current liabilities of AGI and its consolidated Subsidiaries (excluding (to the
extent classified as a current liability) any portion of any Indebtedness of AGI
and its consolidated Subsidiaries the repayment of which is subject to support,
to the satisfaction of the Administrative Agent, from all or a portion of the
Allocated DOCLOC Facility) calculated at such time.
"Adjusted Consolidated Indebtedness" means, at any time, the excess of
----------------------------------
(a) the aggregate principal amount of Indebtedness of AGI and its consolidated
Subsidiaries of the nature referred to in clauses (a), (b), (c) and (e) of the
----------- --- --- ---
definition of that term (together with any Contingent Liability of AGI or any of
its consolidated Subsidiaries in respect of the foregoing), less (b) the sum of
(i) the aggregate principal amount of the Available DOCLOC Facility, plus (ii)
the aggregate principal amount of the Allocated DOCLOC Facility, in each case
calculated at such time.
"Administrative Agent" is defined in the preamble.
-------------------- --------
"AGI" is defined in the preamble.
--- --------
"Agreement" is defined in the preamble.
--------- --------
- 2 -
<PAGE>
"AGRI" is defined in the first recital.
---- -------------
"Allocated DOCLOC Facility" means, at any time, the principal amount
-------------------------
of that portion of the undrawn DOCLOC Facility (including the DOCLOC Refugio
Portion) which has, at such time, been allocated to the support of the repayment
of Indebtedness of AGI.
"Assigned Agreement Counterparty" means each Person (other than AGI)
-------------------------------
party to the Assigned Agreement.
"Assigned Agreement" means the Refugio Project Agreement; provided,
------------------ --------
however, that for the purposes of clause (a) of Section 7.3 and clauses (a) and
------- ---- ---------- ----------- -----------
(b) of Section 8.4 only, the term "Assigned Agreement" shall, at any time when
--- -----------
AGI shall be satisfying its obligations pursuant to Section 3.2 through the
-----------
option referred to in clause (b) thereof, be deemed to include the DOCLOC
----------
Facility Agreement.
"Assigned Collateral" is defined in Section 6.1.
------------------- -----------
"Assignment" is defined in Section 6.1.
---------- -----------
"Available DOCLOC Facility" means, at any time, the excess of (a) the
-------------------------
principal amount of the DOCLOC Facility which has not been drawn at such time,
less (b) the principal amount of the Allocated DOCLOC Facility at such time.
----
"Banks" is defined in the first recital.
----- -------------
"Bema Gold" is defined in the first recital.
--------- -------------
"Borrower" is defined in the first recital.
-------- -------------
"Cash Collateral" means either Deposit Cash Collateral or DOCLOC
---------------
Termination Cash Collateral, as the case may be (together with, in each such
case, and at any time during the occurrence and continuation of a Default,
interest accrued on the Deposit Cash Collateral or the DOCLOC Termination Cash
Collateral pursuant to the terms and conditions of the Deposit Account
Agreement).
"Collateral" means, as the context may require, any Assigned
----------
Collateral, Deposit Account Collateral or Pledged Collateral.
"Colorado U.C.C." means the Uniform Commercial Code as in effect in
---------------
the State of Colorado.
"Compliance Certificate" means a certificate duly executed by an
----------------------
Authorized Representative of AGI, substantially in the form of Exhibit A
---------
attached hereto.
"Consolidated Net Worth" means, at any time, the net worth of AGI and
----------------------
its consolidated Subsidiaries calculated at such time.
- 3 -
<PAGE>
"Consolidated Working Capital" means, at any time, the excess of (a)
----------------------------
Adjusted Consolidated Current Assets, less (b) Adjusted Consolidated Current
Liabilities, in each case calculated at such time.
"Counterparty Notice" means the duly completed notice from AGI to Bema
-------------------
Gold and accepted by the Administrative Agent, substantially in the form of
Exhibit B attached hereto.
---------
"Deposit Account" is defined in clause (a) of Section 3.2.
--------------- ---------- -----------
"Deposit Account Agreement" means an account agreement among the
-------------------------
Administrative Agent, the Account Bank and AGI, relating to the administration
of the Deposit Account (including the ability to utilize the proceeds thereof to
purchase Cash Equivalent Investments (U.S.) subject to a first priority
perfected Lien in favor of the Bank Parties) and in form and substance
satisfactory to the Bank Parties.
"Deposit Account Collateral" is defined in Section 5.1.
-------------------------- -----------
"Deposit Cash Collateral" is defined in clause (a) of Section 3.2.
----------------------- ---------- -----------
"Deutsche Bank" is defined in the first recital.
------------- -------------
"Distributions" means all stock dividends, liquidating dividends,
-------------
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations and all other distributions (whether similar or dissimilar to the
foregoing) on or with respect to any Pledged Shares or other shares of capital
stock constituting Pledged Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect
---------
to any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"DOCLOC Refugio Portion" is defined in clause (b) of Section 3.2 (and
---------------------- ---------- -----------
shall mean as the same may be varied pursuant to clause (b) of Section 3.3).
---------- -----------
"DOCLOC Termination Cash Collateral" is defined in clause (a) of
---------------------------------- ----------
Section 3.3.
-----------
"Guaranteed Obligations" is defined in clause (a) of Section 2.1.
---------------------- ---------- -----------
"Guaranty" is defined in clause (a) of Section 2.1.
-------- ---------- -----------
"Insolvency Default" means any Default with respect to AGI of the
------------------
nature referred to in Section 9.1.6 of the Loan Agreement.
-------------
- 4 -
<PAGE>
"Loan Agreement" is defined in the first recital.
-------------- -------------
"New York U.C.C." means the Uniform Commercial Code as in effect in
---------------
the State of New York.
"Pledge" is defined in Section 4.1.
------ -----------
"Pledged Collateral" is defined in Section 4.1.
------------------ -----------
"Pledged Note" means any promissory note which is payable to AGI from
------------
the Borrower or AGRI or (to the extent such promissory note relates to the
Refugio Project) AGI Chile.
"Pledged Property" means all Pledged Shares, all Pledged Notes and all
----------------
other pledged shares of capital stock or promissory notes, all other securities,
all assignments of any amounts due or to become due and all other instruments
which are now being delivered by AGI to the Administrative Agent or may from
time to time hereafter be delivered by AGI to the Administrative Agent for the
purposes of the Pledge.
"Pledged Shares" means all shares of the capital stock of AGRI owned
--------------
(legally or beneficially) by AGI from time to time.
"Required Cash Collateral Amount" means, initially, U.S.$25,000,000
-------------------------------
and, subsequently at any time on or after the date when AGI shall have opted to
fulfill its obligations under Section 3.2 by maintaining Cash Collateral
-----------
pursuant to clause (a) thereof as a consequence of the unavailability of the
----------
DOCLOC Facility for any reason (excluding as a consequence of the operation of
Section 3.3), U.S.$35,000,000.
-----------
"Rothschild" is defined in the preamble.
---------- --------
"Secured Obligations" is defined in Section 4.1.
------------------- -----------
"Terminated DOCLOC Portion" is defined in Section 3.3.
------------------------- -----------
ARTICLE 2. GUARANTY
--------------------
SECTION 2.1. GUARANTY OF THE BORROWER'S OBLIGATIONS.
(a) AGI hereby absolutely, unconditionally and irrevocably guarantees
(the "Guaranty"), for the ratable benefit of the Bank Parties, the full
--------
and punctual payment when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise, of all
Obligations of the Borrower to any Bank Party now or hereafter existing
under or in connection with the Loan Agreement and each other Loan
Document to which the Borrower is or may become a party, whether for
principal, interest, fees, expenses, or otherwise (including all such
amounts which would become due but for the operation of the automatic stay
under Section 362(a)
- 5 -
<PAGE>
of the United States Bankruptcy Code, 11 U.S.C. (S)362(a), and the
operation of Sections 502(b) and 506(b) of the United States Bankruptcy
Code, 11 U.S.C. (S)502(b) and (S)506(b) and any other similar provisions
arising under Applicable Law); all such amounts referred to as the
"Guaranteed Obligations") and indemnifies and holds harmless each Bank
-----------------------
Party for any and all costs and expenses (including reasonable attorney's
fees and expenses) incurred by such Bank Party in enforcing any rights
under this Section; provided, however, that the obligation of AGI under
-------- -------
the Guaranty in connection with any Guaranteed Obligation shall not exceed
an amount which is equivalent to AGI's Ownership Percentage (calculated at
the date such Guaranteed Obligation shall have become due and payable) of
such Guaranteed Obligation; and provided, further, however, that (except
-------- ------- -------
with respect to any claim made by any Bank Party under the Guaranty on or
prior to the Release Date and subject to Section 2.3) the Guaranty shall
-----------
terminate, and AGI shall be released from its obligations with respect to
the Guaranty, on the Release Date.
