SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ________ to
-----------
Commission file number: 0-16484
Getchell Gold Corporation
(Exact name of Registrant as specified in its charter)
Delaware 64-0748908
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5460 South Quebec Street
Suite 240
Englewood, Colorado 80111
(Address of principal executive offices) (Zip code)
(303) 771-9000
(Registrant's telephone number including area code)
Not applicable
(Former name, former address, and former fiscal year, if changed since last
report)
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 ____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ No ____
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Title Outstanding
Common Stock, par value $0.0001 26,783,991 on October 31, 1997
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GETCHELL GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- ----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $17,587 $17,020 $51,124 $48,868
Cost of sales 21,661 20,592 63,198 55,606
------- ------- ------- -------
Gross loss 4,074 3,572 12,074 6,738
General and administrative expenses 1,292 870 5,055 3,310
Exploration expenses 397 606 1,393 2,189
------- ------- ------- -------
Loss from operations 5,763 5,048 18,522 12,237
Interest expense, net of capitalized interest (204) (436) (646) (970)
Interest and other income 1,065 1,266 3,203 4,365
------- ------- ------- -------
Loss before income taxes 4,902 4,218 15,965 8,842
Income tax benefit - - - 870
------- ------- ------- -------
Net loss $ 4,902 $ 4,218 $15,965 $ 7,972
======= ======= ======= =======
Loss per common share $ 0.18 $ 0.16 $ 0.60 $ 0.31
======= ======= ======= =======
Weighted average number of shares outstanding 26,779 25,743 26,499 25,718
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
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GETCHELL GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GETCHELL GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 62,862 $ 64,130
Accounts receivable:
Trade 2,944 2,478
Employee 196 171
Other 200 315
-------- --------
Total accounts receivable 3,340 2,964
-------- --------
Inventories:
Ore and ore in process 2,599 1,816
Materials and supplies 9,806 8,676
-------- --------
Total inventories 12,405 10,492
-------- --------
Deferred hedging gains, net - 362
Prepaid expenses 792 1,098
-------- --------
Total current assets 79,399 79,046
Property, plant and equipment, net 166,685 129,762
Other 201 -
-------- --------
Total assets $246,285 $208,808
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,076 $ 8,378
Accrued expenses 2,019 1,740
Current portion of capital lease obligations 2,130 1,753
Stock Appreciation Rights liability 2,492 -
Other 237 -
-------- --------
Total current liabilities 17,954 11,871
Long-term debt 26,187 25,336
Capital lease obligations, less current installments 7,305 9,092
Deferred income taxes 7,741 7,741
Reclamation liabilities 2,701 2,694
Other liabilities 1,200 852
-------- --------
Total liabilities 63,088 57,586
-------- --------
Stockholders' equity:
Preferred stock, par value $0.0001; 10,000,000 shares authorized; none issued - -
Common stock, par value $0.0001; 100,000,000 shares authorized; issued and
outstanding 26,779,151 at September 30, 1997 and 25,765,871 at Dec. 31, 1996 3 3
Contributed and paid-in capital 220,820 172,879
Accumulated deficit (37,626) (21,660)
-------- --------
Total stockholders' equity 183,197 151,222
-------- --------
Total liabilities and stockholders' equity $246,285 $208,808
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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GETCHELL GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(15,965) $ (7,972)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 7,820 6,729
Accrued interest converted to loan principal 772 -
Deferred income taxes -- (870)
Deferred hedging gain, net 362 767
Other 237 12
Net change in operating assets and liabilities:
Accounts receivable (375) 1,475
Inventories (1,912) 70
Prepaid expenses 305 (220)
Accounts payable (885) 929
Accrued expenses 280 (94)
Stock Appreciation Rights liability 2,492 -
Other liabilities 355 2,047
-------- --------
Cash provided by (used in) operating activities (6,514) 2,873
-------- --------
Cash flows from investing activities-
Additions to property, plant and mine development (41,070) (36,076)
Other -- 9
-------- --------
Cash used in operating activities (41,070) (36,067)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock 47,726 893
Proceeds from long-term debt -- 31
Principal payments under capital lease obligation (1,410) (1,151)
-------- -------
Cash provided by (used in) financing activities 46,316 (227)
-------- -------
Net decrease in cash and cash equivalents (1,268) (33,421)
Cash and cash equivalents at beginning of period 64,130 114,633
-------- --------
Cash and cash equivalents at end of period $ 62,862 $ 81,212
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
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GETCHELL GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
The financial statements included herein are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and Securities and Exchange Commission regulations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.
In the opinion of management, the financial statements reflect all
adjustments of a normal and recurring nature which are necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods. These financial statements should be read in conjunction with
the Annual Report of Getchell Gold Corporation (the "Company") on Form 10-K for
the year ended December 31, 1996.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(2) EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"), which specifies the computation, presentation and disclosure requirements
for earnings per share. SFAS 128 is effective for periods ending after December
15, 1997 and requires retroactive restatement of earnings per share in prior
periods. The statement replaces the calculation of "primary earnings per share"
with "basic earnings per share" and redefines the "dilutive earnings per share"
computation. Had earnings per share been determined in accordance with SFAS 128
for the three and nine months ended September 30, 1997, the Company's reported
loss per common share would not have been affected.
(3) DEBT AND EQUITY
In March 1997, the Company completed an equity offering of 1,000,000
common shares which resulted in net proceeds to the Company of $47.7 million
after offering costs and expenses of $2.3 million. Net proceeds of the offering
will be used for the continued development of the Turquoise Ridge mine, for
exploration on the Getchell property and for general corporate purposes.
In July 1997, the Company's S-3 shelf registration statement for up to
$300 million in securities was declared effective by the Securities and Exchange
Commission. In September 1997, the Company entered into a three year, $25
million revolving line of credit with the Canadian Imperial Bank of Commerce.
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GETCHELL GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company plans on financing capital development projects and its
operations from its existing cash and cash equivalents. Any shortfalls in funds
required to meet these needs may be supplemented by additional funds raised
through borrowings or securities offerings.
(4) HEDGING AND OTHER PRECIOUS METAL CONTRACT COMMITMENTS
Precious metal contracts consist of spot deferred and European call
option contracts. The Company uses spot deferred contracts to protect earnings
and cash flows from the impact of short-term drops in gold price. Risk of loss
on the spot deferred contracts arises from the possible inability of the
counterparty to fulfill its obligations under the contracts and from the
Company's potential ability to deliver gold, although nonperformance by any
party to the contracts is not anticipated.
At September 30, 1997, the Company had outstanding spot deferred
contracts for 100,000 ounces at an average price of $371 per ounce including
estimated future contango. Of these contracts, 60,000 ounces were for delivery
in 1998 at a price of $385 per ounce and 40,000 ounces were for delivery in 1999
at a weighted average price of $350 per ounce including estimated future
contango. Based on the market price of gold at September 30, 1997, the
unrealized gains on the spot deferred contracts were approximately $3.1 million.
Recognition of premiums received for call options sold are deferred
until the option expires or the related transaction occurs at which time the
deferred amounts are recognized in income. Risk of loss on European call option
contracts exists if the market price were to exceed the exercise price of the
option on the date designated in the contract. At September 30, 1997, the
Company had outstanding European call option contracts for 70,000 ounces of gold
at a weighted average price of $352 per ounce that expire in 1997, 20,000 ounces
of gold at a price of $345 per ounce that expire in 1998 and 60,000 ounces of
gold at a price of $400 per ounce that expire in 1999.
Page 6
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GETCHELL GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) PROPERTY, PLANT AND EQUIPMENT (In thousands)
At At
September December
30, 1997 31, 1996
-------- --------
Land and land improvements $ 9,753 $ 9,524
Buildings and equipment 118,988 115,550
Mine development 55,412 38,757
Construction-in-progress 73,423 48,916
-------- --------
Total property, plant and equipment 257,576 212,747
Accumulated depreciation, depletion and amortization (90,891) (82,985)
-------- --------
Net property, plant and equipment $166,685 $129,762
======== ========
Depreciation and depletion expense was $2.8 million and $2.5 million
for the three months ended September 30, 1997 and 1996, respectively, and $7.8
million and $6.7 million for the nine months ended September 30, 1997 and 1996,
respectively.
Capitalized interest was $0.4 million for both of the three months
ended September 30, 1997 and 1996, and $1.2 million and $1.0 million for the
nine months ended September 30, 1997 and 1996, respectively.
(6) EMPLOYEE BENEFITS
On February 14, 1997, the Compensation, Human Resource and Director
Affairs Committee of the Board of Directors of the Company granted stock
appreciation rights ("SARS") under the Company's 1996 Long Term Equity Incentive
Plan with respect to 75,983 shares at a weighted average option price of $8.32
per share to certain executives and other employees of the Company, as detailed
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996. Compensation with respect to SARS is accounted for on a variable basis and
is "marked to market" at the end of each fiscal quarter based on the market
price of the Company's Common Stock. Based on the $41 market price of the
Company's Common Stock at September 30, 1997, the Company recognized
compensation expense of $2.5 million, or $0.09 per share, in the nine months
ended September 30, 1997. Of the $2.5 million, $1.6 million was charged to
general and administrative expenses, $0.6 million was charged to cost of sales
and $0.3 million was charged to exploration. The Company's future quarterly
results will reflect only compensation expense or income with respect to these
SARS based on the change in the market price of the Common Stock as compared to
the market price at the end
Page 7
<PAGE>
GETCHELL GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the preceding quarter. The Company recognized compensation expense of $0.4
million in the third quarter of 1997 related to the SARS based on the change in
the market price of the Company's Common Stock at September 30, 1997 from June
30, 1997.
(7) SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities includes the following cash
payments (in thousands):
Nine Months Ended
September 30,
---------------
1997 1996
------ ------
Interest, net of amounts capitalized $(588) $(364)
Income taxes paid $ - $ -
Capital lease obligations of $7.2 million were incurred to acquire
equipment during the nine months ended September 30, 1996.
(8) COMMITMENTS AND CONTINGENCIES Environmental Obligations
The Company's mining and exploration activities are subject to various
federal and state laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and are
generally becoming more restrictive. The Company conducts its operations so as
to protect the public health and environment and believes its operations are in
compliance with all applicable laws and regulations. The Company has made, and
expects to make in the future, expenditures to comply with such laws and
regulations. The Company cannot predict such future expenditures.
Internal Revenue Service Tax Claim
In October 1996 and September 1997, the Internal Revenue Service
("IRS") filed notices of deficiencies, stating that the IRS is proceeding
against the Company's former Parent Company, ChemFirst Inc. ("ChemFirst") and,
thus the Company (see Note 7 to Item 8 "Financial Statements and Supplementary
Data" as found in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 regarding the Amended Tax Sharing Agreement between ChemFirst
and the Company), for income taxes associated with ChemFirst's consolidated
income tax returns filed in 1989, 1990, 1991 and 1992. The Company's share of
the asserted deficiency, including interest, totals approximately $4.5 million.
In response, ChemFirst and the Company filed a petition with the United States
Tax Court in December 1996. The Company believes it has adequately reserved for
this tax matter.
Page 8
<PAGE>
GETCHELL GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Major Contracts
The Company has an agreement with an independent contractor who
provides oxygen for the autoclave process in the mill. The agreement requires,
among other things, that the Company must pay the independent contractor at a
rate (subject to future adjustments for inflation) of approximately $0.2 million
a month. The Company is also obligated to pay a termination fee if the contract
were to be terminated prior to January 2004. The termination fee is $2.8 million
in 1997 and decreases each year until reaching $0.4 million in 2004.
Royalties
The Company is obligated to pay a 2% royalty on net smelter returns of
the current mineral production from certain of its mining properties. Royalties,
recorded as operating costs, amounted to $0.2 million and $0.3 million in the
three months ended September 30, 1997 and 1996, respectively, and $0.8 million
and $1.1 million in the nine months ended September 30, 1997 and 1996,
respectively.
Letter of Credit
At December 31, 1996, a $1.0 million unsecured letter of credit was
outstanding for bonding of a reclamation plan. In January 1997, this letter of
credit was increased to $4.5 million. This letter of credit reflects fair value
as a condition of its underlying purpose and is subject to fees competitively
determined in the market place.
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The information set forth in this discussion and analysis includes both
historical information and "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and is subject
to the safe harbor created by that section. To the extent that this report
contains forward-looking statements regarding the financial condition, operating
results, business prospects or any other operations of the Company, the
Company's actual financial condition, operating results and business prospects
may differ materially from that projected or estimated by the Company in such
forward-looking statements. Factors that realistically could cause results to
differ materially from those projected in the forward-looking statements are set
forth in "Risk Factors" below.
Results of Operations
Results for the quarter ended September 30, 1997 were a loss of $4.9
million, or $0.18 per share, versus a loss of $4.2 million, or $0.16 per share,
for the same quarter of 1996. Results for the nine months ended September 30,
1997 were a loss of $16.0 million, or $0.60 per share, compared with a loss of
$8.0 million, or $0.31 per share, in the same period of 1996. Although the
Company reported increased production, lower realized gold prices and higher
costs resulted in an increased loss in the 1997 third quarter and first nine
months as compared to the same periods in 1996. The following table highlights
sales and production information for the three and nine month periods ended
September 30, 1997 and 1996:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1997 1996 1997 1996
-------- -------- ------- -------
Ounces of gold sold 49,280 42,423 135,271 123,442
Average realized price per ounce $357 $401 $378 $396
Average market price per ounce $325 $385 $337 $391
Cash cost per ounce $383 $427 $408 $395
Total cost per ounce $440 $485 $467 $450
Ore milled (dry tons) 281,495 261,059 835,177 820,300
Average grade of ore
milled (ounces per ton) 0.195 0.175 0.181 0.160
Underground ore milled (dry tons) 125,178 117,739 366,736 307,717
Page 10
<PAGE>
Sales revenue of $17.6 million in the third quarter of 1997 was up from
$17.0 million in the same period of 1996 and sales revenue of $51.1 million in
the first nine months of 1997 was up from $48.9 million in the same period of
1996. The increase in the ounces sold in the 1997 periods as compared to the
1996 periods, resulting in $2.5 million and $4.5 million more in revenues for
the 1997 third quarter and first nine months, respectively, resulted from
improvements in underground mining operations and grade of ore milled. Also,
mill throughput was higher in the third quarter of 1997 as compared to the same
period of 1996 due to a loss of nine days of production in the third quarter of
1996 versus a loss of five days of production in the third quarter of 1997, both
because of mechanical problems experienced in the mill. Gold production in the
first nine months of 1997, although higher than the production in the same
period of 1996, was adversely affected by rain induced flooding of the Getchell
Underground mine access and a fatality of a mine worker in the first quarter of
1997.
The Company hedged a portion of its production which resulted in higher
realized gold prices than the average market gold prices in the third quarter
and first nine months of 1997 and 1996. The lower realized gold prices in the
third quarter and first nine months of 1997 compared to the same periods of 1996
resulted in a decrease in revenues of $1.9 million and $2.2 million,
respectively, and partially offset the increase in revenues due to increased
production volumes. Initial net revenue from the Turquoise Ridge mine
development ore, expected no earlier than mid-November 1997, will be offset
against the capital costs of the Turquoise Ridge project until the Turquoise
Ridge mine is declared to be in commercial production, which is expected no
earlier than the second half of 1998.
At September 30, 1997, outstanding spot deferred contracts totaled
100,000 ounces of gold at an average price of $371 per ounce including estimated
future contango. Of these contracts, 60,000 ounces were for delivery in 1998 at
a price of $385 per ounce and 40,000 ounces were for delivery in 1999 at a
weighted average price of $350 per ounce including estimated future contango.
Cost of sales was $21.7 million in the third quarter of 1997, up from
$20.6 million in the third quarter of 1996, and cash costs per ounce produced
were $383 and $427 for the two periods, respectively. For the first nine months,
cost of sales was $63.2 million in 1997, up from $55.6 million in 1996, and cash
costs per ounce produced were $408 and $395 for the two periods, respectively.
On a total cost basis, underground mining costs, mine site general and
administrative ("G&A") costs and depreciation and depletion were higher in the
third quarter and first nine months of 1997 as compared to the same periods last
year, with milling costs only higher in the first nine months. Increases in
underground mining costs were related to higher maintenance costs, as well as
the effects of the flooding and fatality in the first quarter. Higher reagent
and maintenance expenditures associated with the harder and more carbonaceous
underground ore contributed to increased mill costs in the first nine months of
1997. Mine site G&A costs have risen primarily due to increased support services
as the Company expands its operations. Higher depreciation and depletion costs
reflect the addition of assets throughout 1996, mostly at the mill and in the
Getchell Underground operation.
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<PAGE>
On February 14, 1997, the Compensation, Human Resource and Director
Affairs Committee of the Company's Board of Directors granted stock appreciation
rights ("SARS") under the Company's 1996 Long Term Equity Incentive Plan with
respect to 75,983 shares at a weighted average option price of $8.32 per share
to certain executives and other employees of the Company, as detailed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Compensation with respect to SARS is accounted for on a variable basis and is
"marked to market" at the end of each fiscal quarter based on the market price
of the Company's Common Stock. Based on the $41 market price of the Company's
Common Stock at September 30, 1997, the Company recognized compensation expense
of $2.5 million, or $0.09 per share, in the first nine months of 1997. Of the
$2.5 million, $1.6 million was charged to G&A expenses, $0.6 million was charged
to cost of sales and $0.3 million was charged to exploration. The Company's
future quarterly results will reflect only compensation expense or income with
respect to these SARS based on the change in the market price of the Common
Stock as compared to the market price at the end of the preceding quarter. The
Company recognized compensation expense of $0.4 million in the third quarter of
1997 related to the SARS based on the change in the market price of the
Company's Common Stock at September 30, 1997 from June 30, 1997.
Corporate G&A costs increased to $5.1 million in the first nine months
of 1997 from $3.3 million in the same period of 1996 primarily due to the impact
of the grant of the SARS.
Exploration expenses were lower for the three months and nine months
ended September 30, 1997 as compared to the same periods of 1996 due to the
Company's current focus on the delineation and expansion of known ore zones, for
which drilling expenditures are capitalized.
Interest expense, net of capitalized interest, was lower in the 1997
third quarter and first nine months than the same periods of 1996 due to lower
interest expense on leased equipment and higher capitalized interest on the
Turquoise Ridge mine construction.
Interest and other income was lower in the 1997 third quarter and first
nine months than in the same periods of 1996 due to lower cash and cash
equivalent balances throughout the 1997 periods.
A $0.9 million tax benefit was recognized on the pretax loss in the
first quarter of 1996 with no additional benefits taken subsequent to the first
quarter of 1996. Based upon tax planning strategies and estimates of future
operations, the Company anticipates being subject to the alternative minimum tax
in the future. As such, it is more likely than not that the Company will be
unable to realize the benefit of federal net operating loss carryforwards.
Liquidity and Capital Resources
During the first nine months of 1997, the Company used $6.5 million of
cash for operations and $41.1 million for capital expenditures. These capital
expenditures included $18.2 million on the Turquoise Ridge mine development,
$9.6 million on the Getchell Underground
Page 12
<PAGE>
mine, $6.4 million on the mill, $5.5 million on development drilling and $1.4
million on other items. On the Turquoise Ridge mine construction, sinking of the
ventilation shaft had reached a depth of 1,708 feet at September 30,1997, with
expected completion for initial development ore production no earlier than
mid-November 1997. Production shaft sinking had reached a depth of 1,112 feet at
September 30, 1997. Total expenditures on the Turquoise Ridge mine construction
through September 30, 1997 were $46 million, with an estimated $44 million more
to be spent in 1997 and 1998 to complete the project, although there can be no
assurance that actual expenditures will not differ materially from this amount.
In March 1997, the Company completed an equity offering of 1,000,000
shares of Common Stock which resulted in net proceeds to the Company of $47.7
million. As of September 30, 1997, cash and cash equivalents were $62.9 million.
The Company plans on financing its capital development projects,
including the Turquoise Ridge mine as discussed, modifications to the mill, the
Getchell Underground mine development, equipment and development drilling, and
its operations from the existing cash and cash equivalents. Any shortfall in
funds required to meet these needs may be supplemented by additional funds
raised through borrowings or securities offerings. In July 1997, the Company's
S-3 shelf registration statement for up to $300 million in securities was
declared effective by the Securities and Exchange Commission. In September 1997,
the Company entered into a three year, $25 million revolving line of credit with
Canadian Imperial Bank of Commerce. The recoverability of the Turquoise Ridge
assets and completion of the underground mine is dependent on the Company's
ability to raise sufficient funds to complete the construction of such mine.
The principal balance of the Company's promissory note with ChemFirst
was $26.1 million at September 30, 1997. The promissory note is due September
22, 2000 or upon a change in control of the Company and may be prepaid without
penalty. The interest rate on the loan is the London Interbank Offered Rate for
a period selected by the Company, plus an applicable margin based on the
Company's leverage ratio. The interest rate was 6-5/8% at September 30, 1997.