(b) The Guaranty constitutes a guaranty of payment when due and not
of collection, and AGI specifically agrees that it shall not be necessary
or required that any Bank Party exercise any right, assert any claim or
demand or enforce any remedy whatsoever against any Obligor or any other
Person before or as a condition to the obligations of AGI under the
Guaranty.
(c) AGI agrees that the Guaranteed Obligations will be paid strictly
in accordance with the terms of the Loan Agreement and each other Loan
Document under which they arise, regardless of any Applicable Law
affecting any of such terms or the rights of any Bank Party with respect
thereto.
SECTION 2.2. ACCELERATION OF GUARANTY. AGI agrees that, upon
the occurrence of an Insolvency Default at a time when any of the Guaranteed
Obligations may not then be due and payable, AGI will pay to the Administrative
Agent (for the ratable benefit of the Bank Parties) forthwith the full amount
which would be payable under the Guaranty by AGI if all such Guaranteed
Obligations were then due and payable.
SECTION 2.3. REINSTATEMENT. AGI agrees that the Guaranty 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 Guaranteed Obligations is
rescinded or must otherwise be restored by any Bank Party, upon an Insolvency
Default or otherwise, all as though such payment had not been made.
SECTION 2.4. WAIVER. AGI hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and the Guaranty, and any
- 6 -
<PAGE>
requirement that any Bank Party protect, secure, perfect or insure any Lien, or
any property subject thereto, or exhaust any right or take any action against
any Obligor or any other Person (including any other guarantor) or any
collateral (including the Collateral) securing any Guaranteed Obligations.
SECTION 2.5. RELEASE. For the avoidance of doubt, AGI shall not
be under any obligation pursuant to this Article after the Release Date except
to the extent otherwise set forth in this Agreement (including Section 2.3
-----------
thereof).
ARTICLE 3. COST OVERRUNS; CASH COLLATERAL AND DOCLOC FACILITY
--------------------------------------------------------------
SECTION 3.1. COST OVERRUNS. AGI hereby agrees that, if for any
reason and at any time (and from time to time) prior to the Mechanical
Completion Date, the aggregate costs and expenses (whether or not Project Costs
as reflected in the Approved Budget) which are necessary (or which are, at the
beginning of each calendar month, expected to be necessary) to develop and
construct the Mine exceed the Project Costs as reflected in the Approved Budget
(as in effect on the Effective Date), it will immediately contribute (or cause
an Affiliate of AGI to contribute) cash to the Borrower in an amount equal to
such excess in the manner set forth herein. Such cash shall be contributed by
way of contribution to the equity of AGRI (which AGI shall cause AGRI to
contribute to the equity of the Borrower) or shall be advanced to the Borrower
by way of Approved Subordinated Indebtedness. AGI shall deposit any
contribution made by AGI pursuant to the provisions of this Section into the
Construction Account.
SECTION 3.2. CASH DEPOSIT AND DOCLOC FACILITY. AGI agrees that,
at all times prior to the Release Date, it shall, at its option, either:
(a) maintain a cash deposit of an amount of not less than the
Required Cash Collateral Amount (the "Deposit Cash Collateral") in an
-----------------------
account (the "Deposit Account") with The Chase Manhattan Bank N.A. or
---------------
another bank located in New York City acceptable to the Administrative
Agent (the "Account Bank") and ensure that such deposit shall be held as
------------
security for AGI's obligations in respect of the Guaranty as more fully
set forth in Article 5; or
---------
(b) ensure, in a manner (and pursuant to documentation) acceptable to
all the Banks in their absolute discretion that (i) each of the DOCLOC
Facility Agreement and the DOCLOC Support Agreement continues in full
force and effect, (ii) the DOCLOC Facility continues to be available (and,
for the avoidance of doubt, the DOCLOC Facility shall be deemed not to be
available in the event that there shall be any default by Cyprus Amax
thereunder or under the DOCLOC Support Agreement), and (iii) a portion of
the DOCLOC Facility in a principal amount which is at all times in excess
of U.S.$25,000,000
- 7 -
<PAGE>
(the "DOCLOC Refugio Portion") is available to be drawn under the DOCLOC
----------------------
Facility Agreement at all times prior to the Release Date exclusively for
purposes of supporting AGI's obligations in respect of the Guaranty.
AGI further agrees that, at all times prior to the Release Date, it
will ensure that the Allocated DOCLOC Facility is not allocated to the support
of the repayment of any Indebtedness of AGI other than (x) in respect of AGI's
obligations under the Guaranty, and (y) the Indebtedness referred to in clauses
-------
(i) and (ii) of Section 7.05 of the DOCLOC Facility Agreement.
--- ---- ------------
SECTION 3.3. DOCLOC FACILITY CONVERSION. If at any time AGI
shall be satisfying its obligations pursuant to Section 3.2 through the option
-----------
referred to in clause (b) thereof and Cyprus Amax shall elect to purchase common
----------
stock from AGI pursuant to the Lender's Purchase Option (as defined in the
DOCLOC Facility Agreement) and, as a consequence thereof, all or a portion of
the Commitment (as so defined) of Cyprus Amax pursuant to the DOCLOC Facility
Agreement is terminated (such portion, the "Terminated DOCLOC Portion"), then,
-------------------------
with effect from such termination, in place of the option referred to in clause
------
(b) of Section 3.2:
--- -----------
(a) AGI will maintain a cash deposit in U.S. Dollars of not less than
thirty five percent (35%) of the Terminated DOCLOC Portion (the "DOCLOC
------
Termination Cash Collateral") in the Deposit Account with the Account Bank
---------------------------
and ensure that such deposit shall be held as security for AGI's
obligations in respect of the Guaranty as more fully set forth in Article
-------
5; and
-
(b) clause (b) of Section 3.2 shall continue to apply except that the
---------- -----------
DOCLOC Refugio Portion shall be deemed to be reduced to twenty five
percent (25%) of the excess of (i) U.S.$100,000,000, less (ii) the
Terminated DOCLOC Portion.
ARTICLE 4. PLEDGE OF AGRI SHARES AND PROMISSORY NOTES
------------------------------------------------------
SECTION 4.1. PLEDGE AS SECURITY. As security for the full and
punctual payment when due, whether at stated maturity, by required payment,
declaration, acceleration, demand or otherwise of AGI's and the Borrower's
obligations in favor of the Bank Parties under this Agreement, the Loan
Agreement and each other Loan Document to which it is a party (all such
obligations of AGI and the Borrower described in this Section, collectively, the
"Secured Obligations"), AGI hereby pledges, hypothecates, assigns, charges,
-------------------
mortgages, delivers and transfers to the Administrative Agent (for the ratable
benefit of the Bank Parties), and hereby grants to the Administrative Agent (for
the ratable benefit of the Bank Parties) a continuing security interest in, all
of the following property (all collateral described in this Section, the
"Pledged Collateral" and such
-------------------
- 8 -
<PAGE>
pledge, etc., and grant of a continuing security interest, the "Pledge"):
------
(a) all promissory notes of AGRI, AGI Chile or the Borrower
representing AGRI's, AGI Chile's or the Borrower's obligations (in the
case of AGI Chile only, in connection with the Refugio Project), as the
case may be, owing to AGI with respect to any intercompany Indebtedness
(including any Approved Subordinated Indebtedness owing to AGI and any
Indebtedness identified in Item 1 of Schedule 1 attached hereto);
------ ----------
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of the capital stock of AGRI
together with any option or warrant granted in connection therewith;
(d) all other Pledged Shares and all other securities of AGRI
convertible into or exchangeable for Pledged Shares, in each case issued
from time to time;
(e) all other Pledged Property, whether now or hereafter delivered to
the Administrative Agent in connection with this Agreement;
(f) all Dividends, Distributions, interest, cash and other payments,
property and rights received or receivable or distributed with respect to
any Pledged Property;
(g) all certificates representing Pledged Shares and all Instruments
evidencing Pledged Notes; and
(h) all proceeds of any of the foregoing.
SECTION 4.2. DELIVERY OF PLEDGED PROPERTY. All certificates or
instruments representing or evidencing any Pledged Collateral, including all
Pledged Shares and all Pledged Notes, shall be delivered to and held by or on
behalf of (and, in the case of the Pledged Notes, indorsed to the order of) the
Administrative Agent pursuant hereto, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank.
SECTION 4.3. DIVIDENDS. In the event that any Dividend is to be
paid on any Pledged Share or any payment of principal or interest or other
amount is to be made on any Pledged Note (and such payment would then be
permitted to be made by Section 8.2.7 of the Loan Agreement) at a time when no
-------------
Insolvency Default or Enforcement Event has occurred and is continuing, such
Dividend or payment may be paid directly to AGI. If any such Insolvency Default
or Enforcement Event has occurred and is continuing, then any such Dividend or
payment shall be
- 9 -
<PAGE>
paid directly to the Administrative Agent and shall be delivered to the
Administrative Agent and shall, until delivery to the Administrative Agent, be
held by AGI separate and apart from its other property in trust for the
Administrative Agent.
SECTION 4.4. VOTING. Until and unless an Insolvency Default or
an Enforcement Event shall have occurred and be continuing and the
Administrative Agent shall have given the notice referred to in sub-clause
----------
(a)(ii) of Section 10.1, AGI shall have the exclusive voting power with respect
------- ------------
to any shares of capital stock (including any of the Pledged Shares)
constituting Pledged Collateral and the Administrative Agent shall, upon the
written request of AGI, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by AGI which are necessary to allow AGI to
exercise voting power with respect to any such shares of capital stock
(including any of the Pledged Shares); provided, however, that no vote shall be
-------- -------
cast, or consent, waiver or ratification given, or action taken by AGI that
would impair any Pledged Collateral or be inconsistent with or violate any
provision of the Loan Agreement, any other Loan Document (including this
Agreement) or any other Operative Document.
ARTICLE 5. SECURITY OVER DEPOSIT ACCOUNT COLLATERAL
----------------------------------------------------
SECTION 5.1. SECURITY OVER DEPOSIT ACCOUNT COLLATERAL. As
security for the obligations of AGI in respect of the Guaranty, AGI hereby
pledges, hypothecates, assigns, charges, mortgages, delivers and transfers to
the Administrative Agent (for the ratable benefit of each of the Bank Parties),
and hereby grants to the Administrative Agent (for the ratable benefit of each
of the Bank Parties) a continuing security interest in, all of the following
property (all collateral described in this Section, the "Deposit Account
---------------
Collateral"):
----------
(a) all rights and interests of AGI in, to, under and in connection
with the Deposit Account Agreement and the Deposit Account;
(b) all Cash Collateral and other amounts standing to the credit of
the Deposit Account and all certificates and Instruments, if any, from
time to time representing or evidencing the Cash Collateral; and
(c) all interest and other payments and property received or
receivable in connection with, and rights of AGI with respect to, and all
proceeds of any of, the foregoing; provided, however, that so long as no
-------- -------
Default shall have occurred and be continuing, AGI may request that the
Account Bank release to it any interest accrued with respect to the Cash
Collateral from the Deposit Account at which time the Account Bank shall
cause such interest to be released.
- 10 -
<PAGE>
SECTION 5.2. SECURITY OVER DEPOSIT ACCOUNT. As security for the
obligations of the Guarantor in respect of the Guaranty and pursuant to Section
-------
3.1 and without limiting Section 5.1, AGI hereby assigns, pledges, transfers and
--- -----------
sets over to the Administrative Agent (for the ratable benefit of the Bank
Parties) and hereby grants to the Administrative Agent (for the ratable benefit
of the Bank Parties) a possessory Lien in and to the Deposit Account, the Cash
Collateral and all other amounts, certificates and Instruments from time to time
contained in, or otherwise standing to the credit of, the Deposit Account,
including any accrued interest thereon, and all proceeds of any of the
foregoing. The Deposit Account shall be in the name of AGI but under the sole
dominion and control of the Administrative Agent (acting through its sub-agent,
the Account Bank, which shall acknowledge the Lien in favor of the
Administrative Agent on and in connection with the Deposit Account Collateral).
The Account Bank shall agree to operate the Deposit Account in accordance with
the terms, and subject to the conditions, set forth in the Deposit Account
Agreement.
SECTION 5.3. OPERATION OF ARTICLE 5. For the avoidance of doubt
the provisions of this Article shall only be effective when AGI is required to
open and maintain the Deposit Account and maintain Cash Collateral in accordance
with the other terms and conditions of this Agreement.
ARTICLE 6. ASSIGNMENT OF ASSIGNED AGREEMENT
--------------------------------------------
SECTION 6.1. ASSIGNMENT. As security for the Secured
Obligations, AGI hereby assigns (the "Assignment") to the Administrative Agent
----------
(for the ratable benefit of each of the Bank Parties), and hereby grants to the
Administrative Agent (for the ratable benefit of each of the Bank Parties), a
continuing security interest in, all of the AGI's right, title and interest,
whether now existing or hereafter arising or acquired, in and to the Assigned
Agreement, including the following (all collateral described in this Section,
the "Assigned Collateral"):
-------------------
(a) all rights of AGI to receive moneys due and to become due under
or pursuant to the Assigned Agreement;
(b) all rights of AGI to receive proceeds of any insurance,
indemnity, warranty, guaranty or collateral security with respect to the
Assigned Agreement;
(c) all claims of AGI for damages arising out of or for breach of or
default under the Assigned Agreement;
(d) all rights of AGI to terminate the Assigned Agreement, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder; and
(e) to the extent not included in the foregoing, all proceeds of any
and all of the foregoing collateral.
- 11 -
<PAGE>
SECTION 6.2. AGI REMAINS LIABLE. Anything herein to the contrary
notwithstanding:
(a) AGI shall remain liable under the Assigned Agreement to the
extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed;
(b) the exercise by the Administrative Agent of any of its rights
hereunder shall not release AGI from any of its duties or obligations
under the Assigned Agreement; and
(c) neither the Administrative Agent nor any other Bank Party shall
have any obligation or liability under the Assigned Agreement by reason of
this Agreement, nor shall the Administrative Agent or any other Bank Party
be obligated to perform any of the obligations or duties of AGI thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES
------------------------------------------
In order to induce the Bank Parties to enter into the Loan Agreement
and, in the case of the Banks, to make, maintain and convert Loans thereunder,
AGI hereby represents and warrants unto each Bank Party as set forth in this
Article. The representations and warranties of AGI set forth in this Article
shall be made upon the delivery of the Borrowing Request and upon the delivery
of each Continuation/Conversion Notice requesting a conversion from one type of
Loan to another pursuant to the Loan Agreement; provided, however, that AGI
-------- -------
shall not be deemed to make any representation with respect to the Deposit
Account Collateral pursuant to this Article subsequent to the Release Date.
SECTION 7.1. GENERAL REPRESENTATIONS AS TO COLLATERAL.
(a) AGI is the legal and beneficial owner of, and has good title to
(and has full right and authority to pledge and assign and execute a Lien
over) the Pledged Collateral and the Deposit Account Collateral and owns
the Assigned Collateral, in each case free and clear of all Liens, except
any Lien granted pursuant hereto in favor of the Administrative Agent (for
the ratable benefit of the Bank Parties) and Liens arising without the
taking of any affirmative action by AGI and as a result of the application
of any mandatory provision of Applicable Law.
(b) No filing or other action, other than the filing of a financing
statement in the office of the Secretary of State of Colorado with respect
to the Pledge of Pledged Collateral not physically delivered hereunder
(which filing has been duly made), is or will be necessary or
- 12 -
<PAGE>
desirable to perfect or protect the Lien over the Pledged Collateral. All
filings and other actions necessary and desirable (including the filing of
a financing statement in the office of the Secretary of State of Colorado
with respect to the Assigned Collateral and the due execution of the
Counterparty Notice by each relevant party thereto, copies of which shall
have been delivered to the Administrative Agent on or prior to the date
hereof) to perfect and protect the Lien over the Deposit Account
Collateral and the Assigned Collateral have been taken.
(c) No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of the
Administrative Agent relating to this Agreement.
(d) Other than the execution of the Counterparty Notice by each party
thereto with respect to the Assigned Agreement and the filing of the
financing statements described in clause (b), no Approval is required
----------
either for:
(i) the granting by AGI of any Lien over any Collateral pursuant
to this Agreement; or
(ii) the exercise by the Administrative Agent of its rights and
remedies in respect of the Collateral pursuant to this Agreement
(except, with respect to any Pledged Shares, as may be required in
connection with a disposition of such Pledged Shares by laws
affecting the offering and sale of securities generally) or the
voting or other rights in respect of the Pledged Shares provided for
in this Agreement.
(e) Upon the delivery of the Pledged Collateral to the Administrative
Agent, this Agreement will create a valid, perfected, first priority
security interest in all of such Pledged Collateral so delivered, securing
the payment of the obligations stated to be secured thereby. Upon the
filing of the appropriate financing statements and the execution of the
Counterparty Notice, this Agreement will create a valid, perfected, first
priority security interest in all other Collateral, securing the payment
of the obligations stated to be secured thereby.
(f) AGI is in compliance with all Applicable Laws, the non-compliance
with which might materially adversely affect the value of the Collateral
or the worth of the Collateral as collateral security.
- 13 -
<PAGE>
SECTION 7.2. REPRESENTATIONS AS TO PLEDGED COLLATERAL.
(a) All of the Pledged Shares are duly authorized and validly issued,
fully paid and non-assessable, and constitute all of the issued and
outstanding shares of capital stock of AGRI.