Since the inception of the promissory note, interest has been capitalized to the
note at the end of each interest period. An interest period ended in May 1997,
at which time $0.8 of interest million was capitalized to the note.
Accounting Standards
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," requires that long-lived assets to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. Using a gold price
of $350 per ounce, the Company has performed a review of its long-lived assets
and determined that no impairment charge is required as of September 30,1997.
However, there can be no assurance that the factors used in this review will not
change resulting in an impairment charge.
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Risk Factors
Readers should carefully consider the risk factors set forth below, as
well as all information included in this document and the Annual Report of the
Company on Form 10-K for the year ended December 31, 1996.
Gold Price Volatility
The Company's profitability is significantly affected by changes in the
price of gold. Gold prices may fluctuate widely and are affected by numerous
industry factors, such as demand for precious metals, forward selling by
producers, central bank sales and purchases of gold and production and cost
levels in major gold-producing regions. Moreover, gold prices are also affected
by macro-economic factors such as expectations for inflation, interest rates,
currency exchange rates and global or regional political and economic
situations. The current demand for and supply of gold affects gold prices, but
not necessarily in the same manner as current demand and supply affect the
prices of other commodities. The potential supply of gold consists of new mine
production plus existing stocks of bullion and fabricated gold held by central
banks, governments, financial institutions, industrial organizations and
individuals. Since mine production in any single year constitutes a very small
portion of the total potential supply of gold, normal variations in current
production do not necessarily have a significant effect on the supply of gold or
on its price. If gold prices should decline below the Company's expected cash
costs of production and remain at such levels for any sustained period, the
Company could determine that it is not economically feasible to continue
commercial production.
The volatility of gold prices is illustrated in the following table of the
annual high, low and average London P.M. Fix:
Price Per Ounce
------------------
Calendar Year High Low Average
- ------------------------------------------------ ---- ---- -----
1987............................................ $500 $390 $446
1988............................................ $484 $395 $437
1989............................................ $416 $356 $381
1990............................................ $424 $346 $383
1991............................................ $403 $344 $362
1992............................................ $360 $330 $344
1993............................................ $406 $326 $360
1994............................................ $396 $370 $384
1995............................................ $396 $372 $384
1996............................................ $415 $367 $387
1997 (through October 28)....................... $367 $312 $338
The London P.M. Fix on October 28, 1997, was $312 per ounce.
Continuing Losses
The Company reported a net loss of $16.0 million for the nine months
ended September 30, 1997, $14.0 million for the year ended December 31, 1996,
$5.0 million for the six months
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ended December 31, 1995 and $18.4 million for the fiscal year ended June 30,
1995. The Company expects to continue to experience losses until higher grade
ore from Turquoise Ridge or other sources is produced. There can be no assurance
that such higher grade ores will be obtained by the Company.
Funds Needed for Development of Turquoise Ridge
If there are any shortfalls in funds required to meet the needs for the
development of Turquoise Ridge, they may be supplemented by additional funds
raised through borrowings or securities offerings. The recoverability of the
Turquoise Ridge assets and completion of the underground mine at Turquoise Ridge
is dependent on the Company's ability to raise sufficient funds to complete the
construction. There can be no assurance that funding will be available on
favorable terms, if at all.
Reserves
The ore reserves described by the Company are, in large part, estimates
made by the Company and confirmed by independent mining consultants known as
Mine Development Associates ("MDA") and Mineral Resource Development, Inc.
("MRDI"). The reserves confirmed by MDA and MRDI are subject to certain risks
and assumptions, including those discussed in "Certain Turquoise Ridge Mine
Risks" below. Additionally, no assurance can be given that the indicated level
of recovery of gold will be realized or that the assumed gold price of $400 per
ounce will be obtained. Reserve estimates may require revision based on actual
production experience. Market price fluctuations of gold, as well as increased
production costs or reduced recovery rates, may render ore reserves containing
relatively lower grades of mineralization uneconomic and may ultimately result
in a restatement of reserves. Moreover, short-term operating factors relating to
the ore reserves, such as the need for sequential development of ore bodies and
the processing of new or different ore grades, may adversely affect the
Company's profitability in any particular period.
Declines in the market price of gold may also render ore reserves
containing relatively lower grades of gold mineralization uneconomic to exploit
unless the utilization of forward sales contracts or other hedging techniques is
sufficient to offset the effects of a drop in the market price of the gold
expected to be mined from such reserves. If the Company's realized price per
ounce of gold, including hedging benefits, were to decline substantially below
the levels set for calculation of reserves for an extended period, there could
be material delays in the development of new projects, increased net losses,
reduced cash flow, reductions in reserves and asset impairments.
Project Development Risks
The Company from time to time engages in the development of new ore
bodies. Specific risks associated with the Company's development of the
Turquoise Ridge mine are discussed below. The Company's ability to sustain or
increase its present level of gold production is dependent in part on the
successful development of such new ore bodies and/or expansion of existing
mining operations. The economic feasibility of any such development project, and
all
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such projects collectively, is based upon, among other things, estimates of
reserves, metallurgic recoveries, capital and operating costs of such projects
and future gold prices. Development projects are also subject to the successful
completion of feasibility studies, issuance of necessary permits and receipt of
adequate financing.
Development projects have no operating history upon which to base
estimates of future cash operating costs and capital requirements. In
particular, estimates of reserves, metal recoveries and cash operating costs are
to a large extent based upon the interpretation of geologic data obtained from
drill holes and other sampling techniques and feasibility studies which derive
estimates of cash operating costs based upon anticipated tonnage and grades of
ore to be mined and processed, the configuration of the ore body, expected
recovery rates of metals from the ore, comparable facility and equipment costs,
anticipated climate conditions and other factors. As a result, it is possible
that actual cash operating costs and economic returns of any and all development
projects may materially differ from the costs and returns initially estimated.
Certain Turquoise Ridge Mine Risks
The Turquoise Ridge mine involves numerous risks. These include the
following:
Capital Requirements. Expenditures required to advance the Turquoise Ridge mine
to the point of a production test are large, particularly since the Company has
decided to proceed with shaft systems capable of being used in full-scale
production in order to save time and money should trial mining be confirmed as
viable. Thus, to a large extent, expenditures which would usually be supported
by a feasibility study will depend on the data in-hand and assumptions made in
the Company's mine plans with an attendant higher level of uncertainty. See
"-Funds Needed for Development of Turquoise Ridge."
Reserves. There can be no assurance that the probable reserves set forth in
reserve reports by MRDI and MDA for Turquoise Ridge and Shaft Zone will actually
be mined and milled on an economic basis, if at all. The MDA and MRDI reports
are based upon many assumptions, some or all of which may not prove to be
accurate. The failure of any such assumptions to prove accurate may alter the
conclusions of MDA's and/or MRDI's report on reserves and may have a material
adverse affect on the Company. The resource and reserve estimates were prepared
using geological and engineering judgment based on available data. In the
absence of underground development, such estimates must be regarded as imprecise
and some of the assumptions made may later prove to be incorrect or unreliable.
The grade distribution at Turquoise Ridge is between 0.2 to 0.6 ounces per ton.
Small changes in cutoff grade can cause large shifts in the reserves. If
dilution and/or mining costs related to poor ground conditions or other factors
are higher than expected, the reserves could be substantially reduced, resulting
in a shortening of mine life and a reduced or negative cash flow.
Dilution. The tonnage and grade of the mill feed material was estimated by
applying dilution factors to certain resource data. The dilution agents are
backfill, waste from the back of overcut crosscuts and drifts, and from the
walls. In the case of the latter two, MRDI assumed that there
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would be an average of one foot of back and wall dilution. MDA used
approximately 15% dilution and 95% recovery of the mineable reserve. If this
dilution increases, there will be corresponding negative effects on the tonnage
and grade to mill. This risk is related to the irregular configuration of the
ore body which, even with the tight cut-and-fill stoping method used, could make
achievement of the assumed dilution impossible to achieve in practice.
Production Shaft Completion. The two-year assumed construction period for the
Production Shaft, which was started in the fourth quarter of 1996, is an
aggressive schedule. Delay in construction would necessitate removing ore
through the Ventilation Shaft, which is basically designed for waste and the
limited ore from early production. Additionally, the availability of the final
ventilation circuit required for mining depends upon the completion of the
Production Shaft.
Mining Costs. As part of the project risk assessment, sensitivities were run on
various mining costs. Due to uncertainties about actual ground conditions and
productivities, these costs are only predictable within a broad range and the
predictions may not be valid. Therefore, actual mining costs may have a material
adverse effect on the viability of the Turquoise Ridge project and on the
Company.
Hydrology. Drainage of the ore body and surrounding rock will be critical to
the achievement of the mining efficiencies and costs estimated for the study. If
the deposit is not drained and water remains in this clay-rich environment,
mining conditions could worsen, and ground support costs will increase. If, due
to the presence of fine clays, the deposit drains slowly, the start of
production may be delayed, and the build-up to full production may be of longer
duration. Additionally, depending upon the quantity and quality of water
encountered, the water treatment/disposal options presently available to the
Company may be insufficient to meet estimated amounts needed to treat water
pumped from Turquoise Ridge during dewatering.
Geotechnical Considerations. The Turquoise Ridge ore zones contain areas of
poor ground conditions due to a high percentage of the ground being comprised of
low rock mass rating rock and clay. As a result, additional ground support may
be required.
Dependence on a Single Property
All of the Company's revenues are derived from its mining and milling
operations at the Getchell Property. If the operations at the Getchell
Underground mine or at any of the Company's processing facilities were to be
reduced, interrupted or curtailed, the Company's ability to generate revenues
and profits in the future would be materially adversely affected.
Exploration
Mineral exploration, particularly for gold, is highly speculative in
nature, involves many risks and frequently is unsuccessful. The Company is
seeking to expand its reserves only through exploration and development at the
Getchell Property. There can be no assurance that the Company's exploration
efforts will result in the discovery of any additional gold mineralization
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or that any mineralization discovered will result in an increase of the
Company's reserves. If reserves are developed, it may take a number of years and
substantial expenditures from the initial phases of drilling until production is
possible, during which time the economic feasibility of production may change.
No assurance can be given that the Company's exploration programs will result in
the replacement of current production with new reserves or that the Company's
development program will be able to extend the life of the Company's existing
mines.
Hedging Activities
The Company currently uses spot deferred contracts to protect earnings
and cash flows from the impact of short-term drops in gold prices. These
transactions have been designated as hedges of the price of future production
and are accounted for as such.
Spot deferred contracts are agreements between a seller and a
counterparty whereby the seller commits to deliver a set quantity of gold, on an
established future date and at an agreed upon price. The established forward
price is equal to the current spot gold price on the day the agreement is signed
plus "contango." Contango is equal to the difference between the prevailing
market interest rate for cash deposits less the gold lease rate, for comparable
periods. The contango rate was from 3.7% to 3.4% per annum for one-month to
twelve-month periods at September 30, 1997.
On the scheduled future delivery date, the seller may deliver physical
gold and thereby fulfill the contract, liquidate the contract through the
financial market or defer delivery to a future date. If the spot price on the
delivery date is greater than the contract price, delivery on the contract may
be deferred to a new future date and the gold is sold at the higher spot price.
If the spot price is lower than the contract price, the delivery may be made
against the contract and the higher contract price is realized. In practice,
this generally allows the seller to maximize the price realized. Each time a
seller defers delivery, the forward sales price is increased by the then
prevailing contango (assuming it is positive) for the next period out to the
newly established future delivery date. Generally, the counterparty will allow
the seller to continue to defer contract deliveries providing that there is
sufficient scheduled production from proven and probable reserves to fulfill the
commitment.
At September 30, 1997, the Company's outstanding hedge contracts were
for 100,000 ounces at an average price of $371 per ounce including estimated
future contango. Of these contracts, 60,000 ounces were for delivery in 1998 at
a price of $385 per ounce and 40,000 ounces were for delivery in 1999 at a
weighted average price of $350 per ounce including estimated future contango.
Risk of loss from these forward sales agreements arises from the possible
inability of a counterparty to honor contracts and from the Company's potential
ability to deliver gold.
The Company's accounting treatment for hedging is outlined in Notes 2
and 3 to Item 8 "Financial Statements and Supplementary Data" as found in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
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Other Precious Metal Contract Commitments
The Company has entered into European call option contracts. European
call option contracts are agreements between a seller and a counterparty whereby
the counterparty has the right, but not the obligation, to buy gold from the
seller at a predetermined price on a predetermined date. The counterparty pays a
premium for this right. The premiums are deferred until the option expires or
the related transaction occurs at which time the deferred amounts are recognized
in income. Risk of loss on European call option contracts exists if the market
price were to exceed the exercise price of the option on the date designated in
the contract. At September 30, 1997, the Company had outstanding European call
option contracts for 70,000 ounces of gold at a weighted average price of $352
per ounce that expire in 1997, 20,000 ounces of gold at a price of $345 per
ounce that expire in 1998 and 60,000 ounces of gold at a price of $400 per ounce
that expire in 1999.
Dependence on Key Personnel
The Company is dependent on the services of certain key officers and
employees, including its Chief Executive Officer, its Chief Financial Officer,
its Chief Operating Officer and its Chief Administrative Officer. Competition in
the mining industry for qualified individuals is intense, and the loss of any of
these key officers or employees, if not replaced, could have a material adverse
effect on the Company's business and its operations. The Company currently does
not have key person insurance. The Company has entered into Termination
Agreements with its Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer and Chief Administrative Officer which provide for certain
payments upon termination or resignation resulting from a change of control (as
defined in such agreements).
In connection with the development of Turquoise Ridge, the Company
expects that it will require a significant number of additional skilled
employees. The Company faces intense competition from other mining companies in
connection with the recruitment and retention of such employees. Additionally,
although the Company does not currently have any unionized employees, there can
be no assurance that unionization will not occur in the future.
Government Regulation
Safety. The mining operations of the Company are subject to inspection and
regulation by the Mine Safety and Health Administration of the United States
Department of Labor ("MSHA") under the provisions of the Mine Safety and Health
Act of 1977. The Occupational Safety and Health Administration ("OSHA") also has
jurisdiction over safety and health standards not covered by MSHA.
On January 15, 1997, a mine site accident involving a Tamrock loader
resulted in the death of a Company employee. As required by federal law, MSHA
officials investigated the accident. MSHA issued seven enforcement actions, one
of which was vacated subsequently. The maximum civil penalties for which the
Company could be assessed as the result of such actions is $0.3 million. MSHA
also conducted a special investigation to determine whether knowing and/or
willful violations on the part of the Company or any agent, officer or director
of
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the Company occurred. The result of that investigation is unknown, but could
result in additional criminal penalties for the Company and/or civil or criminal
penalties for agents, officers, or directors of the Company. While management of
the Company believes that the results of the investigation will not have a
materially adverse impact on the financial position, operating results or
liquidity of the Company, no assurance can be given that the outcome of this
investigation will not have such effects.
On May 26, 1997, a worker employed by the ventilation shaft sinking
contractor was killed in an accident at the bottom of the ventilation shaft due
to a mechanical failure of a safety device. As required by federal law, MSHA
officials investigated the cause of the accident. Enforcement action was taken
against the contractor, but the Company did not receive any citations as a
result of that accident investigation.
Current Environmental Laws and Regulations. The Company must comply with
environmental standards, laws and regulations which may entail greater or lesser
costs and delays depending on the nature of the regulated activity and how
stringently the regulations are implemented by the regulatory authority. It is
possible that the costs and delays associated with compliance with such laws and
regulations could become such that the Company would not proceed with the
development of a project or the operation or further development of a mine. Laws
and regulations involving the protection and remediation of the environment and
the governmental policies for implementation of such laws and regulations are
constantly changing and are generally becoming more restrictive. The Company has
made, and expects to make in the future, significant expenditures to comply with
such laws and regulations. These requirements include regulations under: (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA" or "Superfund") which regulates and establishes liability for the
release of hazardous substances; (ii) the Endangered Species Act ("ESA") which
identifies endangered species of plants and animals and regulates activities to
protect these species and their habitats; (iii) the Clean Water Act; (iv) the
Clean Air Act; (v) the Resource Conservation and Recovery Act for disposal of
hazardous waste; (vi) the Migratory Bird Treaty Act; (vii) the Safe Drinking
Water Act; (viii) the Federal Land Policy and Management Act; (ix) the National
Environmental Policy Act; (x) the National Historic Preservation Act; and many
other state and federal laws and regulations.
The United States Environmental Protection Agency ("EPA") continues the
development of a solid waste regulatory program specific to mining operations
under the Resource Conservation and Recovery Act ("RCRA"). The EPA is currently
evaluating a Draft Hardrock Mining Framework which, if ultimately implemented,
could create a system of federal regulation of the entire mine site focused on
water quality and waste management. The requirements being considered by the EPA
are very similar to the existing Nevada regulations concerning environmental
controls at mine sites. Many of the requirements being considered by the EPA
could be duplicative of existing Nevada regulations. The effect of compliance
with a new EPA program would depend on the extent to which the substantive or
procedural requirements of such new federal regulations would exceed the
existing requirements of the Nevada regulations.
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Environmental laws and regulations may also have an indirect impact on
the Company, such as increased cost for electricity due to acid rain provisions
of the Clean Air Act Amendments of 1990. Charges by refiners to which the
Company sells its metallic concentrates and products have substantially
increased over the past several years because of requirements that refiners meet
revised environmental quality standards. The Company has no control over the
refiners' operations or their compliance with environmental laws and
regulations.
Potential Legislation. Several recent legislative developments have affected or
may in the future affect the cost of and the ability of mining claimants to use
the Mining Law of 1872, as amended (the "General Mining Law"), to acquire and
use federal lands for mining operations. Since October 1994, a moratorium has
been imposed on processing new patent applications for mining claims. This
moratorium should not affect the status of the patent applications made by the
Company under the General Mining Law before the moratorium was imposed. Also,
since 1993, a rental or maintenance annual fee of $100 per claim has been
imposed by the Federal government on unpatented mining claims in lieu of the
prior requirement for annual assessment work. During the last several
Congressional sessions, bills have been repeatedly introduced in the U.S.
Congress which would supplant or radically alter the General Mining Law. As of
September 30, 1997, no such bills have been passed. Such bills have proposed,
among other things, to permanently eliminate or greatly limit the right to a
mineral patent, impose royalties, and impose new Federal reclamation,
environmental control and other restoration requirements. Royalty proposals have
ranged from a 2% royalty on "net profits" from mining claims to an 8% royalty on
modified gross income/net smelter returns. It is anticipated that similar
legislation will again be introduced in 1997. If enacted, such legislation could
substantially impair the ability of companies to economically develop mineral
resources on federal lands. The extent of the changes, if any, which may be made
by Congress to the General Mining Law is not presently known, and the potential
impact on the Company as a result of future Congressional action is impossible
to predict. Although a majority of the Company's existing mining operations
occur on private or patented property, the proposed changes to the General
Mining Law could adversely affect the Company's ability to economically develop
mineral resources on federal lands. Disposal of overburden and mineral
processing wastes by the Company occur on both private and federal lands.
Exploration activities occur on both private and federal lands. Other
legislative initiatives regarding environmental laws potentially applicable to
mining include proposals to substantially alter CERCLA, the Clean Water Act,
Safe Drinking Water Act, Endangered Species Act and bills which introduce
additional protection of wetlands. Adverse developments and operating
requirements in these acts could impair the ability of the Company as well as
others to develop mineral resources. Revisions to current versions of these
bills could occur prior to passage. Thus, the potential impact on the Company of
such legislative initiatives is not clear at this time.
Environmental Matters and Safety
Environmental Liability. Mining is subject to potential risks and
liabilities associated with pollution of the environment and the disposal of
waste products that could occur as a result of the Company's mineral
exploration, development and production. Environmental liability also may
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result from mining activities conducted by others prior to the Company's
ownership of a property. Historic mining disturbances, facilities, waste
materials and other discrete areas of potential contamination associated with
gold, tungsten, and molybdenum production between 1937 and 1969 by previous
owners and operators are encompassed within the area of the Company's Getchell
Property operations. Restoration of certain areas of historic disturbance and
contamination has been undertaken in conjunction with current mining operations
and has been incorporated into the Company's state permits in coordination with
the federal land management agency.
Pollution Insurance. Insurance for environmental risks (including potential
liability for pollution or other hazards as a result of the disposal of waste
products occurring from exploration and production) has not been purchased by
the Company as it is not generally available at a reasonable price to the
Company or to other companies within the industry. To the extent the Company is
subject to environmental liabilities, the payment of such liabilities or the
costs which must be incurred to remedy environmental pollution would reduce
funds otherwise available to the Company and could have a material adverse
effect on the Company. Should the Company be unable to fully remedy an
environmental problem, the Company might be required to suspend operations or
enter into interim compliance measures pending completion of the required
remedy. The potential exposure may be significant and could have a material
adverse effect on the Company.