(b) All of the Pledged Notes (i) have been duly authorized, executed,
indorsed, issued and delivered, (ii) are the legal, valid and binding
obligations of AGRI, AGI Chile or the Borrower, as the case may be, (iii)
are not in default, and (iv) represent all amounts in respect of
Indebtedness due from AGRI, AGI Chile (with respect to the Refugio Project
only) or the Borrower, as the case may be, to AGI.
SECTION 7.3. REPRESENTATIONS AS TO ASSIGNED COLLATERAL.
(a) The Assigned Agreements, true and complete copies of which have
been furnished to the Administrative Agent prior to its execution of this
Agreement, have been duly authorized, executed and delivered by AGI (and
by any Affiliate of AGI party thereto), have not been amended or otherwise
modified, and are in full force and effect and are binding upon and
enforceable against the parties thereto in accordance with their terms
subject, as to enforceability, to Applicable Laws relating to bankruptcy
and to the enforceability of creditors' rights generally and by the fact
that the availability of equitable remedies is discretionary. AGI has
fully performed all of its obligations under the Assigned Agreements and,
to the best of the knowledge of AGI, the other parties to the Assigned
Agreements have no defense, setoff or counterclaim arising thereunder. To
the best of the knowledge of AGI, there exists no default under any of the
Assigned Agreements by any party thereto.
(b) The place(s) of business and chief executive office of AGI and
the office(s) where AGI keeps its records concerning the Assigned
Collateral are located at the address specified for AGI on the signature
pages hereto. AGI has no trade name. AGI has not been known by any legal
name different from the one set forth on the signature pages hereto, nor
(except as permitted pursuant to the terms and conditions of the Loan
Agreement) has AGI been the subject of any merger or other corporate
reorganization. None of the Assigned Collateral is evidenced by a
promissory note, chattel paper or other instrument.
- 14 -
<PAGE>
ARTICLE 8. COVENANTS
---------------------
AGI agrees with the Administrative Agent that it will perform its
obligations set forth in this Article.
SECTION 8.1. INFORMATIONAL COVENANTS. Until the Release Date
AGI shall furnish within 45 days after the close of each calendar quarter, a
Compliance Certificate calculated as at the close of such calendar quarter.
SECTION 8.2. FINANCIAL COVENANTS. Until the Release Date, AGI
will not permit:
(a) Consolidated Net Worth to be at any time less than U.S.
$180,000,000;
(b) Adjusted Consolidated Indebtedness to exceed at any time 55% of
Consolidated Net Worth; and
(c) Consolidated Working Capital to be at any time less than
U.S.$10,000,000.
SECTION 8.3. COVENANTS AS TO PLEDGED COLLATERAL AND AS TO
DEPOSIT ACCOUNT COLLATERAL. Until the Release Date (in the case of the Deposit
Account Collateral) or, as the case may be, until the Secured Obligations shall
have been paid and performed in full (in the case of the Pledged Collateral),
AGI shall:
(a) not sell, assign, transfer, pledge or encumber in any other
manner the Pledged Collateral or the Deposit Account Collateral (except in
favor of the Administrative Agent hereunder). AGI shall warrant and
defend the right and title herein granted unto the Administrative Agent in
and to the Pledged Collateral and the Deposit Account Collateral (and all
right, title and interest represented by the Pledged Collateral and the
Deposit Account Collateral) against the claims and demands of all Persons
whomsoever. AGI agrees that at any time, and from time to time, at its
expense, it shall promptly execute and deliver all further instruments,
and take all further action, that may be necessary or desirable, or that
the Administrative Agent may reasonably request, in order to perfect and
protect any Lien granted or purported to be granted hereby with respect to
any Pledged Collateral or Deposit Account Collateral or to enable the
Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral or Deposit Account
Collateral.
(b) accompany all Pledged Shares (and all other shares of capital
stock constituting Pledged Collateral) delivered by AGI pursuant to the
Pledge by duly executed undated blank stock powers, or other equivalent
instruments of transfer acceptable to the Administrative Agent. AGI will,
from time to time upon the request of
- 15 -
<PAGE>
the Administrative Agent, promptly deliver to the Administrative Agent
such stock powers, instruments and similar documents, satisfactory in form
and substance to the Administrative Agent, with respect to the Pledged
Collateral as the Administrative Agent may reasonably request and will,
from time to time upon the request of the Administrative Agent after the
occurrence of any Insolvency Default or Enforcement Event, promptly
transfer any Pledged Shares or other shares of common stock constituting
Pledged Collateral into the name of any nominee designated by the
Administrative Agent.
(c) subject to Section 4.3, at all times, keep pledged to the
-----------
Administrative Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Pledged Collateral, all Dividends and
Distributions with respect thereto, all Pledged Notes, all interest,
principal and other proceeds received by the Administrative Agent with
respect to the Pledged Notes, and all other Pledged Collateral and other
securities, instruments, proceeds and rights from time to time received by
or distributable to AGI in respect of any Pledged Collateral.
(d) not, without the prior written consent of the Administrative
Agent:
(i) enter into any agreement amending, supplementing, or waiving
any provision of any Pledged Note (including any underlying
instrument pursuant to which such Pledged Note is issued) or
compromising or releasing or extending the time for payment of any
obligation of the maker thereof; or
(ii) take or omit to take any action the taking or the omission
of which would result in any impairment or alteration of any
obligation of the maker of any Pledged Note or other instrument
constituting Pledged Collateral.
(e) shall cause AGRI not to issue any stock or other securities in
addition to, or in substitution for, the Pledged Shares except to AGI and
shall pledge hereunder such stock or securities immediately upon its
acquisition thereof.
SECTION 8.4. COVENANTS AS TO ASSIGNED COLLATERAL. Until the
Secured Obligations shall have been paid and performed in full, AGI shall at its
expense:
(a) (i) perform and observe all the terms and provisions of the
Assigned Agreements to be performed or observed by it, maintain the
Assigned Agreements in full force and effect, enforce the Assigned
Agreements in accordance with their terms, and take all such action to
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such end as may be from time to time requested by the Administrative
Agent; and
(ii) except to the extent previously or concurrently delivered
by the Borrower pursuant to the Loan Agreement, deliver to the
Administrative Agent promptly upon receipt thereof copies of all
notices, requests and other documents received by AGI under or
pursuant to the Assigned Agreements, and from time to time (x)
deliver to the Administrative Agent such information and reports
regarding the Assigned Collateral as the Administrative Agent may
reasonably request and (y) upon request of the Administrative Agent,
make upon each relevant Assigned Agreement Counterparty such demands
and requests for information and reports or for action as AGI is
entitled to make under the Assigned Agreements.
(b) AGI shall not:
(i) sell, transfer, assign (by operation of law or otherwise) or
otherwise dispose of any of the Assigned Collateral (including the
Assigned Agreements), or create or suffer to exist any Lien upon or
with respect to any of the Assigned Collateral (including the
Assigned Agreements), except for the Lien created by or purported to
be created by the Assignment and Liens arising without the taking of
any affirmative action by AGI and as a result of the application of
any mandatory provision of Applicable Law;
(ii) cancel or terminate the Assigned Agreements or consent to
or accept any cancellation or termination thereof;
(iii) amend or otherwise modify the Assigned Agreements or give
any consent, waiver or approval thereunder;
(iv) waive any default under or breach of the Assigned
Agreements; or
(v) take any other action in connection with the Assigned
Agreements which would impair the value of the interest or rights of
AGI thereunder or which would impair the interest or rights of the
Administrative Agent;
provided, however, that nothing in this clause shall be deemed to be
-------- -------
prohibit any action specifically permitted to be taken in connection with
the DOCLOC Facility Agreement by either Article 3 or the provisions of the
---------
DOCLOC Support Agreement.
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<PAGE>
(c) from time to time, at its expense, promptly execute and deliver
all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Administrative Agent may
request, in order to perfect and protect the Lien granted or purported to
be granted by the Assignment or to enable the Administrative Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Assigned Collateral. Without limiting the generality of the foregoing,
AGI shall:
(i) execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Administrative Agent may
request, in order to perfect and preserve the Lien granted or
purported to be granted by the Assignment; and
(ii) mark conspicuously each original counterpart of the
Assigned Agreement in its possession which evidences any Assigned
Collateral and, at the request of the Administrative Agent, each of
its records pertaining to the Assigned Collateral with a legend, in
form and substance satisfactory to the Administrative Agent,
indicating that the Assigned Agreement has been assigned and are
subject to the Lien granted hereto.
With respect to the foregoing and the grant of the security interest
hereunder, AGI hereby authorizes the Administrative Agent to file one or
more financing or continuation statements, and amendments thereto,
relative to all or any part of the Assigned Collateral without the
signature of AGI where permitted by Applicable Law. A carbon,
photographic or other reproduction of this Agreement or any financing
statement covering the Assigned Collateral or any part thereof shall be
sufficient as a financing statement where permitted by Applicable Law.
(d) AGI shall keep its place(s) of business and chief executive
office and the office(s) where it keeps its records concerning the
Assigned Collateral, and the original copies of the Assigned Agreement at
the location therefor specified in clause (b) of Section 7.3 or, upon 30
---------- -----------
days' prior written notice to the Administrative Agent, at such other
location in a jurisdiction where all action required by clause (c) shall
----------
have been taken with respect to the Assigned Collateral. AGI will hold
and preserve such records and will permit representatives of the
Administrative Agent at any time during normal business hours to inspect
and make abstracts from such records. AGI will not change its name except
upon 30 days' prior written notice to the Administrative Agent.
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ARTICLE 9. RIGHTS AND OBLIGATIONS OF THE ADMINISTRATIVE
--------------------------------------------------------
AGENT WITH RESPECT TO THE COLLATERAL
------------------------------------
SECTION 9.1. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT.
Until the Release Date (in the case of the Deposit Account Collateral) or, as
the case may be, until the Secured Obligations shall have been paid and
performed in full (in the case of the Pledged Collateral and the Assigned
Collateral), AGI hereby irrevocably appoints the Administrative Agent AGI's
attorney-in-fact, with full authority in the place and stead of AGI and in the
name of AGI or otherwise, from time to time in the Administrative Agent's
discretion, to take any action (including any action under the Assigned
Agreement that AGI is entitled to take) and to execute any instrument which the
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under
or in connection with the Collateral;
(b) to receive, indorse and collect any drafts or other instruments
or documents in connection with clause (a);
----------
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem to be necessary or
desirable for the collection thereof or to enforce the rights of the
Administrative Agent with respect to any of the Collateral or to enforce
compliance with the terms and conditions of the Assigned Agreement; and
(d) to perform the affirmative obligations of AGI hereunder
(including all obligations of AGI pursuant to clauses (a) and (c) of
----------- ---
Section 8.4).
-----------
AGI hereby acknowledges, consents and agrees that the power of
attorney granted pursuant to this Section is irrevocable and coupled with an
interest.
SECTION 9.2. ADMINISTRATIVE AGENT MAY PERFORM. If AGI fails to
perform any agreement contained herein, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by AGI
pursuant to Section 10.7.
------------
SECTION 9.3. ADMINISTRATIVE AGENT HAS NO DUTY. In addition to,
and not in limitation of, Section 6.2, the powers conferred on the
-----------
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Bank Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
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possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral and
all rights and interests of AGI in, to, under and in connection with the Deposit
Account, whether or not the Administrative Agent has or is deemed to have
knowledge of such matters, or (b) the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Collateral.
SECTION 9.4. REASONABLE CARE. The Administrative Agent is
required to exercise reasonable care in the custody and preservation of any of
the Collateral in its possession; provided, however, the Administrative Agent
-------- -------
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral, if it takes such action for that purpose
as AGI reasonably requests in writing at times other than upon the occurrence
and during the continuance of any Insolvency Default, Event of Default or
Enforcement Event, as the case may be, but failure of the Administrative Agent
to comply with any such request at any time shall not in itself be deemed a
failure to exercise reasonable care.
SECTION 9.5. PROTECTION OF COLLATERAL. The Administrative Agent
may from time to time, at its option, perform any act which AGI agrees hereunder
to perform and which AGI shall fail to perform after being requested in writing
so to perform (it being understood that no such request need be given after the
occurrence and during the continuance of any Insolvency Default, Event of
Default or Enforcement Event, as the case may be) and the Administrative Agent
may from time to time take any other action which the Administrative Agent
reasonably deems necessary for the maintenance, preservation or protection of
any of the Collateral or of its Lien over such Collateral.
ARTICLE 10. REMEDIES OF THE ADMINISTRATIVE AGENT
-------------------------------------------------
WITH RESPECT TO THE COLLATERAL
------------------------------
SECTION 10.1. CERTAIN REMEDIES WITH RESPECT TO THE PLEDGED
COLLATERAL AND THE DEPOSIT ACCOUNT COLLATERAL.
(a) (i) If any Insolvency Default or Enforcement Event shall have
occurred and be continuing, AGI shall, promptly upon receipt thereof and
without any request therefor by the Administrative Agent, deliver
(properly indorsed where required hereby or requested by the
Administrative Agent) to the Administrative Agent all Dividends,
Distributions, all interest, all principal, all other cash payments and
all proceeds of the Pledged Collateral, all of which shall be held by the
Administrative Agent as additional Pledged Collateral for use in
accordance with Section 10.6; and
------------
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<PAGE>
(ii) after any Insolvency Default or Enforcement Event shall
have occurred and be continuing and the Administrative Agent has notified
AGI of the Administrative Agent's intention to exercise its voting power
under this sub-clause:
(x) the Administrative Agent may exercise (to the
exclusion of AGI but in consultation with the Required
Banks) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other
shares of capital stock constituting Pledged Collateral and
AGI hereby grants the Administrative Agent an irrevocable
proxy, exercisable under such circumstances, to vote the
Pledged Shares and such other Pledged Collateral; and
(y) AGI shall promptly deliver to the Administrative
Agent such additional proxies and other documents as may be
necessary to allow the Administrative Agent to exercise
such voting power.
(b) If any Insolvency Default or Enforcement Event (or, with
respect to any Deposit Account Collateral, any Event of Default) shall
have occurred and be continuing, the Administrative Agent may:
(i) exercise in respect of the Pledged Collateral and the
Deposit Account Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the New York U.C.C.
(whether or not the New York U.C.C. applies to the affected Pledged
Collateral or Deposit Account Collateral) or any other Applicable Law
and also may, without notice except as specified below, sell the
Pledged Collateral or Deposit Account Collateral or any part thereof
in one or more parcels at public or private sale, at the
Administrative Agent's offices or elsewhere, for cash, on credit or
for future delivery and upon such other terms as the Administrative
Agent may deem commercially reasonable. AGI agrees that, to the
extent notice of sale shall be required by Applicable Law, at least
ten days' prior notice to AGI 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. The Administrative Agent shall
not be obligated to make any sale of Pledged Collateral or Deposit
Account Collateral regardless of notice of sale having been given.
The Administrative 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 was so adjourned;
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<PAGE>
(ii) transfer all or part of the Pledged Collateral or the
Deposit Account Collateral into the name of the Administrative Agent
or its nominee, with or without disclosing that such Collateral is
subject to the Lien hereunder;
(iii) notify the parties obligated on any of the Pledged
Collateral or the Deposit Account Collateral to make payment to the
Administrative Agent of any amount due or to become due thereunder;
(iv) enforce collection of any of the Pledged Collateral or the
Deposit Account Collateral by suit or otherwise, and surrender,
release or exchange all or any part thereof, or compromise or extend
or renew for any period (whether or not longer than the original
period) any obligations of any nature of any party with respect
thereto;
(v) indorse any checks, drafts or other writings in AGI's name
to allow collection of the Pledged Collateral or the Deposit Account
Collateral;
(vi) take control of any proceeds of the Pledged Collateral or
the Deposit Account Collateral; and
(vii) execute (in the name, place and stead of AGI)
indorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Pledged
Collateral or the Deposit Account Collateral.
SECTION 10.2. CERTAIN REMEDIES WITH RESPECT TO THE ASSIGNED
COLLATERAL. If any Insolvency Default or Enforcement Event shall have occurred
and be continuing:
(a) the Administrative Agent may exercise in respect of the Assigned
Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured
party on default under the Colorado U.C.C. (whether or not the Colorado
U.C.C. applies to the affected Assigned Collateral) and also may exercise
any and all rights and remedies of AGI under or in connection with the
Assigned Agreement or otherwise in respect of the Assigned Collateral,
including any and all rights of AGI to demand or otherwise require payment
of any amount under, or performance of any provision of, the Assigned
Agreement; and
(b) all payments received by AGI under or in connection with the
Assigned Agreement or otherwise in respect of the Assigned Collateral
shall be received in trust for the benefit of the Administrative Agent,
shall
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<PAGE>
be segregated from other funds of AGI and shall be forthwith paid over to
the Administrative Agent in the same form as so received (with any
necessary indorsement).
SECTION 10.3. CERTAIN REMEDIES WITH RESPECT TO THE DEPOSIT
ACCOUNT. If any Insolvency Default or Enforcement Event shall have occurred and
be continuing, AGI hereby irrevocably authorizes the Administrative Agent,
without notice to any Person other than the Deposit Account Bank, to withdraw
all balances standing to the credit of the Deposit Account and to apply the same
to the obligations secured thereby whether or not then due and owing.