Environmental Permits. All of the Company's exploration, development and
production activities are subject to regulation under one or more of the various
state and federal environmental laws and regulations. These laws address
emissions to the air, discharges to water, management of wastes, management of
hazardous substances, protection of natural resources, protection of antiquities
and restoration of lands which are disturbed by mining. Many of the regulations
require permits to be obtained for the Company's activities. The Company
maintains permits required for its facilities and operations which provide for
ongoing compliance and monitoring. Some of the permits include Bureau of Land
Management Plan of Operations No. N24-87-003P; EPA Hazardous Waste Facility No.
NVD986774735; Nevada water pollution control permits NEV86014 (for mining and
mineral processing) and NEV95113 (for excess mine water disposal); Nevada
reclamation permit 0105; and Nevada air quality permit AP1041-0292. These
permits must be updated and reviewed from time to time, and normally are subject
to environmental impact analyses and public review processes prior to approval
of the activity. For example, the Company has applied for air permits required
by Title V of the 1990 Amendments to the Clean Air Act to maintain compliance
with applicable requirements for air emissions sources of the types utilized by
the Company in its operations. It is possible that future changes in applicable
laws, regulations and permits could have a significant impact on some portion of
the Company's business, causing those activities to be economically re-evaluated
at that time.
Restoration. The Company accrues expenses over the productive life of its
mine for anticipated costs associated with restoration of the mine site.
Activities which result in restoration costs include the permanent closure of
the mining and mineral processing operations and the
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reclamation of the disturbed land to a productive use. This includes restoration
of historic and current mining and mineral processing operations and associated
land disturbances. Restoration takes place concurrent with and after the
productive life of the operations. Activities which result in restoration costs
after permanent closure and reclamation primarily relate to monitoring and other
post mining management activities.
The uncertainties related to future restoration costs result from
unknown future additional regulatory requirements, significant new surface
disturbances or additional mineral processing facilities and the potential for
recognition in the future of additional activities needed for restoration. The
technologies for restoration are evolving during the life of the operations.
Periodic review of the activities and costs for restoration, and consequent
adjustments to the ongoing accrual, are conducted. The Company conducts
concurrent restoration of mining disturbances and anticipates an ongoing program
of restoration over the productive life of the operations. Activities have
included regrading, seeding and planting, monitoring, and restoration research.
In accordance with the State of Nevada Division of Environmental
Protection ("NDEP"), the Company has posted a bond of $4.5 million to cover the
costs for reclamation of the Getchell Property. As of September 30, 1997, the
total estimated restoration costs for the Getchell Property were $5.5 million,
of which the Company had accrued $2.7 million. The amount of total estimated
restoration costs has increased over time due to more stringent regulation
requirements and expanded mining activities and additional increases may occur
in the future for the same reasons. The Company has begun reclamation of surface
mining disturbances and anticipates an ongoing program of reclamation over the
next several years. Activities have included regrading, revegetation and soil
stabilization. This includes restoration activities for which bonding must be
provided and other restoration costs not included in bonding calculations.
Mining Risk and Insurance
The gold ore located on the Getchell Property and the existing tailings
ponds and waste dumps located on the Getchell Property contain relatively high
levels of arsenic, and the milling of such ore involves the use of other toxic
substances, including sodium cyanide, sodium hydroxide, sulfuric acid and nitric
acid. In addition, the business of gold mining is generally subject to a number
of risks and hazards, including environmental hazards, industrial accidents,
labor disputes, the encounter of unusual or unexpected geological conditions,
slope failures, changes in the regulatory environment and natural phenomena such
as inclement weather conditions, floods, blizzards and earthquakes. Such
occurrences could result in damage to, or destruction of, mineral properties or
production facilities, personal injury or death, environmental damage, delays in
mining, monetary losses and possible legal liability. The Company maintains
insurance against risks that are typical in the gold mining industry and in
amounts that the Company believes to be reasonable, but which may not provide
adequate coverage in certain unforeseen circumstances. However, insurance
against certain risks (including certain liabilities for environmental pollution
or other hazards as a result of exploration and production) has not
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been purchased by the Company as such coverage is not generally available to it
or to other companies within the industry.
Title to Properties
Certain of the Company's mineral rights consist of unpatented mining
claims. Unpatented mining claims are unique property interests that are
generally considered to be subject to greater title risk than other real
property interests. The greater title risk results from unpatented mining claims
being dependent on strict compliance with a complex body of federal and state
statutory and decisional law, much of which compliance involves physical
activities on the land, and from the lack of public records which definitively
control the issues of validity and ownership. See "Potential Legislation" under
"Government Regulation" above.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The following exhibits are filed herewith and are referred to and
incorporated herein by reference to such filings.
10(a) - Form of Termination Agreement between the Company and Richard F.
Nanna.
10(b) - Form of Termination Agreement between the Company and G.W.
Thompson, Donald S. Robson, R. David Russell and Donald O. Miller
(Company's Termination Agreement with each such individual contains
identical provisions to those contained in the form).
10(c) - Loan Agreement dated September 5,1997, by and between CIBC INC. and
the Company.
27 - Financial Data Schedule.
Reports on Form 8-K During the three months ended September 30, 1997 there
were no reports filed on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Getchell Gold Corporation
November 3, 1997 By: /s/ G. W. Thompson
Date G. W. Thompson
President, Chief Executive Officer and Director
November 3, 1997 By: /s/ Donald S. Robson
Date Donald S. Robson
Vice President and Chief Financial Officer
(Principal Financial Officer)
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July 1, 1997
PRIVILEGED AND CONFIDENTIAL
Richard F. Nanna
Vice President Exploration
4430 W. Commander Drive
Winnemucca, NV 89445
Re: Termination Agreement
Dear Dick:
GETCHELL Gold Corporation (the "Company") considers it essential to the best
interests of the stockholders of the Company to foster the continuous employment
of key management personnel. In this connection, the Board of Directors (the
"Board") of the Company recognizes that, as is the case with many publicly held
corporations and their subsidiaries and parents, the possibility of a Change in
Control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a Change in Control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereto, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "Change in Control" of the Company (as defined in
Section 2 hereof) under the circumstances described below. This agreement,
however, does not otherwise change your employment arrangements and except for
the conditions pertaining to a Change in Control, your continued employment
continues to be subject to the will of the Board of the Company.
1. TERM OF AGREEMENT
This Agreement shall commence on the date hereof and shall continue in
effect through June
<PAGE>
30, 2000; provided, however, if a Change in Control of the Company shall
have occurred during the term of this Agreement, this Agreement shall
continue in effect for a period of three (3) years beyond the month in
which such Change in Control occurred; provided further, that in no event
shall this Agreement extend beyond your normal retirement age unless
specifically endorsed to so provide.
2. CHANGE IN CONTROL
(i) No benefits shall be payable hereunder unless there shall have been a
Change in Control of the Company, as set forth below. For purposes of
this Agreement, a "Change in Control" of the Company are deemed to
have occurred if:
(A) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended [the "Exchange
Act"], other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation
owned, directly or indirectly by the stockholders of the Company,
in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company's outstanding
securities; or
(B) During Any Period Of Two (2) Consecutive Years (Not Including Any
Period Prior To The Execution Of This Agreement), Individuals Who
At The Beginning Of Such Period Constitute The Board And Any New
Director (Other Than A Director Designated By A Person Who Has
Entered Into An Agreement With The Company To Effect A
Transaction Described In Clause (A) Or (C) Of This Subsection)
Whose Election By The Board Or Nomination For Election By The
Company's Stockholders Was Approved By A Vote Of At Least
Two-thirds (2/3) Of The Directors Then Still In Office Who Either
Were Directors At The Beginning Of The Period Or Whose Election
Or Nomination For Election Was Previously So Approved, Cease For
Any Reason To Constitute A Majority Thereof; Or
(C) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least eighty percent (80%) of the
combined voting power of the voting securities of the Company
or such
<PAGE>
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve an
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets; or
(D) There occurs any "Takeover Event," as such term is defined in the
Amended and Restated Long-Term Incentive Plan of the Company, as
amended November 4, 1992, or a "Change in Control," as such term
is defined in the 1996 Long-Term Equity Incentive Plan of the
Company.
(ii) For purposes of this Agreement, a "potential Change in Control" of
the Company shall be deemed to have occurred if:
(A) The Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the
Company.
(B) Any person (including the Company) publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control of the Company.
(C) Any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of
the Company, in substantially the same proportions as their
ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the
Company representing nine and a half (9.5%) percent or more of
the combined voting power of the Company's then outstanding
securities, increases his beneficial ownership of such securities
by five percent (5%) or more over the percentage so owned by such
person on the date hereof; or
(D) The Board adopts a resolution to the effect that, for purposes of
this Agreement, a potential Change in Control has occurred.
You agree that, subject to the terms and conditions of this Agreement, in the
event of a potential Change in Control, you will remain in the employ of the
Company until the earliest of (i) a date which is six (6) months from the
occurrence of such potential Change in Control, (ii) the termination by you of
your employment by reason of Disability, as defined in Subsection 3(i), or (iii)
the occurrence of a Change in Control of the Company.
3. TERMINATION FOLLOWING CHANGE IN CONTROL
<PAGE>
If any of the events described in Subsection 2(i) hereof constituting a
Change in Control of the Company shall have occurred, you shall be
entitled to the benefits provided in Subsection 4(iii) hereof either upon
the subsequent termination of your employment during the term of this
Agreement unless such termination is (A) because of your death or
Disability as defined in Subsection 3(i), or (B) by the Company for
Cause, or by you other than for Good Reason, in either of which case you
shall be entitled to the benefits provided in Subsection 4(ii).
(i) DISABILITY. If, as a result of your incapacity due to physical or
mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6)
consecutive months, and within thirty (30) days after written
notice of termination is given you shall not have returned to the
full-time performance of your duties, your employment may be
terminated for "Disability".
(ii) CAUSE. Termination by the Company of your employment for "Cause"
shall mean termination upon (A) the willful and continued failure
by you to substantially perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination by you for
Good Reason as defined in Subsections 3(iv) and 3 (iii),
respectively) after a written demand for substantial performance
is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have
not substantially performed your duties, or (B) the willful
engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes
of this Subsection, no act, or failure to act, on your part shall
be deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action
or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to you and
opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clauses (A)
or (B) of the first sentence of this Subsection and specifying
the particulars thereof in detail.
(iii) GOOD REASON. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without your express written consent, the occurrence
after a Change
<PAGE>
in Control of the Company of any of the following circumstances
unless, in the case of paragraphs (A), (E), (F), (G) or (H), such
circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination, as defined in
Subsections 3(v) and 3(iv), respectively, given in respect
thereof:
(A) The assignment to you of any duties inconsistent with your
status as an officer of the Company or a substantial
adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to
the Change in Control of the Company;
(B) A reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be
increased from time to time except for across-the-board
salary reductions similarly affecting all senior
executives of the Company and all senior executives of any
person or entity which accedes to the business of the
Company;
(C) The relocation of your principal office to outside the
Winnemucca, Nevada Metropolitan Area, or the Company's requiring
you to be based anywhere other than in Winnemucca, Nevada except
for required travel on the Company's business to an extent
substantially consistent with your present business travel
obligations;
(D) The failure by the Company, without your consent, to pay to you
any portion of your current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all
senior executives of the Company and all senior executives of any
person or entity which accedes to the business of the Company, or
to pay to you any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is
due;
(E) The failure by the Company to continue in effect any
compensation plan in which you participate immediately
prior to the Change in Control of the Company which is
material to your total compensation, including but not
limited to the Getchell Gold Corporation Long-Term
Incentive Plan, as the plan is amended from time to time
("the Long-Term Incentive Plan"), or any substitute plan
adopted prior to the Change in
<PAGE>
Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue your
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your participation
relative to other participants, as existed at the time of the
Change in Control of the Company;
(F) The failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under
any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which you were
participating at the time of the Change in Control of the
Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such
benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the Change in Control of the
Company, or the failure by the Company to provide you with
the number of paid vacation days to which you are entitled
on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in
effect at the time of the Change in Control of the Company;
(G) The failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement,
as contemplated in Section 5 hereof;
(H) Any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective; or
(iv) Any material breach by the Company of any provision of this Agreement.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness unless such
illness constitutes "Disability". Your continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason hereunder.
(v) NOTICE OF TERMINATION. Any purported termination of your
employment by the Company or by you shall be communicated by written
<PAGE>
Notice of Termination to the other party hereto in accordance with
Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision
so indicated.
(vi) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (A) if your
employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to
the full-time performance of your duties during such thirty (30) day
period), and (B) if your employment is terminated pursuant to
Subsection (ii) or (iii) above or for any other reason (other than
Disability), the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection (ii) above shall
not be less than thirty (30) days, and in the case of a termination
pursuant to Subsection (iii) above shall not be less than fifteen (15)
nor more than sixty (60) days, respectively, from the date such Notice
of Termination is given); provided that if within fifteen (15) days
after any Notice of Termination is given, or if later, prior to the
Date of Termination (as determined without regard to this provision),
the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties by a
binding arbitration award, or by a final judgment, order or decree of
a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no
appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues
the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will
continue to pay you your full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation,
benefit and insurance plans in which you were participating when the
notice giving rise to the dispute was given, until the dispute is
finally resolved in accordance with this Subsection. Amounts paid
under this Subsection are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY
Following a Change in Control as defined by Subsection 2(i), upon
termination of your
<PAGE>
employment or during a period of disability, you shall be entitled to
the following benefits:
(i) During any period that you fail to perform your full-time
duties with the Company as a result of incapacity due to
physical or mental illness that does not constitute
Disability, you shall continue to receive your base salary
at the rate in effect at the commencement of any such
period, together with all compensation payable to you under
the Long-Term Incentive Plan or other plan during such
period, until this Agreement is terminated pursuant to
Section 3(i) hereof. Thereafter, or in the event your
employment shall be terminated, or by reason of your death,
your benefits shall be determined under the Company's
retirement, insurance and other compensation programs then
in effect in accordance with the terms of such programs;
(ii) If your employment shall be terminated by the Company for Cause or
by you other than for Good Reason, or for Disability or death, the
Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further
obligations to you under this Agreement;
(iii) If your employment by the Company shall be terminated (a) by the
Company other than for Cause or Disability or (b) by you for
Good Reason, then you shall be entitled to the benefits provided
below:
(A) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the
Company, at the time such payments are due, except as
otherwise provided below.
(B) In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay
as severance pay to you, a lump sum severance payment
(together with the payments provided in Paragraph E below
and any payment you may receive pursuant to Paragraph D
below, the "Severance Payments") equal to 1.5 times the sum
of (i) your annual base salary and (ii) bonuses, averaged
over the three (3) years (or such portion of the three (3)
years during which you actually were employed by the
Company) prior to the occurrence of the circumstances giving
rise to the Notice of
<PAGE>
Termination.
(C) Health plan, dental plan, life insurance plan and
long-term disability plan coverage in effect on the Date
of Termination will continue for a period of twenty four
(24) months from the Date of Termination.
(D) Except for Incentive Stock Options ("ISO's") which are
hereby specifically excluded, in lieu of shares of common
stock of the Company ("Company Shares") issuable upon
exercise of outstanding options ("Options"), granted to you
under the Company's Long-Term Incentive Plan as amended from
time to time, or any other plan then in effect (which
Options shall be canceled upon the making of the payment
referred to below), unless you notify the Company by giving
notice in accordance with Section 6 hereof within fifteen
(15) days after receipt of Notice of Termination that you do
not wish such payment, the Company shall pay to you not
later than the fifth day following the Date of Termination,
an amount in cash equal to the product of (i) the difference
(to the extent that such difference is a positive number)
obtained by subtracting the per share exercise price of each
Option held by you whether or not then fully exercisable
from the higher of (A) the closing price of Company Shares
as reported on the American Stock Exchange on the Date of
Termination, or (B) the highest per share price for Company
Shares actually paid in connection with any Change in
Control of the Company, or (C) the highest per share price
payable under the terms of the Company's Long-Term Incentive
Plans as amended from time to time and (ii) the number of
Company Shares covered by each such Option.
(E) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this
Agreement or in connection with any tax audit or proceeding
to the extent attributable to the application of Section
4999 of the Internal Revenue Code of 1986, as amended (the
"Code") to any payment or benefit provided hereunder).
(F) In the event that you become entitled to the payments (the
"Severance Payments") provided under paragraphs (B),(D),
and
<PAGE>
(E) above, or to any other payments or benefits received
or to be received by you in connection with a Change in
Control or your termination of employment (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company) any person
whose actions result in a Change in Control or any person
affiliated with the Company or such person (collectively
with the Severance Payments, the "Total Payments) if any
of the Total Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code, the
Company shall pay to you at the time specified in
paragraph (G) below, an additional amount (the "Gross-Up
Payment") such that the net amount retained by you, after
deduction of any Excise Tax on the Total Payments and any
federal income tax and Excise Tax upon the payment
provided for by this paragraph, shall be equal to the
Total Payments. For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and
the amount of such Excise Tax, (i) the Total Payments
shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Company's
independent auditors and acceptable to you such other
payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable
compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of
the Code, or are otherwise not subject to the Excise Tax;
(ii) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the
lesser of (A) the total amount of the Total Payments or
(B) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (i),
above; and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be
made. In the event that
<PAGE>
the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the
Company at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise
Tax and federal income tax imposed on the Gross-Up Payment
being repaid by you if such repayment results in a
reduction in Excise Tax and/or a federal income tax
deduction) plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code.
In the event that the Excise Tax is determined to exceed
the amount taken into account hereunder at the time of the
termination of your employment (including by reason of any
payment, the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
Company shall make an additional gross-up payment in
respect of such excess (plus any interest payable with
respect to such excess) at the time that the amount of
such excess is finally determined.
(G) The payments provided for in paragraphs (B), (D), and (F)
above, shall be made not later than the fifth (5th) day
following the Date of Termination; provided, however, that
if the amounts of such payments cannot be finally determined
on or before such day, the Company shall pay to you on such
day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined, but in no event
later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company
to you payable on the fifth (5th) day after demand by the
Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation
earned by you as the result of employment by another employer,
by retirement benefits, by offset against any amount claimed to
be owed by you to the Company, or otherwise.
<PAGE>
(vii) In addition to all other amounts payable to you under this
Section 4, you shall be entitled to receive all benefits
payable to you under the 401(k) Thrift Plan, and any other
plan or agreement relating to retirement benefits.
5. RELATIONSHIP WITH LONG-TERM INCENTIVE PLANS
In the event of an inconsistency between the terms of this Agreement and
the terms of the Company's Long-Term Incentive Plans, the terms of this
Agreement shall control.
6. SUCCESSORS: BINDING AGREEMENT
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of
the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain
such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the
same amount and on the same terms as you would be entitled
to hereunder if you terminate your employment for Good
Reason following a Change in Control, except that for
purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the
Date of Termination. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee
or, if there is no such designee, to your estate.
7. NOTICES
For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement,
provided that all notice to the Company shall be directed to the
attention
<PAGE>
of the Board with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
8. MISCELLANEOUS
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and
signed by you and such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth
in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State
of Delaware. All references to Sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to such
Sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the Company under Section 4 shall survive the expiration
of the term of this Agreement.
9. VALIDITY
The invalidity or unenforceable ability or any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely yours,
GETCHELL GOLD CORPORATION
<PAGE>
/s/ G. W. Thompson
G. W. (Bill) Thompson
President and Chief Executive Officer
GWT:mim
ACCEPTED AND AGREED to on this 6 day of July, 1997.
/s/ Richard F. Nanna
Richard F. Nanna
July 1, 1997
PRIVILEGED AND CONFIDENTIAL
Officer
Title
Address
City, State, Zip Code
Re: Termination Agreement
Dear Officer:
GETCHELL Gold Corporation (the "Company") considers it essential to the best
interest of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors (the "Board")
of the Company recognizes that, as is the case with many publicly held
corporations and their subsidiaries, the possibility of a Change in Control may
exist and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a Change in Control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereto, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "Change in Control of the Company" (as defined in
Section 2 hereto) under the circumstances below. This letter, however, does not
otherwise change your employment arrangements and except for the conditions
contained therein pertaining to a Change in Control, your continued employment
continues to be subject to the will of the Board of the Company.
1. TERM OF AGREEMENT
This Agreement shall commence on the date hereof and shall continue in
effect through June 30, 2000; provided, however, if a Change in Control
of the Company shall have occurred during the term of this Agreement,
this Agreement shall continue in effect for a period of three
<PAGE>
(3) years beyond the month in which such Change in Control occurred;
provided further, that in no event shall this Agreement extend beyond
your normal retirement age unless specifically endorsed to so provide.
2. CHANGE IN CONTROL
(i) No benefits shall be payable hereunder unless there shall have been a
Change in Control of the Company, as set forth below. For purposes of
this Agreement, a "Change in Control of the Company" shall be deemed
to have occurred if:
(A) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than a trustee or
other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned,
directly or indirectly by the stockholders of the
Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
the Company representing twenty percent (20%) or more
of the combined voting power of the Company's then
outstanding securities; or
(B) During any period of two (2) consecutive years (not
including any period prior to the execution of this
Agreement), individuals who at the beginning of such
period constitute the Board and any new director (other
than a director designated by a person who has entered
into an agreement with the Company to effect a
transaction described in clause (A) or (C) of this
Subsection) whose election by the Board or nomination
for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors
then still in office, who either were directors at the
beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute a majority thereof; or
(C) The shareholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least eighty percent (80%) of the combined
voting power of the voting securities of the company or
such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of
the Company approve an agreement for the sale or
disposition of all or substantially all the Company's
asset; or
(D) There occurs any "Takeover Event," as such term is defined in
the Amended and Restated Long-Term Incentive Plan of the
Company, as amended November 4, 1992, or a "Change in Control,"
as such term is defined in the 1996 Long-Term Equity Incentive
Plan of the Company.
<PAGE>
(ii) For purposes of this Agreement, a "potential Change in Control of the
Company" shall be deemed to have occurred if:
(A) The Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control of the
Company;
(B) Any person (including the Company) publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control of the
Company;
(C) Any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of
the Company of a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership
of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities
of the Company representing nine and a half percent
(9.5%) or more of the combined voting power of the
Company's then outstanding securities, increases his
beneficial ownership of such securities by five percent
(5%) or more over the percentage so owned by such
person on the date hereof; or
(D) The Board adopts a resolution to the effect that, for purposes
of this Agreement, a potential Change in Control of the Company
has occurred.
You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential Change in Control of the
Company, you will remain in the employ of the Company until the
earliest of: (i) a date which is six (6) months from the occurrence
of such potential Change in Control of the Company; (ii) the
termination by your of your employment by reason of Disability, as
defined in Subsection 3(i); or (iii) the occurrence of a Change in
Control of the Company.
3. TERMINATION FOLLOWING CHANGE IN CONTROL
If any of the events described in Subsection 2(i) hereof constituting a
Change in Control of the Company shall have occurred, you shall be
entitled to the benefits provided in Subsection 4(iii) hereof either upon
(a) the subsequent termination of your employment during the term of this
Agreement, or (b) upon your Voluntary Termination within 365 days
following occurrence of any of such events as spedified in Section 2,
hereof, unless such termination is (A) because of your death or
Disability as defined in Section 3 (i), or (B) by the Company for Cause.
(i) DISABILITY. If, as a result of your incapacity due to physical or
mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive
months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time
performance of your duties, your employment may be terminated for
"Disability".
(ii) CAUSE. Termination by the Company of your employment for "Cause" shall
mean
<PAGE>
termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any
such failure resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance
of a Notice of Termination) after a written demand for substantial
performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, or (B) the willful
engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of
this Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission
was in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been Terminated for Cause
unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and opportunity for you, together with your
counsel, to be heard before the Board), finding that in the good
faith opinion of the Board you were guilty of conduct set forth above
in clauses (A) or (B) of the first sentence of this Subsection and
specifying the particulars thereof in detail.
(iii VOLUNTARY TERMINATION. At any time during a period of 365 consecutive
days following the occurrence of any of the events described in
Subsection 2 (i) hereof constituting a Change of Control of the
Company, you shall be entitled to voluntarily terminate your
employment with the Company ("Voluntary Termination") by a Notice of
Termination as provided in Subsection 3 (iv) hereof. Upon such
Voluntary Termination, you shall be entitled to the benefits
described in Subsection 4 (iii) hereof.
(iv) DATE OF TERMINATION, ETC. "Date of Termination" shall
mean (A) if your employment is terminated for
Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have
returned to the full-time performance of your duties
during such thirty (30) day period), and (B) if your
employment is terminated pursuant to Subsection (ii)
above or for any other reason (other than Disability),
the date specified in the Notice of Termination (which,
in the case of a termination pursuant to Subsection
(ii) above shall not be less than thirty (30) days, and
in the case of a termination pursuant to Subsection
(iii) more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided
that if, within fifteen (15) days after any Notice of
Termination is given, or if later, prior to the Date of
Termination (as determined without regard to this
provision), the party receiving such Notice of
Termination notifies the other party that a dispute
exists concerning the termination, the Date of
Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement
of the parties by a binding arbitration award, or by a
final judgement, order or decree of a court of
competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provide that
the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution
of such dispute with reasonable diligence.
Notwithstanding the pendency
<PAGE>
of any such dispute, the Company will continue to pay you full
compensation in effect when the notice giving rise to the dispute
was given (including, but not limited to, base salary) and
continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under
this Subsection are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement.
.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY
Following a Change in Control of the Company, as defined by Subsection
2(i), upon termination of your employment or during a period of
disability, you shall be entitled to the following benefits:
(i) During any period that you fail to perform your
full-time duties with the Company as a result of
incapacity due to physical or mental illness, you shall
continue to receive your base salary at the rate in
effect at the commencement of any such period, together
will all compensation payable to you under the Getchell
Gold Corporation annual incentive plan or other plan
during such period, until this Agreement is terminated
pursuant to Section 3(i) hereof. Thereafter, or in the
event your employment shall be terminated, or by reason
of your death, your benefits shall be determined under
the Company's retirement, insurance and other
compensation programs then in effect in accordance with
the terms of such programs.
(ii) If your employment shall be terminated by the Company for Cause or
Disability, or death, the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated (a) by the
Company other than for Cause of Disability or (b) upon your
Voluntary Termination as set forth in Subsection 3(iii) hereof,
then you shall be entitled to the benefits provided below:
(A) The Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company, at the time
such payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you, a lump sum severance payment (together
with the payments provided in Paragraph E below and any payment
you may receive pursuant to Paragraph D below, the "Severance
Payments") equal to 2.0 times the sum of (i) your annual base
salary and (ii) bonuses, averaged over the
<PAGE>
three (3) years (or such portion of the three (3) years during
which you actually were employed by the Company) prior to the
occurrence of the circumstances giving rise to the Notice of
Termination.
(C) Health plan, dental plan, life insurance plan, and long-term
disability plan coverage in effect on the Date of Termination
will continue for a period of thirty six (36) months from the
Date of Termination.
(D) Except for Incentive Stock Options ("ISO's") which are
hereby specifically excluded, in lieu of shares of
common stock of the Company ("Company Shares") issuable
upon exercise of outstanding options ("Options")
granted to you under the Company's Long- Term Incentive
Plan as amended from time to time, or any other plan
then in effect (which Option shall be canceled upon the
making of the payment referred to below), unless you
notify the Company by giving notice in accordance with
Section 6 hereof within fifteen (15) days after receipt
of Notice of Termination that you do not wish such
payment, the Company shall pay to you not later than
the fifth day following the Date of Termination, an
amount in cash equal to the product of (i) the
difference (to the extent that such difference is a
positive number) obtained by subtracting the per share
exercise price of each Option held by you whether or
not then fully exercisable from the higher of (A) the
closing price of Company Shares as reported on the
American Stock Exchange on the Date of Termination, or
(B) the highest per share price for Company Shares
actually paid in connection with any Change in Control
of the Company, or (C) the highest per share price
payable under the terms of the Company's Long-Term
Incentive Plans as amended from time to time and (ii)
the number of Company Shares covered by each such
Option.
(E) The Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all
such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement or in
connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") to any payment or
benefit provided hereunder).
(F) In the event that you become entitled to the payments
(the "Severance Payments") provided under paragraphs
(B), (D), and (E) above, or to any other payments or
benefits received or to be received by you in
connection with a Change in Control of the Company or
your termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement
or agreement with the Company) any person whose actions
result in a Change in Control or any person affiliated
with the Company or such person, (collectively with the
Severance Payments, the "Total Payments") if any of the
Total Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code, the Company
shall pay to you at the time specified in paragraph (G)
below, an additional amount (the "Gross-Up Payment")
such that the net amount retained by you, after
deduction of any Excise Tax on the Total Payments and
any federal income
<PAGE>
tax and Excise Tax upon the payment provided for by this
paragraph, shall be equal to the Total Payments. For purposes of
determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) the Total
Payments shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) shall be treated as subject to the Excise
Tax, unless, in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you, such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or such compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of Section 280G(b)(3)
of the Code, or are otherwise not subject to the Excise Tax, (ii)
in the amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the
total amount of the total Payment or (B) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after
applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purpose
of determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up
Payment is to be made. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into
account hereunder at the time of the termination of your
employment, you shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such reduction
plus the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable
to the Excise Tax and federal income tax imposed on the Gross-Up
Payment being repaid by you if such repayment results in a
reduction in Excise Tax and/or a federal income tax deduction)
plus interest on the amount of such repayment at the rate provided
in Section 1274(b((2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of your employment
(including by reason of any payment the existence or amount of
which cannot be determined a the time of the Gross-Up Payment),
the Company shall make an additional gross-up payment in respect
of such excess (plus any interest payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
(G) The payments provided for in paragraph (B), (D), and
(E) above shall be made not later than the fifth (5th)
day following the Date of Termination, provided,
however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company
shall pay to you on such day an estimate, as determined
in good faith by the Company, of the minimum amount of
such payments and shall pay the remainder of such
payments (together with interest at the rate provided
in Section 127(b)(2)(B) of the Code) as soon as the
amount thereof can be determined, but in no event that
the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess
shall constitute a loan by the Company to you payable
on
<PAGE>
the fifth (5th) day after demand by the Company (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iv) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment of benefit provided
for in this Section 4 be reduced by any compensation earned by you
as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by you
to the Company, or otherwise.
(v) In addition to all other amounts payable to you under this Section 4,
you shall be entitled to receive all benefits payable to you under
the 401(k) Thrift Plan, and any other plan or agreement relating to
retirement benefits.
5. RELATIONSHIP WITH LONG-TERM INCENTIVE PLANS
In the event of any inconsistency between the terms of this Agreement and
terms of the Company's Long-Term Incentive Plans, the terms of this
Agreement shall control.
6. SUCCESSORS: BINDING AGREEMENT
(i) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and
to the same extent that the Company would be required
to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in
the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment
for Good Reason following a Change in Control of the
Company, except that for purposes of implementing the
foregoing, the date of which any such succession
becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should
die while any amount would still be payable to you hereunder if you
had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there is no such
designee, to your estate.
7. NOTICES
For the purpose of this Agreement, notices and all other communications
provided for in the
<PAGE>
Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notice to
the Company shall be directed to the attention of the Board with a copy
to the Secretary of the Company, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
8. MISCELLANEOUS
No provisions of this Agreement may be modified, waiver or discharged
unless such waiver, modification or discharge is agreed to in writing and
signed by you and such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth
in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State
of Delaware. All references to Sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to such
Sections. Any payments provided for hereunder shall be paid net or any
applicable withholding required under federal, state or local law. The
obligations of the Company under Section 4 shall survive the expiration
of the term of this Agreement.
9. VALIDITY
The invalidity or unenforceable ability or any provision of this
Agreement shall not affect the validity or enforceability or any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely,
GETCHELL GOLD CORPORATION
ACCEPTED AND AGREED to on this _____ day of ___________________, 1997.
- -----------------------------------
Employee Signature
<PAGE>
Execution Copy
LOAN AGREEMENT
Dated as of September 5, 1997
by and among
GETCHELL GOLD CORPORATION,
as Borrower,
FMG INC.,
as Guarantor
and
CIBC INC.,
as Lender
0198094.04
3
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
CERTAIN DEFINITIONS AND ACCOUNTING TERMS..............................1
ARTICLE 2
LOANS.................................................................9
2.1 Revolving Loans..............................................9
2.2 Making the Advances..........................................9
2.3 Funding of Borrowings; Borrowing Options.....................9
2.4 Payment Dates...............................................10
2.5 Fees........................................................10
2.6 Reduction of the Commitment.................................11
2.7 Optional Prepayment.........................................11
2.8 Mandatory Prepayment........................................11
2.9 Amount and Allocation of Partial Prepayments................11
2.10 Conversion of Borrowings....................................11
2.11 Inability to Provide Funds..................................12
2.12 Yield Protection............................................13
2.13 Payments and Computations...................................14
2.14 Advance, Conversion, Renewal or Payment on Business Day.....14
ARTICLE 3
CONDITIONS OF LENDING................................................14
3.1 Conditions Precedent to the Initial Borrowing...............14
3.2 Conditions Precedent to All Borrowings, Conversions
and Renewals...............................15
ARTICLE 4
REPRESENTATIONS AND WARRANTIES.......................................16
4.1 Representations and Warranties of the Borrower and the
Guarantor...............................16
ARTICLE 5
COVENANTS OF THE BORROWER AND THE GUARANTOR..........................19
5.1 Affirmative Covenants.......................................19
5.2 Negative Covenants..........................................22
5.3 Financial Covenants.........................................24
0198094.04
i
<PAGE>
ARTICLE 6
ABSOLUTE CONTINUING GUARANTEE........................................25
6.1 Undertaking.................................................25
6.2 Unconditional Guarantee.....................................25
ARTICLE 7
EVENTS OF DEFAULT....................................................28
7.1 Events of Default...........................................28
ARTICLE 8
MISCELLANEOUS........................................................30
8.1 Amendments, Etc.............................................30
8.2 Notices, Etc................................................30
8.3 No Waiver; Remedies.........................................31
8.4 Accounting Terms............................................31
8.5 Costs, Expenses and Taxes...................................31
8.6 Right of Setoff.............................................32
8.7 Binding Effect; Governing Law...............................33
8.8 Consent to Jurisdiction.....................................33
8.9 Severability................................................33
8.10 Confidentiality.............................................34
8.11 Execution in Counterparts...................................34
EXHIBITS AND SCHEDULES
Exhibit A -- Promissory Note
Exhibit B -- Notice of Borrowing
Exhibit C -- Notice of Conversion or Renewal of Interest
Schedule A -- Lender Model For Determination of Net Present Value
of Future North American Mining Cash Flow
0198094.04
ii
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), made and entered into as of
September 5, 1997, by and among GETCHELL GOLD CORPORATION, a Delaware
corporation (the "Borrower"), FMG INC., a Nevada corporation (the "Guarantor"),
and CIBC INC. (the "Lender").
WITNESSETH:
WHEREAS, the Borrower is engaged in the business of exploring,
developing, owning interests in and operating precious metals properties,
including gold mines, and requires funds for working capital needs and for other
general corporate purposes;
WHEREAS, the Lender has agreed to extend credit to the Borrower, and
the Borrower wishes to avail itself of such credit in the amounts and subject to
the terms and conditions hereof for the corporate purposes described above; and
WHEREAS, to induce the Lender to enter into this Agreement and the
transactions contemplated hereby, the Guarantor shall guarantee the obligations
of the Borrower hereunder;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS AND ACCOUNTING TERMS
1.1 Certain Defined Terms. As used in this Agreement and unless
otherwise expressly indicated, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined).
"Additional Costs" has the meaning assigned to it in Section 2.11(b).
"Adjusted Revolving Commitment" means, for purposes of computing the
commitment fee only, an amount which is the lesser of (i) the Revolving
Commitment or (ii) the amount of Debt actually available to be incurred and
outstanding hereunder from time to time in compliance with the Protection Ratio.
"Advance" means a Borrowing hereunder and "Advances" means all of the
outstanding Advances.
"Advance Date" means the date of funding of a Borrowing.
"Affiliate", means any Person directly or indirectly controlling or
controlled by or under common control with the Borrower, provided that, for
purposes of this definition, "control", as used
-1-
0198094.04
<PAGE>
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Annual Operating Cash Flow" means, as at any date of determination
thereof, as to the Borrower and its subsidiaries, the Operating Cash Flow for
the immediately preceding four consecutive fiscal quarters for which the Lender
has received financial statements in compliance with Section 5.1(b)(i) or (ii)
hereof (or, if as at any date of determination the Lender shall not yet have
received financial statements delivered in compliance with Section 5.1(b)(i) or
(ii) hereof, then the Operating Cash Flow for such immediately preceding four
consecutive fiscal quarters shall be determined by the Lender in its reasonable
judgment based on such financial information as it shall have requested and
received from the Borrower).
"Asset Disposition" means any conveyance, sale, lease, assignment,
transfer or other disposition of property, assets or business of the Borrower or
any subsidiary of the Borrower in a single transaction or a series of related
transactions (other than in the ordinary course of business).
"Authorized Officer or Agent" means the president or any vice president
of the Borrower and each other officer or agent of the Borrower authorized by
the Board of Directors of the Borrower to act on behalf of the Borrower under
this Agreement executed pursuant hereto.
"Base Borrowing" means any Borrowing bearing interest at a rate based
on the Base Rate.
"Base Rate" means a fluctuating interest rate per annum equal at all
times to the greater of: (a) the rate of interest announced by the Lender in
Atlanta, Georgia from time to time in its sole discretion as the Lender's "prime
rate"; and (b) the Federal Funds Effective Rate plus 1/2 of 1% per annum. If for
any reason the Lender shall have determined (which determination shall be
conclusive, absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including without limitation, the inability
or failure of the Lender to obtain sufficient bids or publications in accordance
with the terms hereof, the rate announced by the Lender as its base rate shall
be the Base Rate until the circumstances giving rise to such inability no longer
exist. For purposes of this paragraph, "Federal Funds Effective Rate" means for
any period, a fluctuating interest rate per annum equal, for each day during
such period, to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York or,
for any day on which such rate is not so published for such day by the Federal
Reserve Bank of New York, the average of the quotations for such day for such
transactions received by the Lender from three federal funds brokers of
recognized standing selected by the Lender. Any change in the Base Rate shall
take effect on the day specified in the public announcement of change to the
Lender's prime rate. The Lender's prime rate is set by the Lender based on
various factors, including the Lender's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans. The Lender may price other loans at, above or below the
Lender's prime rate.
"Borrower" has the meaning assigned to it in the introduction to this
Agreement.
-2-
0198094.04
<PAGE>
"Borrowing" has the meaning assigned to it in Section 2.1(a).
"Breakage Costs" means all costs and losses which the Lender may incur
as a result of any repayment of principal on LIBOR Borrowings hereunder on a
date other than a scheduled maturity date for the applicable Borrowing and all
costs and losses which the Lender may incur as a result of any failure of the
Borrower to borrow hereunder after giving written notice of its intent to borrow
hereunder to the Lender pursuant to Section 2.2, the Lender's good faith
computation of such costs and losses to be conclusive and binding in the absence
of manifest error, and the amount thereof to be paid in same day funds upon
demand by the Lender.
"Business Day" means a day of the year on which banks are open for
business in New York, New York, and Atlanta, Georgia.
"Change in Control" means, at any time, (i) any Person or "group" has
acquired "beneficial ownership" (as such terms are defined under Section 13d-3
of and Regulation 13D under the Securities Exchange Act of 1934, as amended)
either directly or indirectly, of more than thirty percent (30%) of the
outstanding shares of stock of the Borrower having the right to vote for the
election of directors of the Borrower under ordinary circumstances or (ii) more
than fifty percent (50%) of the Persons constituting the Borrower's board of
directors at the beginning of any consecutive twenty-four (24) month period
shall have been replaced by new directors not nominated for membership on the
board of directors by two-thirds of the directors who were directors at the
beginning of such period.
"ChemFirst Note" has the meaning assigned to it in Section 5.2(a).
"Closing Date" means September 5, 1997.
"Debt" means (i) obligations under the Note and this Agreement and
financial Letter of Credit Obligations; (ii) indebtedness for borrowed money or
for the deferred purchase price of property or services where such purchase
price is deferred for more than sixty (60) days, (iii) obligations as lessee
under leases which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases, and (iv) obligations
under direct or indirect guarantees in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clause (ii) or (iii) above.
"Dollars" and the sign "$" each mean lawful money of the United States
of America.
"Environmental Laws" means any Governmental Requirement pertaining to
land use, air, soil, surface water, groundwater (including the protection,
cleanup, removal, remediation or damage thereof), public or employee health or
safety or any other environmental matter, including, without limitation, the
following laws as the same may be amended from time to time: (1) Clean Air Act
(42 U.S.C. ss. 7401, et seq.); (2) Clean Water Act (33 U.S.C. ss. 1251, et
seq.); (3) Resource Conservation and Recovery Act (42 U.S.C. ss. 6901, et seq.);
(4) Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") (42 U.S.C. ss. 9601, et seq.); (5) Safe
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Drinking Water Act (42 U.S.C. ss. 300f, et seq.); (6) Toxic Substances Control
Act (15 U.S.C. ss. 2601, et seq.); (7) Rivers and Harbors Act (33 U.S.C. ss.
401, et seq.); (8) Endangered Species Act (16 U.S.C. ss. 1531, et seq.); (9)
Occupational Safety and Health Act (29 U.S.C. ss. 651, et seq.); (10) Mine
Safety and Health Act of 1977; (11) Migratory Bird Treaty Act; (12) Federal Land
Policy and Management Act; (13) National Environmental Policy Act; and (14)
National Historic Preservation Act; together with any other foreign or domestic
laws (federal, state or local) relating to emissions, discharges, releases or
threatened releases of any Hazardous Substance into ambient air, land, surface
water, groundwater, personal property or structures, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, discharge or handling of any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning assigned to that term in Section 7.1.