SECTION 10.4. SECURITIES LAWS. If the Administrative Agent shall
determine to exercise its right to sell all or any of the Pledged Collateral or
the Deposit Account Collateral pursuant to Section 10.1, AGI agrees that, upon
------------
request of the Administrative Agent, AGI will, at its own expense:
(a) execute and deliver, and cause each relevant party to execute and
deliver, all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion of
the Administrative Agent, advisable to register such Pledged Collateral
under the provisions of the U.S. Securities Act of 1933 and the securities
laws of any other relevant jurisdiction or qualify for any available
exemption from registration thereunder; and
(b) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Pledged Collateral or the Deposit
Account Collateral or any part thereof valid and binding and in compliance
with Applicable Law.
AGI further acknowledges the impossibility of ascertaining the amount
of damages that would be suffered by the Administrative Agent or the Bank
Parties by reason of the failure by AGI to perform any of the covenants
contained in this Section and, consequently, agrees that, if AGI shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Administrative
Agent) of the Pledged Collateral or Deposit Account Collateral on the date the
Administrative Agent shall demand compliance with this Section.
SECTION 10.5. COMPLIANCE WITH RESTRICTIONS. AGI agrees that in
any sale of any of the Pledged Collateral or Deposit Account Collateral whenever
an Insolvency Default, Event of Default or, as the case may be, Enforcement
Event shall have occurred and be continuing, the Administrative Agent is hereby
authorized to comply with any limitation or restriction in connection with such
sale as it may be advised by counsel is necessary in order to avoid any
violation of Applicable Law (including compliance with such procedures as may
restrict the
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<PAGE>
number of prospective bidders and purchasers, require that such prospective
bidders and purchasers have certain qualifications, and restrict such
prospective bidders and purchasers to Persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of such Pledged Collateral), or in order to obtain
any required approval of the sale or of the purchaser by any Governmental
Agency, and AGI further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Administrative Agent be liable nor accountable
to AGI for any discount allowed by the reason of the fact that such Pledged
Collateral or Deposit Account Collateral is sold in compliance with any such
limitation or restriction.
SECTION 10.6. APPLICATION OF PROCEEDS. All proceeds received by
the Administrative Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral 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 either Agent pursuant to Sections 11.3 and
-------------
11.4 of the Loan Agreement and Section 10.7) in whole or in part by the
---- ------------
Administrative Agent against, all or any part of the Secured Obligations in the
order set forth in Section 5.13 of the Loan Agreement.
------------
SECTION 10.7. INDEMNITY AND EXPENSES. In addition to any similar
obligations contained in this Agreement and each other Loan Document, AGI hereby
indemnifies and holds harmless the Administrative Agent from and against any and
all claims, losses and liabilities arising out of or resulting from this
Agreement (including the enforcement hereof), except claims, losses or
liabilities resulting from the Administrative Agent's gross negligence or wilful
misconduct. Upon demand, AGI will pay to the Administrative Agent the amount of
any and all reasonable expenses, including the reasonable fees and disbursements
of its counsel and of any experts and agents (including the Account Bank), which
the Administrative Agent may incur in connection with:
(a) the administration of this Agreement and each other Loan Document
to which AGI or any of its Affiliates is a party;
(b) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the
Administrative Agent hereunder; or
(d) the failure by AGI to perform or observe any of the provisions
hereof.
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<PAGE>
ARTICLE 11. PROVISIONS OF GENERAL APPLICATION
----------------------------------------------
SECTION 11.1. OBLIGATIONS ABSOLUTE, ETC. Except for those
provisions hereof which are expressed to terminate on the Release Date, this
Agreement shall remain in full force and effect until all Secured Obligations
have been paid in full, all obligations of AGI hereunder shall have been paid in
full and all Commitments shall have terminated. The liability of AGI under this
Agreement shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Loan
Agreement or any other Operative Document;
(b) the failure of any Bank Party:
(i) to assert any claim or demand or to enforce any right or
remedy against any Obligor or any other Person (including any other
guarantor) under the provisions of the Loan Agreement or any other
Operative Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, the Guaranteed Obligations and/or Secured
Obligations;
(c) any change in the time, manner or place of payment or performance
of, or in any other term of, all or any of the Guaranteed Obligations
and/or the Secured Obligations or any other extension, compromise or
renewal of any Guaranteed Obligation and/or Secured Obligation;
(d) any reduction, limitation, impairment or termination of any
Guaranteed Obligations and/or Secured Obligations for any reason,
including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and AGI hereby waives any right
to or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of or any other
event or occurrence affecting, any Obligation of any Obligor or otherwise;
(e) any amendment to, rescission, waiver or other modification of, or
any consent to departure from, any of the terms of the Loan Agreement or
any other Operative Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver
or release or addition to, or consent to departure from, any other
guaranty held by any Bank Party securing any of the Guaranteed Obligations
or the Secured Obligations; or
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<PAGE>
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, any Obligor,
any surety or any guarantor.
AGI agrees that the Guaranty contained in this Agreement is an
"instrument for the payment of money only" within the meaning of Section 3213 of
the New York Civil Practice Law and Rules.
SECTION 11.2. WAIVER OF SUBROGATION. AGI will not exercise any
rights which it may acquire by reason of any payment made hereunder, whether by
way of subrogation, reimbursement or otherwise, until the prior payment, in full
and in cash, of all Secured Obligations. Any amount paid to AGI on account of
any payment made hereunder prior to the payment in full of all Secured
Obligations shall be held in trust for the benefit of the Bank Parties and shall
immediately be paid to the Administrative Agent (for the ratable benefit of the
Bank Parties) and credited and applied against the Guaranteed Obligations and/or
the Secured Obligations, whether matured or unmatured, in accordance with the
terms of the Loan Agreement; provided, however, upon the payment in full of all
-------- -------
Secured Obligations and the termination of all Commitments, AGI and the
Administrative Agent agree that, at AGI's request, the Administrative Agent will
execute and deliver to AGI appropriate documents (without recourse and without
representation or warranty except to the effect that the Administrative Agent
shall not have theretofore transferred or otherwise disposed of any such
interest) necessary to evidence the transfer by subrogation to AGI of an
interest in the Guaranteed Obligations and/or the Secured Obligations resulting
from such payment by AGI. In furtherance of the foregoing, for so long as any
Guaranteed Obligations and/or Secured Obligations or Commitments or any other
commitments of the Banks to the Borrower remain outstanding, AGI shall refrain
from taking any action or commencing any proceeding adverse to the interests of
the Bank Parties against the Borrower or any other Obligor (whether in
connection with a bankruptcy proceeding or otherwise) to recover any amounts in
respect of payments made under this Agreement to the Bank Parties.
SECTION 11.3. RECONVEYANCE OF COLLATERAL. Upon the Release Date,
the Lien over the Deposit Account Collateral shall terminate, and upon the
payment in full of the Secured Obligations and the termination of all
Commitments, the Lien over the Assigned Collateral and the Pledged Collateral
shall terminate and in either case all rights to the relevant Collateral shall
revert to AGI and the Administrative Agent will, at AGI's sole expense, without
any representations, warranties or recourse of any kind whatsoever:
(a) deliver to AGI all certificates and instruments representing or
evidencing all Pledged Shares and all Pledged Notes together with all
other Pledged Collateral held by the Administrative Agent hereunder, and
execute
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<PAGE>
and deliver to AGI such documents as AGI shall reasonably request to
evidence such termination; and
(b) execute and deliver to AGI such documents as AGI shall reasonably
request to evidence the termination of the Lien over the Assigned
Collateral or the Deposit Account Collateral, as the case may be.
ARTICLE 12. MISCELLANEOUS
--------------------------
SECTION 12.1. 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 AGI and the
Administrative Agent (acting with the approval of the Required Banks or all the
Banks, as may be required pursuant to the Loan Agreement).
No failure or delay on the part of the Administrative Agent 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 AGI in any case shall entitle it to
any notice or demand in similar or other circumstances. No waiver or approval
by the Administrative Agent 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.
SECTION 12.2. NOTICES. All notices and other communications
provided to any party hereto under 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 mailed and properly addressed with postage prepaid,
shall be deemed given when received; any notice, 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).
SECTION 12.3. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto (and in the
case of the Administrative Agent, to the ratable benefit of the Bank Parties)
and their respective successors and assigns; provided, however, that:
-------- -------
(a) AGI may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Administrative Agent
and all the Banks; and
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<PAGE>
(b) the rights of sale, assignment and transfer of the
Administrative Agent and the Banks are subject to Article 10 and Section
---------- -------
11.11 of the Loan Agreement.
-----
SECTION 12.4. 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.
SECTION 12.5. 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.
SECTION 12.6. GOVERNING LAW; ENTIRE AGREEMENT.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE LIEN HEREUNDER, OR ANY
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED
BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(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 (including the
Compania Minera Maricunga Summary Indicative Terms and Conditions dated
July 8, 1994).