"Event of Loss" means, with respect to any property, (i) any loss,
destruction or damage of such property or (ii) any condemnation, seizure or
taking, by exercise of the power of eminent domain or otherwise, of such
property, or confiscation of such property or the requisition of the use of such
property.
"Funds" means lawful money of the United States of America.
"Getchell Property" means the 33,000-acre tract of property of the
Borrower located in the Potosi Mining District in north central Nevada.
"Governmental Agency" means the federal government of the United States
of America and the government of any state, county, municipality or other
political subdivision thereof or any governmental body, agency, authority,
department or commission (including without limitation any taxing authority) or
any instrumentality or officer thereof (including without limitation any court
or tribunal) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any corporation,
partnership or other entity directly or indirectly owned by or controlled by the
foregoing.
"Governmental Requirements" means all legal requirements in effect from
time to time, including all laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, and such other directions and requirements of all Governmental
Agencies and all instruments of record, foreseen or unforeseen and ordinary or
extraordinary, including but not limited to any change in any law, regulation or
the interpretation thereof by any Governmental Agency, relating at any time to
the business or operations of the Borrower or the Guarantor or to any of the
property owned, leased or used by the Borrower or the Guarantor, including,
without limitation, the exploration, development, construction, mining,
processing, ownership, operation and maintenance of the Getchell Property.
"Guarantor" has the meaning assigned to it in the introduction to this
Agreement.
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"Hazardous Substance" means any pollutant, contaminant, toxic or
hazardous substance, material, constituent or waste as such terms are defined in
or pursuant to any Environmental Law.
"Indemnitees" has the meaning assigned to it in Section 8.5(c).
"Interest Coverage Ratio" means, as at any date, for the immediately
preceding four consecutive fiscal quarters, the ratio determined by dividing (i)
Annual Operating Cash Flow by (ii) Interest Expense for such period; provided,
however, that (x) for the fiscal quarter ended December 31, 1998, the ratio
shall be determined solely by reference to the preceding fiscal quarter ended
such date, (y) for the fiscal quarter ended March 31, 1999, the ratio shall be
determined solely by reference to the preceding two consecutive fiscal quarters
ended such date, and (z) for the fiscal quarter ended June 30, 1999, the ratio
shall be determined solely by reference to the preceding three consecutive
fiscal quarters ended such date.
"Interest Expense" means, with respect to Debt of the Borrower and its
subsidiaries on a consolidated basis, the sum of all (i) interest and all
amortization of debt discount and expense (including, without limitation,
interest that is imputed in accordance with generally accepted accounting
principles on capitalized lease obligations that are included in Debt) and (ii)
commitment fees, commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and net costs
under interest rate contracts, in each case that were due and payable relating
to such Debt during the immediately preceding four consecutive fiscal quarters
for which the Lender has received financial statements in compliance with
Sections 5.1(b)(i) or (ii) hereof (or, if as at any date of determination the
Lender shall not yet have received financial statements delivered in compliance
with Sections 5.1(b)(i) or (ii) hereof, then Interest Expense for such
immediately preceding four consecutive fiscal quarters shall be determined by
the Lender in its reasonable judgment based on such financial information as it
shall have requested and received from the Borrower).
"Interest Period" means, with respect to any Borrowing, a period from
the Advance Date or date of conversion or renewal with respect to such Borrowing
to a date which is (a) one (1), two (2), three (3) or six (6) months thereafter,
in the case of a LIBOR Borrowing; provided that:
(a) The Interest Period for any Borrowing shall commence on the Advance
Date or date of conversion or renewal with respect to such Borrowing;
(b) If any Interest Period would otherwise expire on a day which is not
a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided, however, that if any Interest Period in respect of a
LIBOR Borrowing would otherwise expire on a day which is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(c) Any Interest Period in respect of a LIBOR Borrowing which begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (d) below, end on the last Business Day of a
calendar month;
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(d) No Interest Period for any Borrowing shall extend beyond the
Maturity Date;
(e) There shall be no more than five (5) different Interest Periods
respecting Borrowings at any one time; and
(f) If the Borrower shall fail to request an initial Interest Period
with respect to a LIBOR Borrowing pursuant to Section 2.3 hereof, the Borrower
shall be deemed to have selected an Interest Period of one (1) month.
"Lender" has the meaning assigned to it in the introduction to this
Agreement.
"Letter of Credit" means any financial (but not performance) standby
letter of credit issued for the account of the Borrower.
"Letter of Credit Obligations" means, as at the time of determination
thereof, all liabilities, whether actual or contingent, of the Borrower with
respect to Letters of Credit, including the sum of (a) Letter of Credit
Reimbursement Obligations and (b) the aggregate undrawn face amount of
outstanding Letters of Credit.
"Letter of Credit Reimbursement Obligations" means, at any time, the
aggregate of the obligations of the Borrower under all reimbursement agreements
in respect of all unreimbursed drawings under Letters of Credit.
"LIBOR" means the rate (rounded upwards if necessary to the nearest
whole one-sixteenth of one percent (1/16%)) equal to the product of Base LIBOR
times Statutory Reserves. "Base LIBOR" means the rate per annum determined by
the Lender (which determination shall be conclusive in the absence of manifest
error) to be the average of the rate at which it is offered Dollars deposits in
the interbank Eurodollar market at about 11:00 A.M. London time, two (2)
Business Days prior to the beginning of the Interest Period for any LIBOR
Borrowing, for delivery on the first day thereof for the number of months
comprised therein and in an amount equal to the amount of such LIBOR Borrowing.
"LIBOR Borrowing" means any Borrowing bearing interest at a rate based
on LIBOR.
"Maturity Date" means September 1, 2000.
"Net Present Value of Future North American Mining Cash Flow" means, at
any time, the net present value of the Borrower's future North American mining
operations cash flow as determined by the Lender substantially in the manner
reflected on Schedule A attached hereto in accordance with the Lender's current
policies and practices applicable to mine financings. Such value shall be
recalculated at least annually after Borrower's delivery to the Lender of the
business plan and mine plan referred to in Section 5.1(b)(iii) hereof.
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"Note" means a promissory note in the form of Exhibit A hereto signed
by an Authorized Officer or Agent of the Borrower delivered by the Borrower to
the Lender, including all renewals, extensions and replacements thereof.
"Notice of Borrowing" means a notice of Borrowing by the Borrower, on
the Borrower's letterhead and in the form set forth in Exhibit B hereto, signed
by an Authorized Officer or Agent of the Borrower.
"Notice of Conversion or Renewal of Interest" means a notice by the
Borrower, on the Borrower's letterhead and in the form set forth in Exhibit C
hereto, signed by an Authorized Officer or Agent of the Borrower.
"Operating Cash Flow" means, for any period, the consolidated net
income (or net loss) of the Borrower and its subsidiaries during such period (a)
plus, but only to the extent such items shall have been deducted in determining
such net income (or net loss), the sum of (i) all interest, fees and costs paid
or accrued during such period on Debt, including, without limitation, interest
that is imputed in accordance with generally accepted accounting principles on
capitalized lease obligations that are included in Debt, (ii) depreciation and
amortization of assets, and (iii) income taxes paid or accrued during such
period; (b) minus the sum of (i) interest and other income, (ii) income derived
from other than the consolidated operations of the Borrower, (iii) income tax
benefits, and (iv) to the extent not already deducted in determining such net
income, all corporate overhead expenses of the Borrower; all of the above items
exclusive of minority interests (except to the extent of cash or cash
equivalents in respect thereof actually received by the Borrower in such
period); as to all of the foregoing, as determined in accordance with generally
accepted accounting principles consistently applied; provided, that,
notwithstanding any of the foregoing, regardless of the receipt of any proceeds
or any other distributions therefrom, there shall not be considered in
calculating Operating Cash Flow any subsidiary which is not a Guarantor
hereunder.
"Person" means an individual, partnership, corporation (including a
business trust or bank), joint venture or other entity, or a Governmental
Agency.
"Plan" means a pension plan providing benefits for employees of the
Borrower or any affiliate (as such term is defined in the definition of
"Termination Event" herein) and covered by Title IV of ERISA.
"Protection Ratio" means, as at any date, the ratio determined by
dividing (i) the Net Present Value of Future North American Mining Cash Flow by
(ii) Total Senior Debt.
"Regulatory Change" shall mean, with respect to the Lender, any change
after the date of this Agreement in United States federal, state or foreign laws
or regulations (including Regulation D of the Federal Reserve Board) or the
adoption or making after such date of any interpretations, directives or
requests applying to a class of banks including the Lender of or under any
United States federal or state, or any foreign, laws or regulations (whether or
not having the force of law) by any
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court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Revolving Advance" has the meaning assigned to it in Section 2.1(a).
"Revolving Commitment" means as to the Lender initially $25,000,000, as
such amount may be subject to reduction or assignment in accordance with the
terms hereof.
"Statutory Reserves" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including, without
limitations, any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Federal Reserve Board for a member
bank in the Federal Reserve System, for Eurocurrency Liabilities (as defined in
Regulation D of the Federal Reserve Board). Such reserve percentages shall
include, without limitation, those imposed under such Regulation D LIBOR
Borrowings as shall be deemed to constitute Eurocurrency Liabilities and as such
shall be deemed to be subject to such reserve requirements without benefit of or
credit for proration, exceptions or offsets which may be available from time to
time to the Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Taxes" has the meaning assigned to it in Section 6.2(i).
"Termination Event" means (i) a Reportable Event described in section
4043 of ERISA and the regulations issued thereunder (other than a Reportable
Event not subject to the provision for thirty (30) day notice to the Pension
Benefit Guaranty Corporation under such regulations), or (ii) the withdrawal of
the Borrower or any of its affiliates from a Plan during a plan year in which it
was a "substantial employer" as defined in section 4001(a)(2) of ERISA, or (iii)
the filing of a notice of intent to terminate a Plan in a distress termination
or the treatment of a Plan amendment as a distress termination under section
4041(c) of ERISA, or (iv) the institution of proceedings to terminate a Plan by
the Pension Benefit Guaranty Corporation under section 4042 of ERISA, or (v) any
other event or condition which might constitute grounds under section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan. For purposes of this definition, the term "affiliate" means any member
(whether or not incorporated) of a group which is under common control (within
the meaning of the regulations under section 414 of the Internal Revenue Code of
1986, as amended) and of which the Borrower is a member.
"Total Senior Debt" means, for the Borrower and its subsidiaries on a
consolidated basis, the aggregate outstanding principal balance of: (i) the
obligations of the Borrower under the Note and this Agreement and financial
Letter of Credit Obligations, (ii) the ChemFirst Note, and (iii) all other Debt
other than capitalized leases and Debt which is subordinated on terms and
conditions acceptable to the Lender. Total Senior Debt shall be determined by
the Lender, in its reasonable judgment, based upon its review of a certificate
of the Borrower delivered to the Lender which shall set forth in reasonable
detail a calculation of Total Senior Debt, together with such financial
information as the Lender shall have requested and received from the Borrower,
or in the absence
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of such certificate, such other pertinent financial information as the Lender in
its sole discretion shall deem appropriate.
ARTICLE 2
LOANS
2.1 Revolving Loans.
(a) Revolving Advances. The Lender agrees on the terms and
conditions set forth herein to make advances ("Revolving Advances") on a
revolving basis to the Borrower of various amounts of Funds from time to time on
any Business Day during the period from the Closing Date to but not including
the Maturity Date, provided that each such Revolving Advance shall be limited to
an amount which, when added to the principal amount of all outstanding Revolving
Advances, shall not exceed the Revolving Commitment. Each borrowing under this
Section 2.1 (a "Borrowing") shall be in an aggregate amount of (x) in the case
of LIBOR Borrowings, five hundred thousand dollars ($500,000) and (y) in the
case of Base Borrowings, one hundred thousand dollars ($100,000), or, in either
case in an integral multiple of one hundred thousand dollars ($100,000) in
excess of the applicable minimum. Subject to the terms and conditions of this
Agreement, Borrowings which are repaid or prepaid may be reborrowed.
(b) Note. The Borrower shall execute and deliver to the Lender
on or prior to the Closing Date a Note to evidence the Lender's Revolving
Advances.
2.2 Making the Advances. Each Borrowing shall be made not later than 11
a.m., Atlanta time, upon one (1) Business Day's notice, in the case of a Base
Borrowing, and three (3) Business Days' notice, in the case of a LIBOR
Borrowing, by irrevocable written notice pursuant to a Notice of Borrowing from
the Borrower to the Lender setting forth (i) the Advance Date, which shall be a
Business Day, (ii) the amount of the Borrowing, (iii) whether the Borrowing is
to be a Base Borrowing or a LIBOR Borrowing and the applicable Interest Period
(if the proposed Borrowing is a LIBOR Borrowing), (iv) such additional
information as is required by the Notice of Borrowing. In the event that the
Borrower fails to borrow after delivering a Notice of Borrowing hereunder to the
Lender, the Borrower shall pay any resulting Breakage Costs to the Lender, and
provided such Breakage Costs are promptly paid upon the request of the Lender,
such failure to borrow shall not be a default hereunder.
2.3 Funding of Borrowings; Borrowing Options.
(a) Not later than noon (Atlanta time) on the date of a
Borrowing, upon the satisfaction of the conditions set forth in Article 3 with
respect to such Borrowing, the Lender shall make available to the Borrower the
proceeds of such Borrowing at the Lender's Atlanta, Georgia address set forth
below. All repayments of Advances and cash payments of interest shall be made to
the Lender at said address.
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(b) Borrowings may, at the option of the Borrower, be Base
Borrowings or LIBOR Borrowings. Borrowings shall bear interest from the Advance
Date on the unpaid principal amount thereof from time to time outstanding until
due and payable (whether on the Maturity Date, upon acceleration or otherwise)
(i) in the case of Base Borrowings, at a fluctuating rate per annum equal to the
Base Rate, as from time to time in effect, and (ii) in the case of LIBOR
Borrowings, at a rate per annum equal to the sum of LIBOR for the applicable
Interest Period plus three-fourths of one percent (3/4%); provided, however,
that if the sum of the principal amount of all outstanding Revolving Advances
equals or exceeds fifteen million dollars ($15,000,000), then in the case of
LIBOR Borrowings the rate per annum shall be equal to the sum of LIBOR for the
applicable Interest Period plus seven-eighths of one percent (7/8%); provided,
further that any interest rate for Borrowings hereunder shall be in no event
more than the maximum allowed under applicable law. The unpaid balance of
principal and, to the extent permitted by law, any accrued interest on Base
Borrowings and LIBOR Borrowings shall bear interest payable on demand from the
Maturity Date (or such earlier date as such principal has become due by
acceleration pursuant to Section 7.1 or by operation of Section 2.8), whether
scheduled or accelerated, until paid in full, at a rate per annum equal to (in
the case of LIBOR Borrowings) LIBOR plus two percent (2%) until the end of the
applicable Interest Period and thereafter at a rate per annum equal to the Base
Rate plus one percent (1%), which rate shall change as the Base Rate changes, or
(in the case of Base Borrowings) the Base Rate plus one percent (1%), which rate
shall change as the Base Rate changes.
2.4 Payment Dates. The Borrower shall pay interest on each outstanding
Base Borrowing in arrears on the first Business Day of each quarter, and on the
Maturity Date. The Borrower shall pay interest on each outstanding LIBOR
Borrowing on the last day of the Interest Period for such Borrowing but not less
frequently than every three (3) months following the date of such Borrowing, and
on such date as the LIBOR Borrowing is paid in full. The entire balance of all
Advances shall be repaid not later than the Maturity Date. All payments
hereunder shall be applied first to interest on past due interest, if any,
second to interest due on the outstanding principal balance of the Note as
designated by the Borrower (or, if the Borrower makes no designation, as
designated by the Lender), and then to principal on Base Borrowings or on LIBOR
Borrowings with Interest Periods expiring on the date of payment as designated
by the Borrower (or, if the Borrower makes no designation, as designated by the
Lender).
2.5 Fees.
(a) Commitment Fee. The Borrower agrees to pay in Dollars to
the Lender on the first Business Day of each calendar quarter, commencing on
October 1, 1997, up to and including the Maturity Date, a commitment fee for the
Revolving Commitment at the rate of one-quarter of one percent (1/4%) per annum
of the daily average of the unused amount of the Adjusted Revolving Commitment
(determined by subtracting the principal amount of all outstanding Advances from
the amount of the Adjusted Revolving Commitment) during the preceding calendar
quarter or portion thereof. The first payment shall be made for the period from
the Closing Date through September 30, 1997.
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(b) Structuring Fee. The Borrower agrees to pay to the Lender
on the Closing Date the structuring fee provided in the letter agreement of even
date herewith between the Borrower and the Lender.
2.6 Reduction of the Commitment. The Borrower shall have the right,
upon at least five (5) days' written notice to the Lender, to terminate in whole
or in part the unused portion of the Revolving Commitment, provided that each
partial reduction of such Commitment shall be in the aggregate amount of five
million dollars ($5,000,000) or any greater integral multiple of one million
dollars ($1,000,000). The Borrower shall designate in its notice to the Lender
the amount of the Revolving Commitment giving effect to such reduction.
2.7 Optional Prepayment. The Borrower may from time to time, repay
Advances hereunder before the Maturity Date without premium or penalty, provided
that any such prepayment shall be made together with interest accrued thereon to
the date of such repayment and any related Breakage Costs, and provided, further
that any prepayment hereunder must be made on a Business Day. The amount of any
such prepayment on any date shall be not less than one million dollars
($1,000,000) or any integral multiple of one hundred thousand dollars ($100,000)
in excess of such minimum amount (or, if less, the entire outstanding principal
amount of Advances).
2.8 Mandatory Prepayment.
(a) Advances in Excess of Revolving Commitment. If on any date
the aggregate principal amount of Advances outstanding exceeds the amount of the
Revolving Commitment in effect on such date, the Borrower will on such date
repay to the Lender such amount, together with interest accrued thereon to the
date of such payment and any Breakage Costs, as will cause the Advances
outstanding after such repayment to be equal to or less than the amount of the
Revolving Commitment.
(b) Asset Dispositions. The Borrower shall prepay any
Advances, and the Revolving Commitment shall be permanently and irrevocably
reduced, by an amount equal to one hundred percent (100%) of the aggregate net
proceeds in excess of $1,000,000 realized in any fiscal year by the Borrower and
its subsidiaries from any and all Asset Dispositions and Events of Loss to the
extent that such aggregate net proceeds are not reinvested by the Borrower in
substantially similar assets within 180 days after the date of such disposition.
2.9 Amount and Allocation of Partial Prepayments. In the case of any
partial prepayments of Advances, the aggregate amount repaid shall be allocated
by the Lender among all of the Borrowings at the time outstanding in such manner
as shall minimize to the greatest extent reasonably possible the amount of any
Breakage Costs.
2.10 Conversion of Borrowings. Unless an Event of Default shall have
occurred and be continuing and subject to the terms and conditions of this
Agreement, the Borrower shall have the right at any time or from time to time
prior to the Maturity Date to convert Base Borrowings to LIBOR Borrowings and
LIBOR Borrowings to Base Borrowings in the same aggregate principal amount, or
to select a new Interest Period for an outstanding LIBOR Borrowing, provided
that: (i)
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the Borrower shall give the Lender notice of each such conversion or renewal as
provided below; (ii) LIBOR Borrowings may be converted or renewed (upon at least
five (5) Business Days' notice to the Lender pursuant to a Notice of Conversion
or Renewal of Interest) only on the last day of an Interest Period for such
Borrowings; (iii) Base Borrowings may be converted at any time upon two (2)
Business Days' notice to the Lender pursuant to a Notice of Conversion or
Renewal of Interest in a minimum aggregate principal amount of one million
dollars ($1,000,000). Each Notice of Conversion or Renewal of Interest shall
specify the Borrowings to be converted or renewed, whether such Borrowings are
being converted or renewed, the duration of the Interest Period selected and the
date of conversion or renewal (which shall be a Business Day). In the event that
the Borrower fails to renew any Interest Period for any LIBOR Borrowing before
the expiration of such Interest Period, such Borrowing will be automatically
converted into a Base Borrowing on the last day of the then current Interest
Period for such Borrowing.
2.11 Inability to Provide Funds.
(a) Funds at LIBOR. Notwithstanding anything to the contrary
in this Agreement, the Lender shall not be liable for any failure to comply with
its obligations under or pursuant to this Article, and the Lender shall be
entitled to terminate any arrangements respecting LIBOR Borrowings entered into
under this Article without liability, if such failure is caused directly or
indirectly, wholly or partly, by:
(i) Lack of availability in the interbank Eurodollar
market of Dollar deposits in the principal amount and for a period
equal to the relevant Interest Period; or
(ii) Failure of LIBOR to accurately reflect the
cost of the Lender of making, funding or maintaining the LIBOR Borrowing; or
(iii) Any change in financial, political or economic
conditions or currency exchange rates making it impractical for the
Lender to make, fund or maintain the LIBOR Borrowing; or
(iv) Any change in applicable law or regulation or in
the interpretation thereof making it unlawful or impractical for the
Lender to make, fund or maintain the LIBOR Borrowing.
The Lender shall give prompt notice of the foregoing to the Borrower and upon
the sending of such notice, any obligation of the Lender to make, fund or
maintain the LIBOR Borrowing shall terminate and the Lender shall make, fund or
maintain such Borrowing as a Base Borrowing.
(b) Commercial Impracticability. In the event that, by reason
of any Regulatory Change, the Lender either (i) incurs any incremental costs
which the Lender determines are attributable to its making or maintaining any
Advances or its obligation to make any Advances hereunder, or any reduction in
any amount receivable by the Lender hereunder in respect of any of such Advances
or such obligation (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs") based on or measured by the excess above
a specified level
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of the amount of a category of deposits or other liabilities of the Lender which
includes deposits by reference to which the interest rate on LIBOR Borrowings or
Base Borrowings is determined as provided in this Agreement or a category of
extensions of credit or other assets of the Lender which includes LIBOR
Borrowings or Base Borrowings or (ii) becomes subject to restrictions on the
amount of such category of liabilities or assets which it may hold, then, if the
Lender so elects by notice to the Borrower, the obligation of the Lender to make
additional Advances of such type hereunder shall be suspended until such
Regulatory Change ceases to be in effect (in which case the provisions of
Section 2.11(a) hereof shall be applicable).
2.12 Yield Protection.
(a) Increased Costs. If due to (i) the imposition or increase
of the taxes (other than income taxes) on amounts payable by the Borrower
hereunder or (ii) the introduction of, or any Regulatory Change (including,
without limitation, any change by way of imposition or increase of reserve
requirements) or (iii) the compliance by the Lender with any guideline or
request from any central bank or other governmental authority respecting capital
requirements or any other matter (whether or not having the force of law), there
shall be any increase in the cost to the Lender of agreeing to make or making,
funding or maintaining Advances or resulting in a reduction of the amounts which
the Lender is entitled to receive and retain hereunder, then the Borrower shall
from time to time, upon demand by the Lender, pay to the Lender additional
amounts sufficient to indemnify the Lender against such cost.
(b) Capital Requirements. In the event that at any time after
the date of this Agreement any Regulatory Change shall, in the reasonable
opinion of the Lender, require that its Revolving Commitment (or any portion
thereof) be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital or equity to be maintained by the
Lender or any corporation controlling or affiliated with the Lender and such
Regulatory Change shall have the effect of reducing the rate of return on the
Lender's or such corporation's capital or equity, as the case may be, as a
consequence of the Lender's obligations hereunder to a level below that which
the Lender or such corporation, as the case may be, could have achieved but for
such Regulatory Change (taking into account the Lender's or such corporation's
policies, as the case may be, with respect to capital adequacy and any payments
made to the Lender pursuant to Section 2.12(a) which relate to capital adequacy)
by an amount reasonably deemed by the Lender to be material, then from time to
time following written notice by the Lender to the Borrower of such Regulatory
Change, within five (5) days after demand by the Lender, the Borrower shall pay
to the Lender such additional amount or amounts as will compensate the Lender or
such corporation, as the case may be, for such reduction.
(c) Payment of Compensation. If the Lender becomes entitled to
claim any additional amounts pursuant to this Section 2.12, it shall promptly
notify the Borrower of the event by reason of which it has become so entitled. A
certificate setting forth in reasonable detail the method of computation of any
additional amounts payable pursuant to this Section 2.12, submitted by the
Lender to the Borrower, shall be delivered to the Borrower promptly after the
initial incurrence of such additional amounts and shall be conclusive in the
absence of manifest error. The
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covenants in this Section 2.12 shall survive the termination of this Agreement
and the payment of the Note.
2.13 Payments and Computations. The Borrower shall make each payment
hereunder and under the Note not later than 11 A.M. (Atlanta time) on the day
when due in lawful money of the United States of America to the Lender at its
address set forth after its signature to this Agreement in immediately available
funds. The Borrower hereby authorizes the Lender, if and to the extent payment
is not made when due hereunder, to charge from time to time against the
Borrower's account with the Lender any amount so due. All computations of
interest under the Note and the commitment fee specified in Section 2.5 hereof
shall be made by the Lender on the basis of a year of three hundred sixty (360)
days (or, in the case of Base Borrowings, three hundred sixty-five (365) days)
for the actual number of days (including the first day but excluding the last
day) elapsed.
2.14 Advance, Conversion, Renewal or Payment on Business Day. All
Advances or payments to be made hereunder and all renewals of Interest Periods
for LIBOR Borrowings shall be made on a Business Day. Whenever any Advance,
conversion or payment in respect of a Base Borrowing to be made hereunder shall
be stated to be due on a day which is not a Business Day, such Advance, return,
conversion, renewal or 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
payment of interest or commitment fee, as the case may be. Whenever any payment,
conversion or renewal in respect of a LIBOR Borrowing to be made hereunder or
under the Note shall be stated to be due on a day which is not a Business Day,
such payment, conversion or renewal shall be made on the next preceding Business
Day.
ARTICLE 3
CONDITIONS OF LENDING
3.1 Conditions Precedent to the Initial Borrowing. The obligation of
the Lender to make its initial Advance hereunder is subject to the conditions
precedent that the Lender shall have received the following on or before the
initial Advance, each dated the Closing Date, in form and substance satisfactory
to the Lender:
(a) This Agreement and the Note duly executed by an
Authorized Officer or Agent of the Borrower;
(b) Certified copies of the resolutions of the Board of
Directors of the Borrower approving and authorizing the execution and delivery
of this Agreement and the Note, and of all documents evidencing other necessary
corporate action and governmental approvals with respect to this Agreement and
the Note;
(c) Certified copies of the charter and by-laws of the
Borrower, and a certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures
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of the officers of the Borrower authorized to sign this Agreement and the Note
and the other documents to be delivered hereunder;
(d) Certified copies of the resolutions of the Board of
Directors of the Guarantor approving and authorizing the execution and delivery
of this Agreement by the Guarantor, and of all documents evidencing other
necessary corporate action and any governmental approvals with respect to the
Agreement;
(e) Certified copies of the charter and by-laws of the
Guarantor, and a certificate of the Secretary or an Assistant Secretary of the
Guarantor certifying the names and true signatures of the officers of the
Guarantor authorized to sign the Agreement;
(f) A favorable opinion of counsel for the Borrower and the
Guarantor in form satisfactory to the Lender;
(g) Evidence that the structuring fee referred to in Section
2.5(b) has been disbursed to the Lender; and
(h) A satisfactory review by the Lender's environmental risk
group of the environmental policies, procedures and liabilities of the Borrower
and the Guarantor.
3.2 Conditions Precedent to All Borrowings, Conversions and Renewals.
The obligation of the Lender to make any Advance including the initial Advance
(and, with respect to subsection (a)(iii) below, the obligation of the Lender to
make each conversion or renewal in respect of an outstanding Advance) shall be
subject to the further conditions precedent that on the date of such Advance
(and, with respect to subsection (a)(iii) below, on the date of such conversion
or renewal):
(a) The following statements shall be true: (i) the
representations and warranties contained in Article 4 hereof are true and
correct and with the same effect as though made as of the date of such Advance,
and since December 31, 1996 there has been no material adverse change in the
business or financial condition of the Borrower or the Guarantor, (ii) there is
no pending , or to the knowledge of the Borrower or the Guarantor, threatened,
action, suit or proceeding affecting the Borrower or the Guarantor before any
court, Governmental Agency or arbitrator which could reasonably be expected to
have a material adverse effect upon the business or financial condition of the
Borrower or the Guarantor, and (iii) no event or condition has occurred and is
continuing, or would result from such Borrowing or the application of the
proceeds thereof, which constitutes an Event of Default or would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both; and the giving of the Notice of Borrowing (and, with respect to subsection
(a) (iii) only, the giving of the Notice of Conversion or Renewal of Interest)
by the Borrower shall be deemed to constitute a representation and warranty by
the Borrower that at the date of such Advance the foregoing statements are true;
and
(b) The Lender shall have received for such Advance the Notice
of Borrowing or the Notice of Conversion or Renewal of Interest, as appropriate.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Borrower and the Guarantor.
The Borrower and the Guarantor each represent and warrant as follows:
(a) Organization, Good Standing. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and the Guarantor is a corporation duly incorporated, validly existing
and in good standing under the laws of Nevada. The Borrower and the Guarantor
are and at all times will be duly qualified or otherwise authorized to do
business wherever necessary to own or lease their properties and to conduct
their businesses and operations.
(b) Authorization, No Conflict. The execution, delivery and
performance by the Borrower of this Agreement and the Note, and by the Guarantor
of this Agreement, have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the stockholders
of the Borrower or the Guarantor, (ii) contravene the Borrower's or the
Guarantor's charter or by-laws, (iii) violate any provision of any law, rule,
regulation (including, without limitation, Regulation X of the Federal Reserve
Board), order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Borrower or the Guarantor, (iv)
result in a breach of or constitute a default under or require the consent of
any party pursuant to any indenture or loan or credit agreement or any other
agreement, lease or instrument to which the Borrower or the Guarantor is a party
or by which they or their properties may be bound or affected, or (v) result in
or require the creation or imposition of any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance of any nature upon or
with respect to any of the properties now owned or hereafter acquired by the
Borrower or the Guarantor; and neither the Borrower nor the Guarantor is in
material default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, agreement,
lease or instrument.
(c) No Other Action Required. No authorization or approval or
other action by, and no notice to or filing with, any Governmental Agency or
regulatory body is required for the due execution, delivery and performance by
the Borrower of this Agreement and the Note or for the due execution, delivery
and performance by the Guarantor of this Agreement.
(d) Validity and Binding Nature of Agreement and Note. This
Agreement is, and the Note when delivered hereunder will be, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms, and this Agreement is a legal, valid and
binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and except to the extent that equitable remedies,
including specific performance and injunction, may be granted only in the
discretion of a court of competent jurisdiction.
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(e) Other Agreements. Neither the Borrower nor the Guarantor
is a party to any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate restriction which
would reasonably be expected to have a material adverse effect on the business,
properties, assets, operations or condition, financial or otherwise, of the
Borrower or the Guarantor, or on the ability of the Borrower to carry out its
obligations under this Agreement or the Note or on the ability of the Guarantor
to carry out its obligations under this Agreement.
(f) Financial Statements. The consolidated balance sheets of
the Borrower at December 31, 1996 and June 30, 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows of
the Borrower for the year and the quarter then ended, copies of which have been
furnished to the Lender, fairly present the financial condition of the Borrower
and the Guarantor as at such dates, and the results of their operations and
their cash flows for the year and the quarter ended on such dates, in accordance
with generally accepted accounting principles consistently applied. Since
December 31, 1996 there has been no material adverse change in the financial
condition or operations of the Borrower or the Guarantor.
(g) Litigation, Contingent Liabilities, Taxes. There is no
pending or, to the Borrower's knowledge, threatened action or proceeding
affecting the Borrower or the Guarantor or any of their respective properties
before any court, Governmental Agency or arbitrator, which could have a
materially adverse effect on the financial condition or operations of the
Borrower or the Guarantor. Neither the Borrower nor the Guarantor has any
material contingent liabilities not provided for or disclosed in the financial
statements referred to in Section 4.1(f).
(h) Condition of Business and Properties. Neither the
business, properties or operations of the Borrower or of the Guarantor as of the
date of this Agreement are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy or other casualty (whether or not covered by
insurance) materially and adversely affecting such business, properties or
operations of the Borrower or of the Guarantor.
(i) Compliance With Applicable Laws. All work performed and
other actions or omissions to act at the properties of the Borrower and the
Guarantor and the current condition of the properties of the Borrower and the
Guarantor comply in all material respects with all applicable laws, ordinances,
rules and regulations of any Governmental Agency and with all directives, rules
and regulations of officers of every Governmental Agency having jurisdiction
over the properties and operations of the Borrower and the Guarantor, and there
are no existing material violations of any such applicable laws, ordinances,
directives, rules or regulations.
(j) Environmental Matters. To the best knowledge of the
Borrower and the Guarantor, except for normal or anticipated circumstances
incurred in the regular course of the business of the Borrower and the
Guarantor, which circumstances do not have a materially adverse effect on the
respective financial condition or operations of the Borrower or the Guarantor,
and except as previously disclosed in writing to the Lender, (i) the properties
and operations of the Borrower and the Guarantor comply in all material respects
with all applicable Environmental Laws; (ii) none of the properties or
operations of the Borrower or the Guarantor is subject to any judicial
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or administrative proceeding alleging the material violation of any
Environmental Laws; (iii) none of the properties or operations of the Borrower
or the Guarantor is the subject of any investigation concerning any use or
release of any Hazardous Substance; (iv) neither the Borrower nor the Guarantor
nor any predecessor of the Borrower has filed any notice under any Environmental
Laws indicating past or present material treatment, storage or disposal of a
hazardous waste or reporting a material spill or release of a Hazardous
Substance into the environment; (v) neither the Borrower nor the Guarantor has
any material contingent liability in connection with any release of any
Hazardous Substance into the environment, including any material liability
arising in connection with the acts or omissions of any past owner or operator
of any of the premises owned, leased or used by the Borrower or the Guarantor;
(vi) none of the Borrower's or the Guarantor's operations involve the
generation, transportation, treatment, storage or disposal of Hazardous
Substances (other than in the normal course of and incidental to their business
operations); (vii) neither the Borrower nor the Guarantor has improperly
disposed of any material amount of any Hazardous Substance in, on or about any
premises owned, leased or used by it or them; (viii) each surface impoundment or
underground storage tank located in, on or about any of the premises owned,
leased or used by the Borrower or the Guarantor complies in all material
respects with applicable Environmental Laws; and (ix) (A) no lien in favor of
any Governmental Agency for any liability under Environmental Laws exists, and
(B) no claim for damages arising from or costs incurred by such Governmental
Agency in response to a release of any Hazardous Substance into the environment
is pending or attached to any of the premises owned, leased or used by the
Borrower or the Guarantor.
(k) Taxes. Each of the Borrower and the Guarantor has timely
filed all tax returns and reports required to have been filed and has paid all
taxes required to have been paid by it, except (i) taxes that are being
contested in good faith by appropriate proceedings and for which the Borrower or
the Guarantor, as applicable, has set aside on its books adequate reserves, or
(ii) to the extent that the failure to do so could not reasonably be expected to
result in a material adverse effect on the financial condition or operations of
the Borrower or the Guarantor.
(l) Liens. None of the assets of the Borrower or the Guarantor
is subject to any mortgage, pledge, title retention lien, or other lien,
encumbrance or security interest, except (i) for current taxes not delinquent or
taxes being contested in good faith by appropriate proceedings, (ii) liens
arising in the ordinary course of business for sums not due or sums being
contested in good faith by appropriate proceedings, and (iii) in connection with
capitalized leases and as otherwise disclosed in the financial statements
referred to in Section 4.1(f).
(m) Employee Benefit Plans. Each Plan complies in all material
respects with all applicable requirements of law and regulations and no
Termination Event with respect to any Plan has occurred.
(n) Regulation U. Neither the Borrower nor the Guarantor is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Federal
Reserve Board), and no proceeds of any Advance will be used to purchase or carry
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
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(o) Investment Company Act. Neither the Borrower nor the
Guarantor is an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(p) No Misstatements of Fact. No information, schedule or
report furnished by the Borrower or the Guarantor to the Lender in writing in
connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading.
(q) No Default. No Event of Default has occurred and is
continuing.
ARTICLE 5
COVENANTS OF THE BORROWER AND THE GUARANTOR
5.1 Affirmative Covenants. So long as any obligation under the Note
shall remain outstanding or the Lender shall have any Revolving Commitment
hereunder, the Borrower and the Guarantor hereby covenant and agree as follows:
(a) Compliance With Laws, Etc. The Borrower and the Guarantor
shall comply in all material respects with all Governmental Requirements,
including without limitation all Environmental Laws, now in force or that may be
enacted hereafter and with all directives, rules and regulations of officers of
any Governmental Agency now having or hereafter acquiring jurisdiction over the
operations or properties of the Borrower or the Guarantor.
(b) Reporting Requirements.
(i) Annual Financial Statements. Annually, as soon as
available, but in any event within ninety (90) days after the last day
of each of its fiscal years, consolidated balance sheets of the
Borrower and the Guarantor as of such last day of the fiscal year, and
consolidated statements of operations, stockholders' equity and cash
flows for such fiscal year, each prepared in accordance with generally
accepted accounting principles consistently applied, in reasonable
detail, and certified without qualification by a nationally recognized
firm of independent certified public accountants satisfactory to the
Lender as fairly presenting the financial position and the results of
operations and cash flows of the Borrower and the Guarantor as at its
date and for such year and as having been prepared in accordance with
generally accepted accounting principles consistently applied.
(ii) Quarterly Reports. As soon as available, but in
any event within fifty (50) days after the end of the Borrower's first
three fiscal quarters (and for purposes of calculating the financial
ratio in Section 5.3(b) hereof, for the immediately preceding four
consecutive fiscal quarters necessary to such calculation),
consolidated balance sheets of the Borrower and the Guarantor as of the
last day of such quarter and consolidated statements of operations,
stockholders' equity and cash flows for such period, and on a
comparative
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basis figures for the corresponding period of the immediately preceding
fiscal year, all in reasonable detail, each such statement to be
certified in a certificate of the president or chief financial officer
of the Borrower as accurately presenting the financial position and
results of operations and cash flows of the Borrower and the Guarantor
as at its date and for such period and as having been prepared in
accordance with generally accepted accounting principles consistently
applied (subject to non-material, year-end audit adjustments in
accordance with generally accepted accounting principles).
(iii) Business Plan. Annually, as soon as available,
but in any event within thirty (30) days after the last day of each of
its fiscal years, a business/mine plan relating to the operations of
the Borrower and the Guarantor, together with appropriate supporting
details and statement of underlying assumptions.
(iv) Turquoise Ridge. Subsequent to the initial
Advance borrowed hereunder, the Borrower shall furnish to the Lender as
soon as available and in any event within fifteen (15) days after the
end of each month, a monthly management report summarizing the progress
toward completion of the Turquoise Ridge mine project, and after such
mine has commenced commercial production, a periodic report of the
quantity and quality of ore mined and production costs in form
acceptable to the Lender.
(v) No Default Certificate. At the same time as it
delivers the financial statements required under the provisions of
Sections 5.1(b)(i) and (ii) hereof, a certificate of the president or
chief financial officer of the Borrower to the effect that no Event of
Default and no default under any other agreement to which the Borrower
or the Guarantor is a party or by which it is bound, and no event
which, with the giving of notice or the lapse of time, or both, would
constitute such an Event of Default or default, exists, or, if such
cannot be so certified, specifying in reasonable detail the exceptions
and the nature of any corrective action taken or proposed to be taken.
Such certificate shall be accompanied by a detailed calculation
indicating compliance with the financial covenants contained in
Sections 5.3(a) and 5.3(b) hereof.
(vi) Other Reports. The Borrower and the Guarantor
shall furnish to the Lender: (A) any correspondence or notices received
by the Borrower from any federal, state or local governmental authority
regulating the operations of the Borrower or the Guarantor relating to
(1) a Plan or (2) an actual or threatened change or development
(including any regulatory directive or order) that in either case could
be materially adverse to the Borrower or the Guarantor; (B) promptly
after the filing or receiving thereof, copies of all notices which the
Borrower receives from any Governmental Agency alleging its material
noncompliance with Environmental Laws or actual or potential liability
for cleanup, remediation or removal of any Hazardous Substance wherever
located and any replies of the Borrower filed in response thereto; (C)
promptly upon becoming aware of any actual or proposed Change in
Control, a notice setting forth the particulars thereof; and (D) such
other information regarding the business, operations or financial
condition of the Borrower or the Guarantor, or such other financial
data or information evidencing compliance with the requirements of this
Agreement, as the Lender may from time to time reasonably request.
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(c) Visitation Rights. The Borrower shall at any reasonable
time during normal business hours and from time to time, on reasonable notice,
permit the Lender or any agents or representatives thereof to (i) examine and
make copies of and abstracts from the records and books of account of the
Borrower; (ii) discuss the affairs, finances and accounts of the Borrower with
any of its officers or its Board of Directors; and (iii) visit and inspect any
mine, mill or facility on the Getchell Property.
(d) Maintenance of Insurance. The Borrower and the Guarantor
shall maintain such insurance with responsible and reputable insurance companies
or associations in such amounts and covering such risks as is customarily and
prudently carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower and the Guarantor
operate.