SECTION 12.7. FORUM SELECTION AND CONSENT TO JURISDICTION, WAIVER
OF INDEMNITY. 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 ADMINISTRATIVE AGENT OR
AGI 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 ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY
MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. AGI 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 JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. SERVICE OF PROCESS MAY BE MADE UPON AGI BY MAILING OR
DELIVERING A COPY OF SUCH PROCESS TO IT IN CARE OF THE PROCESS AGENT AT THE
PROCESS AGENT'S ADDRESS AND AGI HEREBY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN NEW YORK ARISING OUT OF
THIS AGREEMENT
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<PAGE>
BY THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS ADDRESS FOR NOTICES SET
FORTH BELOW ITS SIGNATURE HERETO. AGI 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 AGI HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF 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, AGI
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT.
SECTION 12.8. WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT AND
AGI 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
ADMINISTRATIVE AGENT AND AGI. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
ADMINISTRATIVE AGENT ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the day and year first above written.
AMAX GOLD INC.
By: ___________________________
Title: ______________________
Address for notices:
9100 East Mineral Circle
Englewood
Colorado 80112
USA
Facsimile No.: 1-303-643-5507
Telex No.: 216910
(Answerback CMCO UR)
Attention: President
per pro N M ROTHSCHILD & SONS
LIMITED, in its capacity as
the Administrative Agent
By: ___________________________
Title: ______________________
By: ___________________________
Title: ______________________
Address for notices:
New Court
St. Swithin's Lane
London EC4P 4DU
England
Facsimile No.: 44-71-280-5139
Telex No.: 888031
Attention: Dr. Michael A. Price
<PAGE>
SCHEDULE I
TO
AGI SUPPORT AGREEMENT
Item 1. Pledged Notes
-------------
Issuer Principal Amount of Interest Rate Maturity Date
------ Intercompany Indebtedness ------------- -------------
-------------------------
N/A.
<PAGE>
EXHIBIT A
TO
AGI SUPPORT AGREEMENT
COMPLIANCE CERTIFICATE
[Date]
N M Rothschild & Sons Limited,
as the Administrative Agent
under the Loan Agreement
referred to below and each of
the other Bank Parties from
time to time party to such
Loan Agreement
c/o N M Rothschild & Sons Limited
New Court
St. Swithin's Lane
London EC4P 4DU
England
Attention: Dr. Michael A. Price
RE: AGI SUPPORT AGREEMENT
---------------------
Dear Sirs:
This Compliance Certificate (this "Certificate") is delivered to you
-----------
pursuant to Section 8.1 of the AGI Support Agreement, dated as of February 14,
-----------
1995 (the "AGI Support Agreement"), as executed in connection with a Loan
---------------------
Agreement, dated as of November 23, 1994 and amended by letter agreements,
dated as of February 7, 1995 and February 14, 1995 (as amended, the "Loan
----
Agreement"), among Compania Minera Maricunga, as the Borrower, Amax Gold
---------
Refugio, Inc. and Bema Gold (Bermuda) Ltd., as the Intermediate Owners, Amax
Gold Inc. ("AGI") and Bema Gold Corporation, as the Guarantors, Canadian
---
Imperial Bank of Commerce, Credit Lyonnais, Credit Lyonnais Canada, Deutsche
Bank AG, Los Angeles and/or Cayman Islands Branches, Internationale Nederlanden
(U.S.) Capital Corporation and N M Rothschild & Sons Limited, as the Banks,
Deutsche Bank AG, New York Branch, as the Technical Agent for the Banks, and N
M Rothschild & Sons Limited, as the Administrative Agent for the Banks (the
"Administrative Agent"). Unless otherwise defined herein or the context
---------------------
otherwise requires, terms used herein have the meanings provided in, and shall
be interpreted in accordance with, the AGI Support Agreement.
AGI hereby certifies and warrants to the Administrative Agent and each
other Bank Party that as of the last day of the calendar quarter ending
__________ (such last day, herein the "Compliance Date"):
---------------
(a) Consolidated Net Worth was U.S.$_____________;
- 29 -
<PAGE>
(b) as set forth on Attachment I hereto, the ratio of Adjusted
------------
Consolidated Indebtedness to Consolidated Net Worth (expressed as a
percentage) was __%;
(c) as set forth on Attachment II hereto, Consolidated Working
-------------
Capital was U.S.$______________; and
(d) no Default has occurred and is continuing.
IN WITNESS WHEREOF, AGI has caused this Certificate to be executed and
delivered by its Authorized Representative this day of [ ] , [ ].
AMAX GOLD INC.
By:__________________________
Title:____________________
<PAGE>
ATTACHMENT I
to
__/__/__ Compliance Certificate
RATIO OF ADJUSTED CONSOLIDATED
INDEBTEDNESS TO CONSOLIDATED NET WORTH
--------------------------------------
1. The aggregate principal amount of Indebtedness of AGI and its consolidated
Subsidiaries of the nature referred to in clauses (a), (b), (c) and (e) of
----------- --- --- ---
the definition thereof (together with any Contingent Liability of AGI or
any of its consolidated Subsidiaries in respect of the foregoing) as at
the Compliance Date U.S.$______________
2. The aggregate principal amount of the Available DOCLOC Facility as at the
Compliance Date U.S.$______________
3. The aggregate principal amount of the Allocated DOCLOC Facility as at the
Compliance Date U.S.$______________
4. Item 2 plus Item 3 U.S.$______________
------ ------
5. Item 1 minus Item 4 (Adjusted
------ ------
Consolidated Indebtedness) U.S.$______________
6. Net worth of AGI and its consolidated Subsidiaries, as at the Compliance
Date (Consolidated Net Worth) U.S.$______________
7. Ratio of Item 5 to Item 6 (expressed
------ ------
as a percentage) _______%
<PAGE>
ATTACHMENT II
to
__/__/__ Compliance Certificate
CONSOLIDATED WORKING CAPITAL
----------------------------
1. Current assets of AGI and its consolidated Subsidiaries (including, to the
extent classified as current assets, (a) the aggregate principal amount of
the Available DOCLOC Facility but excluding (b) the principal amount of
--- ---------
the balances standing to the credit of the Deposit Account and/or the
principal amount of the DOCLOC Refugio Portion, (c) the aggregate
principal amount of Indebtedness outstanding under the Bema Gold/AGI
Subordinated Note, and (d) any Project Asset (including any balance
standing to the credit of any Project Account) as at the Compliance Date
(Adjusted Consolidated Current
Assets) U.S.$______________
2. Current liabilities of AGI and its consolidated Subsidiaries (excluding,
to the extent classified as a current liability, any portion of any
Indebtedness of AGI and its consolidated Subsidiaries the repayment of
which is subject to support, to the satisfaction of the Administrative
Agent, from all or a portion of the Allocated DOCLOC Facility) as at the
Compliance Date (Adjusted Consolidated Current
Liabilities) U.S.$______________
3. Item 1 minus Item 2 (Consolidated
Working Capital). U.S.$______________
<PAGE>
EXHIBIT B
TO
AGI SUPPORT AGREEMENT
COUNTERPARTY NOTICE
Bema Gold Corporation February , 1995
1400-510 Burrard Street
Vancouver B.C.
V6C 3A8 Canada
Attention:
RE: AGI SUPPORT AGREEMENT
---------------------
Dear Sirs:
This Counterparty Notice (this "Notice") is delivered to you pursuant
------
to clause (b) of Section 7.1 of the AGI Support Agreement, dated as of
---------- -----------
February 14, 1995 (the "AGI Support Agreement"), between Amax Gold Inc.
---------------------
("AGI") and N M Rothschild & Sons Limited ("Rothschild"), as Administrative
----- ----------
Agent (the "Administrative Agent") delivered pursuant to the Loan
--------------------
Agreement, dated as of November 23, 1994 and amended by letter agreements,
dated as of February 7, 1995 and February 14, 1995 (as so amended, the
"Loan Agreement"), among (1) Compania Minera Maricunga, a contractual
---------------
mining company (sociedad contractual minera) organized and existing under
the laws of Chile, as the Borrower, (2) Amax Gold Refugio, Inc. and Bema
Gold (Bermuda) Ltd., as the Intermediate Owners, (3) AGI and Bema Gold
Corporation, as the Guarantors, (4) Canadian Imperial Bank of Commerce,
Credit Lyonnais, Credit Lyonnais Canada, Deutsche Bank AG ("Deutsche
--------
Bank"), Los Angeles and/or Cayman Islands Branches, Internationale
Nederlanden (U.S.) Capital Corporation and N M Rothschild & Sons Limited,
as the Banks, (5) Deutsche Bank, New York Branch, as the Technical Agent
for the Banks, and (6) N M Rothschild & Sons Limited, as the Administrative
Agent for the Banks. Unless otherwise defined herein or the context
otherwise requires, terms used herein have the meanings provided in, and
shall be interpreted in accordance with, the AGI Support Agreement.