(e) Maintenance of Properties, Etc. The Borrower and the
Guarantor will maintain or cause to be maintained in good repair, working order
and condition all material properties used in its business and will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
(f) Keeping of Records and Books of Account. The Borrower and
the Guarantor shall keep adequate records and books of account, in which
complete entries will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of the
Borrower and the Guarantor.
(g) Preservation of Corporate Existence, Licenses, Etc. The
Borrower and the Guarantor shall (i) preserve and maintain their corporate
existence, rights, franchises and privileges in the jurisdictions of their
incorporation, (ii) maintain all consents, licenses, approvals, permits and
authorizations material to the conduct of their businesses and operations or the
ownership of their properties, and (iii) qualify and remain qualified as foreign
corporations in each jurisdiction in which such qualification is necessary or
desirable.
(h) Mining Business. The Borrower and the Guarantor shall
engage solely in the business of exploring for, developing, owning interests in
and operating precious metals properties, particularly gold mines, and in
activities incidental thereto, and shall conduct their businesses in accordance
with generally accepted industry practices.
(i) Notice of Default; Litigation; ERISA Matters. The Borrower
shall furnish to the Lender written notice as soon as possible, and in any event
within five (5) Business Days after the occurrence of any of the following
events or circumstances: (i) the occurrence of any Event of Default (or event or
condition which, with the giving of notice or the passage of time, or both,
would constitute an Event of Default), including a statement of the president or
chief financial officer of the Borrower setting forth the details of such Event
of Default (or such event or condition) and the action which the Borrower
proposes to take with respect thereto; (ii) any litigation, legal proceeding,
action or dispute involving amounts in excess of $500,000 affecting the Borrower
or the Guarantor (whether or not fully covered by insurance), or seeking
injunctive or similar relief which, if adversely determined, could have a
materially adverse effect on the Borrower or the Guarantor;
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(iii) the occurrence of any Termination Event; and (iv) any other event,
circumstance or condition, including without limitation any development relating
to an environmental liability, which could have a material adverse effect on the
business, operations, properties or financial condition of the Borrower or the
Guarantor.
(j) Payment of Taxes and Other Claims. The Borrower and the
Guarantor shall pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon them or upon their income, profits or property,
and (ii) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon their respective properties; provided, however,
that the Borrower and the Guarantor shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings if the Borrower and the Guarantor shall have set aside
on their books adequate reserves with respect thereto in accordance with
generally accepted accounting principles.
(k) Additional Guarantors. The Borrower will cause each
subsidiary of the Borrower established or created after the Closing Date to
execute a guarantee of the obligations of the Borrower hereunder substantially
on the terms contained in Article 6 hereof and in form satisfactory to the
Lender.
(l) Further Assurances. The Borrower and the Guarantor shall
promptly and duly execute and deliver to the Lender such instruments, reports or
other documents and take such further action as the Lender may from time to time
reasonably request in order to evidence, perfect or otherwise implement the
obligations of the Borrower and the Guarantor provided for in this Agreement.
5.2 Negative Covenants. So long as any obligation under the Note shall
remain outstanding or the Lender shall have any Revolving Commitment hereunder,
the Borrower and the Guarantor each hereby covenant and agree that it shall not:
(a) Debt. Create, incur, assume or suffer to exist, directly
or indirectly, any funded Debt except (i) Debt incurred pursuant to this
Agreement and the Note and Letters of Credit issued by the Lender; or (ii) Debt
represented by the outstanding promissory note of the Borrower to ChemFirst Inc.
due September 22, 2000 with a current principal balance of $25,300,000 (the
"ChemFirst Note"); provided, however, that the Borrower shall not modify or
amend any terms or provisions of the ChemFirst Note, or optionally prepay any
portion of the ChemFirst Note while any Advances are outstanding under the Note,
without the prior written consent of the Lender; or (iii) capitalized leases and
Debt secured by the security interests referred to in Section 5.2(b)(vii) hereof
in an aggregate amount not exceeding $15,000,000.
(b) Liens, Etc. Create, incur, assume or suffer to exist,
directly or indirectly, any mortgage, deed of trust, pledge, lien, security
interest, or other charge or encumbrance whether or not determined (including
the lien or retained security title of a conditional vendor) of any nature, upon
or with respect to any of its properties, now owned or hereafter acquired, or
assign or otherwise convey any right to receive the production, proceeds or
income therefrom, except that the foregoing
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restrictions shall not apply to mortgages, deeds of trust, pledges, liens,
security interests or other charges or encumbrances:
(i) for taxes, assessments or governmental charges or
levies if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith by
appropriate proceedings;
(ii) imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in
the ordinary course of business in an amount which at no time exceeds
$100,000;
(iii) arising out of pledges or deposits under
workmen's compensation laws, unemployment insurance, old age pensions,
or other social security or retirement benefits, or similar
legislation;
(iv) arising out of pledges or deposits to secure
performance in connection with bids, tenders, contracts (other than
contracts for the payment of money), or to secure public or statutory
obligations of the Borrower or the Guarantor, in an amount which at no
time exceeds $100,000;
(v) arising out of deposits to secure, or in lieu of,
surety, appeal or customs bonds in proceedings to which the Borrower or
the Guarantor is a party in an amount which at no time exceeds
$100,000;
(vi) arising out of operating leases entered into in
the ordinary course of business and under which the aggregate annual
rentals do not exceed $500,000;
(vii) of purchase money mortgages and other security
interests on equipment acquired, leased or held by the Borrower or the
Guarantor (including equipment held by the Borrower or the Guarantor as
lessee under leveraged leases) in the ordinary course of business to
secure the purchase price of such equipment or to secure Debt incurred
solely for the purpose of financing the acquisition (including
acquisition as lessee under leveraged leases), construction or
improvement of any such equipment to be subject to such mortgages or
security interests, or mortgages or other security interests existing
on any such equipment at the time of such acquisition, or extensions,
renewals or replacements of any of the foregoing for the same or a
lesser amount, provided that no such mortgage or other security
interest shall extend to or cover any equipment other than the
equipment being acquired, constructed or improved, and no such
extension, renewal or replacement shall extend to or cover any property
not theretofore subject to the mortgage or security interest being
extended, renewed or replaced; and provided, further, that the
aggregate principal amount of the Debt of the Borrower and the
Guarantor at any one time outstanding and secured by mortgages and
other security interests permitted by this clause (vii) shall not
exceed $15,000,000 and that any such Debt shall not otherwise be
prohibited by the terms of this Agreement; and
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(viii) zoning restrictions, easements, licenses,
restrictions on the use of properties or minor irregularities in title
thereto, which do not materially impair the use of such properties in
the operations of the Borrower or the Guarantor in the ordinary course
of business or the value of such properties for the purpose of such
businesses.
(c) Restriction on Fundamental Changes. (i) Enter into any
transaction of merger, consolidation or other reorganization having a similar
result or effect; (ii) liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution); (iii) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock of any of its
subsidiaries, whether now owned or hereafter acquired; or (iv) acquire by
purchase or otherwise all or any substantial part of the business or assets of,
or stock or other evidence of beneficial ownership of, any Person; provided that
the foregoing restrictions shall not apply to any merger of a subsidiary of the
Borrower with and into the Borrower or to a merger in which the Borrower is the
surviving corporation or the purchase of all or any substantial part of the
business or assets of, or stock or other evidence of beneficial ownership of,
any Person, provided that upon the consummation of such merger or purchase no
Event of Default shall have occurred and be continuing or would occur after
giving effect to such merger or purchase.
(d) Asset Dispositions. Engage in any Asset Disposition unless
(i) such Asset Disposition is for consideration at least 75% of which is cash,
(ii) such consideration is at least equal to the fair market value of the assets
sold, transferred, leased or disposed of, and (iii) the fair market value of all
assets sold, transferred, leased or disposed of pursuant to this Section 5.2(d)
shall not exceed (A) $2,000,000 in any fiscal year or (B) $4,000,000 in the
aggregate; provided, however, that where the aggregate net proceeds of any Asset
Disposition are reinvested by the Borrower or the Guarantor in substantially
similar assets within 180 days after the date of disposition, such Asset
Disposition shall not be counted for purposes of calculating the $2,000,000
annual limitation (but nevertheless shall be counted for purposes of calculating
the $4,000,000 aggregate limitation) in clause (iii) above; and provided,
further, that if the Borrower shall enter into a "lay-back" or similar agreement
with Newmont Mining Corporation relating to Sections 13, 25 and/or 36 of the
Getchell Property, such transaction shall be excluded for purposes of the
limitations set forth above.
(e) Investments and Loans. Make or permit to exist investments
in or loans to any other Person, except: (i) investments in short-term direct
obligations of the United States or Canadian governments; (ii) time deposits
maturing within one year from the date of creation thereof with, including
certificates of deposit issued by, any bank or trust company which is organized
under the laws of the United States or any state thereof or Canada and has
capital, surplus and undivided profits aggregating at least $250,000,000; (iii)
investments in commercial paper rated at least A-2 by Standard & Poor's
Corporation or at least P-2 by Moody's Investors Service, Inc.; and (iv) loans
and advances to employees for moving, entertainment, travel, purchases of stock
in the Borrower and other similar expenses in the ordinary course of business.
5.3 Financial Covenants. So long as any obligation under the Note shall
remain outstanding or the Lender shall have any Revolving Commitment hereunder,
the Borrower hereby covenants and agrees that it will have or maintain, on a
consolidated basis, at all times:
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(a) a Protection Ratio, determined as of the end of each
fiscal quarter, of not less than 1.50 to 1; and
(b) an Interest Coverage Ratio, determined as of the end of
each fiscal quarter beginning with the fiscal quarter ended December 31, 1998,
of not less than 2.00 to 1.
ARTICLE 6
ABSOLUTE CONTINUING GUARANTEE
6.1 Undertaking. For and in consideration of the entering into by the
Lender of this Agreement, and in order to provide the Lender with further
assurance of the Borrower's payment of any and all indebtedness under this
Agreement, the Guarantor guarantees and promises to pay the Lender when due any
amounts now or at any time hereafter owed by the Borrower to the Lender,
pursuant to this Agreement or the Note (such amounts owed by the Borrower to the
Lender are sometimes hereinafter referred to as the "indebtedness"). The word
"indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, interest and other obligations and liabilities of the
Borrower under this Agreement or the Note.
6.2 Unconditional Guarantee. The Guarantor hereby agrees that this
guarantee is an absolute, unconditional, continuing guarantee subject to the
following terms and conditions:
(a) Authorization. The Guarantor authorizes the Lender,
without notice to, demand of, or consent from the Guarantor, and without
affecting its liability to the Lender hereunder, from time to time, to (i)
renew, extend, accelerate or otherwise change the time or place for payment of,
or otherwise change the terms of, the indebtedness or any part thereof,
including an increase or decrease of any rate of interest thereon; (ii) take and
hold security (including other guarantees) for the payment of the indebtedness
or this guarantee, and exchange, enforce, waive, surrender, modify, impair,
change, alter, renew, continue, compromise or release in whole or in part any
such security, or fail to perfect its interest in any such security, or to
establish its priority with respect thereof; (iii) apply such security and
direct the order or manner of sale thereof as the Lender in its sole discretion
may determine; (iv) release or substitute, in whole or in part, the Borrower or
any one or more endorsers or guarantors of any or all of the indebtedness; (v)
settle or compromise any or all of the indebtedness with the Borrower or any
endorser or guarantor of the indebtedness; and (vi) subordinate any or all of
the indebtedness to any other indebtedness of or claim against the Borrower or
any other Guarantor, whether owing to or existing in favor of the Lender or any
other party. The Guarantor shall be and remain bound hereunder notwithstanding
any such renewal, extension, acceleration, change, taking, holding, exchange,
enforcement, waiver, surrender, modification, impairment, alteration, renewal,
continuation, compromise, release, failure, application, direction,
substitution, settlement or subordination. The Lender may assign this guarantee
in whole or in part.
(b) Continuing Guarantee. This is a continuing guarantee
becoming effective to the full extent stated herein upon execution of this
Agreement and remaining effective until the
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transactions contemplated by this Agreement have been completed and all
indebtedness has been fully and finally paid. In the event that the Borrower
becomes insolvent or may be adjudicated bankrupt or files a petition for
reorganization, arrangement, composition or similar relief under any present or
future provision of the United States Bankruptcy Code, or if such a petition be
filed against the Borrower, or the Borrower becomes the subject of any
proceedings under any laws or regulations of any jurisdiction relating to the
relief of debtors, and in any such proceedings some or all of the indebtedness
shall be terminated or rejected or any obligation of the Borrower thereunder
modified or abrogated, the Guarantor agrees that its liability hereunder shall
not thereby be affected or modified, and such liability shall continue in full
force and effect as if no such action or proceeding had occurred. This guarantee
shall continue to be effective or reinstated, as the case may be, if any payment
of any indebtedness must be returned by the Lender upon the insolvency,
bankruptcy or reorganization of the Borrower or the Guarantor, or otherwise, as
though such payment had not been made.
(c) Waiver of Notice, Etc. The Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, notices of default, and notices of
acceptance of this guarantee and of the existence, creation or incurring of new
or additional indebtedness. At the option of the Lender, the Guarantor may be
joined in any action or proceeding commenced by the Lender against the Borrower
in connection with or based upon the indebtedness or any security therefor and
recovery may be had against the Guarantor in such action or proceeding against
the Guarantor, without any requirement that the Lender first assert, prosecute
or exhaust any remedy or claim against the Borrower. Without limiting the
foregoing, the Guarantor acknowledges that repeated and successive demands may
be made and payments made hereunder in response to such demands as and when,
from time to time, the Borrower may default in payment of the indebtedness.
Notwithstanding any such payments hereunder, this guarantee shall remain in full
force and effect and shall apply to any and all subsequent defaults by the
Borrower in payment of the indebtedness. All settlements, compromises,
compositions, accounts stated and agreed balances made in good faith between the
Lender and the Borrower shall be binding upon the Guarantor.
(d) Additional Waivers. The Guarantor waives any and all
rights to require the Lender to (i) proceed against the Borrower or any other
guarantor, (ii) proceed against or exhaust any security held from the Borrower
or any other guarantor, or (iii) pursue any other remedy in the Lender's power
whatsoever. The Lender may, at its election, exercise any right or remedy it may
have against the Borrower or any security now or hereafter held by the Lender,
including, without limitation, the right to foreclose upon any such security by
judicial or nonjudicial sale and regardless of whether such sale is deemed to be
commercially reasonable, without affecting or impairing in any way the liability
of the Guarantor hereunder except to the extent the indebtedness may thereby be
paid. Only the net proceeds from any such foreclosure, after deduction of all
costs and expenses authorized to be deducted pursuant to the documents under
which such security is held or by law, shall be applied against the
indebtedness. The Lender may at its discretion purchase all or any part of such
security so sold or offered for sale for its own account and may apply against
the amount bid therefor all or any part of the indebtedness for which such
security is held. The Guarantor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement or subrogation or other right
or remedy of the Guarantor against the Borrower or any such security,
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whether resulting from such election by the Lender, any defect in, failure of or
loss or absence of priority with respect to the Lender, interest in such
security, or otherwise. The Lender shall not be required to institute or
prosecute proceedings to recover any deficiency as a condition of payment
hereunder or enforcement hereof. The Guarantor waives any defense arising by
reason of any disability or other defense of the Borrower or by reason of the
cessation from any cause whatsoever of the liability of the Borrower. The
Guarantor shall have no right of subrogation, and waive any right to enforce any
remedy which the Lender now has or may hereafter have against the Borrower, and
waives any and all benefit of or right to participate in any security now or
hereafter held by the Lender.
(e) Independent Obligations. The obligations hereunder are
independent of the obligations of the Borrower, and a separate action or actions
may be brought and prosecuted against the Guarantor, whether action is brought
against the Borrower or whether the Borrower is joined in any such action or
actions. The Guarantor waives the benefit of any statute of limitations
affecting its liability hereunder or the enforcement thereof.
(f) Subordination. Any indebtedness of the Borrower now or
hereafter held by the Guarantor is hereby subordinated and postponed to the
indebtedness of the Borrower to the Lender, and the Guarantor agrees that it
will not accelerate the maturity of such indebtedness; and such indebtedness of
the Borrower to the Guarantor, if the Lender so requests, shall be collected,
enforced and received by the Guarantor as trustee for the Lender and be paid
over to the Lender, but without reducing or affecting in any manner the
liability of the Guarantor under the other provisions of this guarantee. This
subordination and postponement is independent of this guarantee.
(g) Inquiry Into Powers, Etc. It is not necessary for the
Lender to inquire into the powers of the Borrower or its officers, directors,
partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder. Any sum which may not be recoverable from
the Guarantor on the basis of a guarantee shall be recoverable from the
Guarantor as the principal debtor and shall be paid to the Lender on demand with
interest. The Guarantor assumes the responsibility for being and keeping itself
informed of the financial condition of the Borrower and of all other
circumstances bearing upon the risk of nonpayment of the indebtedness which
diligent inquiry would reveal, and agree that the Lender shall have no duty to
advise the Guarantor of information known to it regarding such condition or any
such circumstances.
(h) Assignment. The Guarantor may not assign its rights or
delegate its obligations hereunder voluntarily or by operation of law without in
each case obtaining the Lender's prior written consent, and any purported
assignment or delegation without such consent shall be null and void. Consent by
the Lender to any such assignment or delegation shall not relieve the Guarantor
of any obligations or liabilities hereunder, unless such consent so states. No
such consent shall constitute consent to any other or subsequent such assignment
or delegation.
(i) Taxes. The Guarantor will (i) pay all principal, interest,
fees and all other amounts payable hereunder to the Lender free and clear and
without deduction for any and all present and future taxes, duties, levies,
compulsory loans, imposts, deductions, fees, charges,
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restrictions, conditions and withholdings, of whatsoever nature, if any, and all
liabilities with respect thereto, excluding as to the Lender those which are
imposed by the United States of America, or any other country in which the
Lender's principal office or its lending branch is or may become organized or
established, or any political subdivision or taxing authority in such respective
countries and are imposed on or measured by the net income of the Lender of its
lending branch or are imposed on or measured by the gross income, or gross
receipts of, the Lender or its lending branch and are in lieu of taxes on or
measured by the net income ("Taxes"); and (ii) pay and indemnify the Lender
against any liability for any interest equalization and similar taxes, stamp or
any other transfer taxes with respect to this Agreement, and taxes (net of
applicable deduction and credits actually taken) of all jurisdictions with
respect to any amounts paid under this provision. If any Taxes or amounts to be
paid under subsection (ii) of the preceding sentence are paid by the Lender or
if the Guarantor is required by applicable law to make any deduction or
withholding as aforesaid from any payment of the principal or interest
(including interest on any overdue principal) due hereunder or any other fees or
amounts due hereunder in respect of any such Taxes, the Guarantor shall pay such
amount that after payment of any such Taxes to the appropriate taxing authority
there shall be paid to the Lender the net amount otherwise payable hereunder in
the absence of such Taxes.
(j) Agreement To Pay. All payments by or on behalf of the
Guarantor hereunder shall be in lawful money of the United States of America.
The Guarantor agrees to pay reasonable attorneys' fees and all other reasonable
costs and expenses which may be incurred by the Lender in the enforcement of
this guarantee.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) Nonpayment of Note, Etc. The Borrower shall fail to pay
any principal of the Note when due (whether at stated maturity or by prepayment
or otherwise), or shall fail to pay any interest hereunder or on the Note, or
any fees payable hereunder, within three days after the same shall become due;
or
(b) Representations and Warranties. Any representation or
warranty made by the Borrower or the Guarantor (or any of its officers) under or
in connection with this Agreement shall prove to have been incorrect in any
material respect when made, or any schedule, certificate, financial statement,
report, notice or other writing furnished by the Borrower or the Guarantor to
the Lender shall prove to have been incorrect in any material respect when made;
or
(c) Noncompliance With This Agreement. The Borrower or the
Guarantor shall fail to perform or observe any other term, covenant or agreement
contained in this Agreement on
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its part to be performed or observed and any such failure shall remain
unremedied for fifteen (15) days after written notice thereof shall have been
given to such Person by the Lender; or
(d) Nonpayment of Other Indebtedness for Borrowed Money. The
Borrower or the Guarantor shall fail to pay any Debt in excess of one million
dollars ($1,000,000) in principal amount (but excluding Debt evidenced by the
Note) of the Borrower or the Guarantor, or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise); or any other default under any agreement or instrument relating to
any such Debt, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Debt, unless such default or event shall
be waived by the holders or trustees for such Debt or unless such default or
event of default is being contested in good faith and for which adequate
reserves have been provided; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(e) Bankruptcy, Insolvency, Etc. The Borrower or the Guarantor
ceases to be solvent or shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Borrower or the Guarantor seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of any order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its property and, if instituted against the
Borrower or the Guarantor, shall remain undismissed for a period of sixty (60)
days; or the Borrower or the Guarantor shall take any corporate action to
authorize any of the actions set forth in this subsection (e); or
(f) Judgment. Final judgment(s) or order(s) for the payment of
money aggregating in excess of five hundred thousand dollars ($500,000) shall be
rendered against the Borrower or the Guarantor and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) a stay of enforcement of such judgment(s) or order(s), by reason
of a pending appeal or otherwise, shall not be in effect for any period of ten
(10) consecutive days; or
(g) Repudiation or Termination of the Guarantee. The Guarantor
shall have terminated or repudiated all or any part of its liability under
Article 6 before the transactions contemplated by this Agreement have been
completed and all indebtedness hereunder has been fully and finally paid; or
(h) Termination Event. Any Termination Event with respect to a
Plan shall have occurred and be continuing thirty (30) days after notice thereof
shall have been given by the Borrower or the Guarantor to the Lender and such
Plan's aggregate Amount of Unfunded Benefit Commitments (as defined in section
4001(a)(18) of ERISA) exceeds five hundred thousand dollars ($500,000) (or in
the case of a Termination Event involving the withdrawal of a substantial
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employer, the withdrawing employer's proportionate share of such aggregate
Amount of Unfunded Benefit Commitments exceeds such amount); or
(i) Cessation of Business. The Borrower or the Guarantor
ceases or threatens to cease to carry on its business in the ordinary course; or
(j) Material Adverse Change. There shall occur any event, or
any condition shall exist, which materially adversely affects (i) the ability of
the Borrower or the Guarantor to perform its obligations under this Agreement,
or (ii) the business or financial condition of the Borrower or the Guarantor; or
(k) Change in Control. A Change in Control shall have occurred
and the Lender reasonably determines that such Change in Control materially
adversely affects its position as Lender hereunder;
then, upon the occurrence of an Event of Default under subsection (e) above,
automatically, without notice of any kind, the obligation of the Lender to make
Advances shall terminate and the unpaid balance of the Note, all interest
thereon and all other amounts payable under this Agreement, shall become
immediately due and payable; and, upon the occurrence of any other Event of
Default, the Lender, by notice to the Borrower, may (i) declare the obligation
of the Lender to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) declare the Note, all interest thereon and all
other amounts payable under this Agreement to be forthwith due and payable
(except in the case of a declaration by the Lender pursuant to subsection (k)
above, in which case all such amounts shall be due and payable 30 days from the
date of such declaration if the Lender is unwilling or unable to renegotiate the
terms of this Agreement on a mutually satisfactory basis with the Borrower);
whereupon all Advances shall be immediately repaid and all such interest and all
such amounts shall become and be forthwith due and payable, together with any
Breakage Costs and any other transaction and other costs shall be paid forthwith
to the Lender, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower.
ARTICLE 8
MISCELLANEOUS
8.1 Amendments, Etc. Except as otherwise expressly provided in this
Agreement, no amendment or waiver of any provision of this Agreement or of 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,
in the case of any amendment, by the Borrower, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
8.2 Notices, Etc. All notices and other communications provided for
hereunder shall be in writing (including facsimile transmissions) and mailed,
sent by facsimile or delivered, if to the
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Borrower or the Guarantor, c/o Getchell Gold Corporation, 5460 South Quebec
Street, Suite 240, Englewood, Colorado 80111, Attention: Vice President and
Chief Financial Officer (facsimile (303) 771-1075); if to the Lender, at its
address set forth under its name on the signature pages hereof; or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other parties. All such notices and communications shall, when
transmitted by overnight (next day) delivery, or faxed, be effective when
delivered for overnight (next day) delivery, or when transmitted by facsimile
machine, respectively, or if mailed, when received, addressed as aforesaid,
except that notices to the Lender pursuant to the provisions of Article 2 shall
not be effective until received by the Lender.
8.3 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.
8.4 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with U.S. generally accepted accounting
principles consistently applied, except as otherwise stated herein.
8.5 Costs, Expenses and Taxes.
(a) The Borrower agrees to pay on demand all reasonable,
out-of-pocket costs and expenses in connection with the preparation, execution,
delivery and administration of this Agreement, the Note and the other documents
to be delivered hereunder, all amendments or waivers thereto including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Lender with respect thereto and with respect to advising the Lender as to its
rights and responsibilities under this Agreement, and all reasonable costs and
expenses, if any, in connection with the enforcement of this Agreement, the Note
and the other documents to be delivered hereunder.
(b) In addition to any amounts that may become payable under
Section 2.11, the Borrower shall pay any and all stamp, mortgage recording and
other taxes, filing fees or charges payable or determined to be payable in
connection with the execution and delivery of this Agreement, the Note and the
other documents to be delivered hereunder, and agrees to save the Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes, filing fees or charges.
The Borrower agrees to indemnify and hold harmless the Lender on demand against
any taxes (including any late payment penalties or interest) imposed by any
state of the United States or any agency or political subdivision thereof on or
in respect of (i) the interest and other amounts payable on any loan under this
Agreement and (ii) any payment of indemnity under this Section, so that such
interest and indemnity payments shall be in an aggregate amount which, after
deduction of all such taxes (including penalties and interest) in respect of
such aggregate amount, will be equal to the amount of such interest or indemnity
payment otherwise required hereunder.
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(c) In addition to the payment of expenses pursuant to the
preceding paragraphs, whether or not the transactions contemplated hereby shall
be consummated, the Borrower agrees to indemnify, pay and hold the Lender, and
the officers, directors, employees and agents of the Lender (collectively called
the "Indemnitees") harmless from and against, any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitee shall be designated a party thereto),
that may be imposed on, incurred by, or asserted against such Indemnitee, in any
manner relating to or arising out of this Agreement or the Note, the Lender's
agreement to make the loans hereunder, the making of the loans hereunder, or in
any way arising from any actions in connection with the transactions
contemplated hereby, or the use or intended use of the proceeds of loans
hereunder (the "indemnified liabilities"); provided that the Borrower shall have
no obligation to an Indemnitee hereunder with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of any such Indemnitee.
To the extent that the undertaking to indemnify, pay and hold harmless set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, the Borrower shall contribute the maximum portion which it
is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or any
of them.
(d) The Borrower hereby agrees to indemnify, defend and hold
harmless the Indemnitees from and against any and all liabilities, obligations,
claims, demands, assessments, losses, damages, penalties, actions, judgments,
suits, costs, fines, sanctions, charges, expenses or disbursements, including
attorneys' and environmental consultants' fees and disbursements, and other
costs of defending or denying the same, including the reasonable expense of
preparing any necessary environmental assessment report (all the foregoing,
collectively, the "environmental liabilities"), resulting from, arising out of,
or relating to (i) the breach by the Borrower or the Guarantor of any of its
representations, warranties and covenants contained in this Agreement, (ii) any
release, deposit, discharge or disposal of any Hazardous Substance in connection
with the properties or business of the Borrower or any of its subsidiaries and
the remedial action (if any) taken by the Lender in respect of any such release,
deposit, discharge or disposal, and (iii) all environmental liabilities arising
under Environmental Laws and environmental permits, including, without
limitation, CERCLA, resulting from, arising out of or relating to any conditions
or activities at, on, in, under, to or from the property of the Borrower or any
of its subsidiaries prior to and after the Closing Date, including without
limitation, the off-site disposal of Hazardous Substances. No action taken by
legal counsel chosen by the Lender with regard to any matter related to this
environmental indemnity shall vitiate or in any way impair the Borrower's
obligation and duty hereunder to indemnify and hold harmless the Indemnitees.
The indemnities contained in Sections 8.5(c) and 8.5(d) shall survive the
termination of this Agreement.
8.6 Right of Setoff. Upon the occurrence and during the continuance of
any Event of Default, the Lender is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower), to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Lender to or for the credit or the account of the Borrower
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against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement and the Note, although such obligations may be contingent
and unmatured. The Lender agrees promptly to notify the Borrower after any such
setoff and application, provided that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of the Lender
under this section are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Lender may have.
8.7 Binding Effect; Governing Law. This Agreement shall be binding upon
and inure to the benefit of the Borrower, the Guarantor, and the Lender and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender. The Lender may assign to its successors and
affiliates, or may grant participations to one or more banks or other financial
institutions in or to all or any part of, and may assign to one or more banks or
other financial institutions all or any part of, its obligations, rights and
benefits hereunder, including any Advance or Advances owing to the Lender and
the Note. To the extent of such assignment such assignee shall have the same
obligations, rights and benefits with respect to the Borrower as it would have
had if it were the Lender hereunder. Subject to the consent of the Borrower to
such assignment, which consent will not unreasonably be withheld, the Lender
shall be relieved of its obligations hereunder to the extent of the Revolving
Commitment assigned. In the event of any such assignment, the Lender shall have
the right to unilaterally amend this Agreement to allocate the Revolving
Commitment between the Lender and all such assignees in a pro rata manner, to
stipulate the level of concurrence between the Lender and all such assignees
required for any amendments, waivers or consents by the Lender hereunder, and
generally to settle the rights and obligations between the Lender and all such
assignees with respect to this Agreement. The parties hereto hereby agree to
execute and deliver any such supplement or amendment to this Agreement that may
be necessary to effectuate such substitution. This Agreement and the Note shall
be governed by, and construed in accordance with, the laws of the State of
Illinois.
8.8 Consent to Jurisdiction. The Borrower and the Guarantor irrevocably
submit to the nonexclusive jurisdiction of any United States federal or Illinois
State court sitting in the City of Chicago in any action or proceeding arising
out of this Agreement and agree that all claims and matters in respect of such
action and proceeding may be heard and determined by such federal or Illinois
State court. The Borrower and the Guarantor also waive any objection they might
now or hereafter have on the ground that any such action or proceeding in such
federal or Illinois court has been brought in an inconvenient forum. The
Borrower and the Guarantor agree that service of process may be made upon them
by service on C.T. Corporation System at its office in Chicago in any such
action or proceeding, and hereby irrevocably appoint C.T. Corporation System as
agent for service of process therein.
8.9 Severability. In the event that any one or more provisions
contained in this Agreement should for any reason be held to be unenforceable in
any respect under the laws of the United States or any state, such
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed in the applicable jurisdiction as if such unenforceable
provision had not been contained herein.
-33-
0198094.04
<PAGE>
8.10 Confidentiality. The Lender agrees to use reasonable efforts to
ensure that any information concerning the Borrower and the Guarantor obtained
by the Lender or any authorized agents or representatives of the Lender pursuant
to this Agreement which is not contained in a report or other document filed
with the Securities and Exchange Commission, distributed by the Borrower or the
Guarantor to shareholders or otherwise available to the public generally or
otherwise independently known by the Lender (otherwise than by breach of these
confidentiality obligations by the Lender) will, to the extent permitted by law
and except as may be required by valid subpoena or other external reporting
requirements or as may be necessary in litigation in the sole determination of
the Lender, be treated confidentially by the Lender and will not be distributed
or otherwise made available by the Lender to any Person other than the Lender's
employees, authorized agents or representatives who have a reasonable need to
know such information. Notwithstanding the foregoing, the Lender may furnish
copies of any information received hereunder to any assignee or participant
pursuant to Section 8.7.
8.11 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
[signature pages follow]
-34-
0198094.04
<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.
CIBC INC. GETCHELL GOLD CORPORATION
By: /s/ John W. Kunkle By: /s/ D. S. Robson
Title: As Agent Title: Vice President
and Chief Financial Officer
Address For Notices to Bank: FMG INC.
for operational matters:
Canadian Imperial Bank of Commerce By: /s/ D. S. Robson
Two Paces West
2727 Paces Ferry Road, Suite 1200 Title: Vice President
Atlanta, Georgia 30339 and Chief Financial Officer
Attention: Vice President,
Credit Operations
Telecopier No.: (404) 319-4950
Telephone No.: (404) 319-4999
for credit matters:
Canadian Imperial Bank of Commerce
200 W. Madison Avenue
Suite 2300
Chicago, Illinois 60606
Attention: John Kunkle
Telecopier No.: (312) 726-8884
Telephone No.: (312) 750-8732
-35-
0198094.04
<PAGE>
EXHIBIT A
to
LOAN AGREEMENT
GETCHELL GOLD CORPORATION
REVOLVING LOAN PROMISSORY NOTE
, 199_
FOR VALUE RECEIVED, the undersigned, GETCHELL GOLD CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
CIBC Inc. (the "Lender") at Two Paces West, 2727 Paces Ferry Road, Suite 1200,
Atlanta, Georgia 30339 and in immediately available funds, the aggregate
outstanding principal amount of all Advances (as defined in the Loan Agreement
(as hereinafter defined)) made by the Lender to the Borrower pursuant to the
Loan Agreement. Unless earlier paid, the aggregate unpaid principal balance
hereunder shall be due and payable on the Maturity Date (as defined in the Loan
Agreement). All such payments shall be made in accordance with the terms of the
Loan Agreement. The Borrower also agrees to pay interest on the unpaid principal
amount of each such Advance at the interest rate per annum equal at all times to
the rate for each such Advance determined in accordance with the terms of the
Loan Agreement. All accrued and unpaid interest hereunder shall be due and
payable prior to and at maturity as provided in Section 2.4 of the Loan
Agreement. Any amount of principal hereof which is not paid when due (whether as
scheduled, by virtue of mandatory prepayment, by acceleration or otherwise)
shall bear interest until paid, payable on demand (in the case of a LIBOR
Borrowing (as defined in the Loan Agreement)) at a rate per annum equal to LIBOR
plus two percent (2%) until the end of the applicable Interest Period (as
defined in the Loan Agreement) and thereafter at a fluctuating rate per annum
equal to the Base Rate (as defined in the Loan Agreement) plus one percent (1%),
or (in the case of Base Borrowings (as defined in the Loan Agreement)) the Base
Rate plus one percent (1%). All Advances made by the Lender to the Borrower
pursuant to the Loan Agreement and all payments made on account of Advances
hereof shall be recorded by the Lender and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this Promissory Note, it
being understood, however, that the failure to make any such endorsement (or any
errors in notation) shall not affect the obligations of the Borrower hereunder
or under the Loan Agreement in respect of such Advances.
This Promissory Note is the Note referred to in, and is entitled to the
benefits of, the Loan Agreement dated as of September 5, 1997 (the "Loan
Agreement") by and among the Borrower, FMG Inc., a Nevada Corporation (the
"Guarantor"), and CIBC Inc.(the "Lender"), which Loan Agreement, among other
things, contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
In addition to and not in limitation of the foregoing and the
provisions of the Loan Agreement, the Borrower promises to pay the holder hereof
all costs and expenses of collection of this Promissory Note and to pay all
reasonable attorneys' fees incurred in such collection or in any
0198094.04
1
<PAGE>
suit or action to collect this Promissory Note or any appeal thereof. The
Borrower waives presentment, demand, protest, notice of protest, notice of
dishonor, notice of nonpayment, any and all other notices and demands in
connection with the delivery, acceptance, performance, default or enforcement of
this Promissory Note, as well as any applicable statute of limitations. No delay
by the holder hereof in exercising any power or right hereunder shall operate as
a waiver of any power or right.
This Promissory Note shall be deemed to be made under and shall be
construed in accordance with and governed by the laws of the State of Illinois.
GETCHELL GOLD CORPORATION
By:
Its:
0198094.04
2
<PAGE>
AMOUNT OF AMOUNT OF UNPAID
ADVANCE PRINCIPAL PRINCIPAL NAME OF
MADE PREPAID OF NOTE PERSON MAKING
DATE (in Dollars) (in Dollars) (in Dollars NOTATION
0198094.04
3
<PAGE>
EXHIBIT B
to
LOAN AGREEMENT
FORM OF
NOTICE OF BORROWING
[Letterhead of Borrower]
Date: _______________, ____
Canadian Imperial Bank of Commerce
200 W. Madison Avenue
Suite 2300
Chicago, Illinois 60606
Attention: John Kunkle
Ladies and Gentlemen:
Reference is made to that certain Loan Agreement dated as of September
5, 1997 by and among CIBC Inc., Getchell Gold Corporation (as "Borrower") and
FMG Inc. (as "Guarantor") (as from time to time amended, the "Loan Agreement").
All terms defined in the Loan Agreement shall have the same meaning when used
herein.
Pursuant to Section 2.2 of the Loan Agreement, the Borrower hereby
irrevocably requests an Advance on __________, ____, which is a Business Day, as
follows:
1. Available Amount of $__________________
Revolving Commitment
2. Total Amount of Advance $_________________*
Requested Pursuant to this
Notice
3. Type of Borrowing (Base/LIBOR) __________________
- --------
* NOTE: EACH AMOUNT ON LINE 2 MUST BE IN A MINIMUM AMOUNT OF $500,000
($100,000 IN THE CASE OF A BASE BORROWING) OR A GREATER INTEGRAL MULTIPLE
OF $100,000.
0198094.04
1
<PAGE>
4. If the Borrowing is LIBOR
- Interest Period __________________
The Borrower certifies that:
(i) Representations and Warranties. The representations and
warranties made in Article 4 of the Loan Agreement are true and correct and with
the same effect as if made on the date hereof, and since December 31, 1996 there
has been no material adverse change in the business or financial condition of
the Borrower or the Guarantor;
(ii) No Proceeding. There is no pending or, to the knowledge
of the Borrower or the Guarantor, threatened, action, suit or proceeding
affecting the Borrower or the Guarantor before any court, Governmental Agency or
arbitrator which could reasonably be expected to have a material adverse effect
upon the business or financial condition of the Borrower or the Guarantor; and
(iii) No Event of Default. No event or condition has occurred
or is continuing, or would result from the above Borrowing or the application of
the proceeds thereof, which constitutes an Event of Default or would constitute
an Event of Default but for the requirement that notice be given or time elapse
or both.
GETCHELL GOLD CORPORATION
By:
Its:
0198094.04
2
<PAGE>
EXHIBIT C
to
LOAN AGREEMENT
FORM OF
NOTICE OF CONVERSION OR RENEWAL OF INTEREST
[Letterhead of Borrower]
---------------, ----
Canadian Imperial Bank of Commerce
200 W. Madison Avenue
Suite 2300
Chicago, Illinois 60606
Attention: John Kunkle
Ladies and Gentlemen:
Reference is made to that certain Loan Agreement dated as of September
5, 1997 by and among CIBC Inc., Getchell Gold Corporation (as "Borrower") and
FMG Inc. (as "Guarantor") (as from time to time amended, the "Loan Agreement").
All terms defined in the Loan Agreement shall have the same meaning when used
herein.
Pursuant to Section 2.10 of the Loan Agreement, the Borrower hereby
requests a conversion or renewal on _____________, ____, which is a Business Day
(or which, in the case of a LIBOR Borrowing or a new Interest Period for an
outstanding LIBOR Borrowing, shall be a day on which commercial banks are open
for international business and quoting interest rates for Dollar deposits in the
interbank Eurodollar market), as follows (all terms defined in the Loan
Agreement shall have the same meaning when used herein):
1.A. Amount of Borrowings to be $__________________
converted
1.B. Amount of Borrowings to be renewed $__________________
2.A. The LIBOR Borrowings to be
converted have Interest Periods
ending _________________, 19___
_________________, 19___
_________________, 19___
0198094.04
1
<PAGE>
2.B. and are to be converted to Base
Borrowings for: $__________________
2.C. and are to be renewed for Interest
Periods of:
(i) 1 month for $__________________
(ii) 2 months for $__________________
(iii) 3 months for $__________________
(iv) 6 months for $__________________
Total of 2.C. $__________________
Total of 2.B. and 2.C. $__________________
3. The Base Borrowings to be
converted are to be converted to
LIBOR Borrowings having Interest Periods of:
(i) 1 month for $__________________
(ii) 2 months for $__________________
(iii) 3 months for $__________________
(iv) 6 months for $__________________
Total of 3. $__________________
GETCHELL GOLD CORPORATION
By:
Its:
0198094.04
2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-07-1997
<PERIOD-END> SEP-01-1997 SEP-01-1997
<CASH> 62862 62862
<SECURITIES> 0 0
<RECEIVABLES> 3340 3340
<ALLOWANCES> 0 0
<INVENTORY> 12405 12405
<CURRENT-ASSETS> 79399 79399
<PP&E> 257576 257576
<DEPRECIATION> 90891 90891
<TOTAL-ASSETS> 246285 246285
<CURRENT-LIABILITIES> 17954 17954
<BONDS> 31 31
0 0
0 0
<COMMON> 3 3
<OTHER-SE> 183194 183194
<TOTAL-LIABILITY-AND-EQUITY> 246285 246285
<SALES> 17587 51124
<TOTAL-REVENUES> 17587 51124
<CGS> 21661 63198
<TOTAL-COSTS> 21661 63198
<OTHER-EXPENSES> 624 3245
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 204 646
<INCOME-PRETAX> (4902) (15965)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4902) (15965)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4902) (15965)
<EPS-PRIMARY> (0.18) (0.60)
<EPS-DILUTED> (0.18) (0.60)
</TABLE>