We hereby notify you that we have assigned by way of security our
interest in the Refugio Project Agreement pursuant to the terms of the AGI
Support Agreement. As execution of this Notice is required pursuant to the
AGI Support Agreement, please acknowledge the following in the space
provided below:
1. You consent to the assignment by way of security of our rights,
title and interest in, to, under and in connection with the Refugio Project
Agreement pursuant to the terms of the AGI Support Agreement and, without
limiting the foregoing, to the exercise by the Administrative Agent of any
rights and remedies
- 30 -
<PAGE>
it may have, whether under the AGI Support Agreement, the Loan Agreement
and/or Applicable Law, with respect to the Refugio Project Agreement as so
assigned, following the occurrence of an Insolvency Default and/or an
Enforcement Event.
2. You agree to make any payments due to ourselves under the Refugio
Project Agreement to such account as the Administrative Agent may notify
you in writing from time to time.
3. You agree that you will not exercise any rights of set-off or
counterclaim that you may otherwise have against AGI which may affect your
payment or performance obligations under the Refugio Project Agreement.
4. You agree that upon receipt of a notice in writing from the
Administrative Agent to the effect that an Insolvency Default and/or
Enforcement Event shall have occurred, you will take such actions in
connection with the Refugio Project Agreement as the Administrative Agent
shall direct.
This Notice shall be deemed to be a contract made under and governed
by the internal laws of the State of New York.
AGI has caused this Notice to be executed and delivered by its duly
Authorized Representative this _____ day of February , 1995.
AMAX GOLD INC.
By: ______________________
Title: _________________
Accepted and acknowledged
this ___ day of February 1995
BEMA GOLD CORPORATION
By: ______________________
Title: _________________
Accepted this ___ day
of February 1995
per pro N M ROTHSCHILD & SONS LIMITED,
in its capacity as Administrative Agent
By: ______________________
Title: _________________
By: ______________________
Title: _________________
- 31 -
<PAGE>
EXHIBIT 18
February 17, 1995
To the Board of Directors
of Amax Gold Inc.
We have audited the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 and issued our
report thereon dated February 17, 1995. Note 5 to the consolidated financial
statements describes a changes in the Company's method of accounting for heap
leach ore costs from expensing these costs to inventorying such costs using the
last-in, first-out method. It should be understood that the preferability of
one acceptable method of accounting over another has not been addressed in any
authoritative accounting literature and in arriving at our opinion expressed
below, we have relied on management's business planning and judgment. Based on
our discussions with management and the stated reasons for the change, we
believe that such change represents, in your circumstances, the adoption of a
preferable alternative accounting principle for heap leach ore costs in
conformity with Accounting Principles Board Opinion No. 20.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Denver, Colorado
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF AMAX GOLD INC.
(All 100% owned unless otherwise indicated)
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
------------------ ------------------------------
<S> <C>
AGI Chile Credit Corp., Inc. Delaware
Amax Gold (B.C.) Ltd. British Columbia
Amax Gold de Chile Ltda. Chile
Amax Gold Exploration, Inc. Delaware
Amax Gold Exploration Canada Ltd. Canada
Amax Gold Refugio, Inc. Delaware
Amax Precious Metals, Inc. Delaware
Compania Minera Amax Guanaco* Chile
Compania Minera Maricunga** Chile
Fairbanks Gold Ltd. British Columbia
Fairbanks Gold Mining, Inc. Delaware
Guanaco Mining Company, Inc. Delaware
Haile Mining Company, Inc. Delaware
Lancaster Mining Company, Inc. Delaware
Lassen Gold Mining, Inc. Delaware
Luning Gold Inc. Nevada
Melba Creek Mining, Inc. Alaska
Nevada Gold Mining, Inc. Delaware
Wind Mountain Mining, Inc. Delaware
</TABLE>
--------
* 90% ownership.
** 50% ownership.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 33-36612 and
33-53963), Form S-4 (Nos. 33-43383 and 33-43076) and Form S-8 (Nos. 33-53665 and
33-54553) of Amax Gold Inc. of our report dated February 17, 1995, appearing on
page 24 of this Form 10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Denver, Colorado
March 29, 1995
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus constituting
part of the Registration Statements on Form S-3 (Nos. 33-36612 and 33-53963),
Form S-4 (Nos. 33-43383 and 33-43076) and Form S-8 (Nos. 33-53665 and 33-54553)
of Amax Gold Inc. of our report dated February 4, 1994 except for Note 8 for
which the date is March 18, 1994, on our audits of the consolidated financial
statements of Amax Gold Inc. as of December 31, 1993 and for the years ended
December 31, 1993 and 1992 which report is included in this Annual Report on
Form 10-K.
/s/ COOPERS & LYBRAND LLP
COOPERS & LYBRAND L.L.P.
Denver, Colorado
March 29, 1995
<PAGE>
[LETTERHEAD OF MINERAL RESOURCES DEVELOPMENT, INC. APPEARS HERE]
Exhibit 23.3
March 27, 1995
Amax Gold Inc.
9100 East Mineral Circle
Englewood, Colorado 80112
RE: FORT KNOX AND REFUGIO GOLD PROJECTS RESERVE STUDIES
-------------------------------------------------------
Ladies and Gentlemen:
We hereby authorize the reference to the following described reports prepared by
Mineral Resources Development, Inc., in the Annual Report on Form 10-K of Amax
Gold, Inc., (File No. 1-9620), to be filed with the United States Securities and
Exchange Commission:
1. 1994 Reserve audit for Hayden Hill and Sleeper Mines, dated February 1995,
prepared for Amax Gold Inc.
2. Fort Knox Gold Project, Fairbanks, Alaska, 1992 Reserve Update, dated
December 14, 1992, prepared for Fairbanks Gold Mining, Inc., and
3. Verde Gold Deposit, Refugio Property, Northern Chile, Revised Feasibility
Study, dated December 1992, prepared for Compania Minera Maricunga.
We also confirm that we have read the descriptions of the Sleeper Mine ore
reserves, the Hayden Hill Mine ore reserves, the Fort Knox Project ore reserves
and the Refugio Project ore reserves as contained in the Annual Report on Form
10-K, and have no reason to believe that there is any misrepresentation in the
information contained therein that is derived from our reports or known to us as
a result of services we performed in connection with the preparation of such
reports.
Sincerely,
MINERAL RESOURCES DEVELOPMENT, INC.
/s/ ANTHONY J. BROWN
By: Anthony J. Brown
Title: Vice President, Process Engineering
<PAGE>
[LETTERHEAD OF DMBW, INC. APPEARS HERE]
Exhibit 23.4
March 27, 1995
Amax Gold Inc.
9100 East Mineral Circle
Englewood, CO 80112
RE: Haile Project Reserve Study
Ladies and Gentlemen:
We hereby authorize the reference to the following described report prepared by
DMBW, Inc. (Derry, Michener, Booth & Wahl) ("DMBW") in an Annual Report on Form
10-K to be filed by Amax Gold Inc. ("AGI") (File No. 1-9620), with the
Securities and Exchange Commission ("SEC"):
1. Audit of April 1, 1994 Ore Reserves at the Haile Mine, dated April 22, 1994,
prepared for Amax Gold, Inc.
We also confirm that we have had read the description of the Haile Project ore
reserves as contained in the Annual Report and have no reason to believe that
there is any misrepresentation in the information contained on Form 10-K, which
is derived from our report, or known to us as a result of services we performed
in connection with the preparation of such report.
Sincerely,
DMBW, Inc.
[Derry, Michener, Booth & Wahl]
/s/ I. S. PARRISH
By: I. S. Parrish
Title: President/Economic Geologist
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 36700
<SECURITIES> 0
<RECEIVABLES> 400
<ALLOWANCES> 0
<INVENTORY> 28600
<CURRENT-ASSETS> 72700
<PP&E> 559600
<DEPRECIATION> (246300)
<TOTAL-ASSETS> 403200
<CURRENT-LIABILITIES> 45600
<BONDS> 0
<COMMON> 800
0
1800
<OTHER-SE> 242900
<TOTAL-LIABILITY-AND-EQUITY> 403200
<SALES> 94600
<TOTAL-REVENUES> 94600
<CGS> 79000
<TOTAL-COSTS> 111200
<OTHER-EXPENSES> 5100
<LOSS-PROVISION> 21100
<INTEREST-EXPENSE> 6800<F1>
<INCOME-PRETAX> (49600)
<INCOME-TAX> 6600
<INCOME-CONTINUING> (43000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 7500
<NET-INCOME> (35500)
<EPS-PRIMARY> (0.47)
<EPS-DILUTED> 0
<FN>
<F1>Net of interest income of $2,100
</FN>
</TABLE>
