FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
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 2-2274
ALTA GOLD CO.
-------------
(Exact Name of Registrant as specified in its
charter)
Nevada 87-0259249
------ ----------
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or Number)
601 Whitney Ranch Drive, Suite 10
Henderson, Nevada 89014
- --------------------------------- -----
(Address of Principal Executive Offices)(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA
CODE: (702) 433-8525
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
--- ---
The number of shares outstanding of the
Registrant's Common Stock as of May 13, 1998
was 32,515,557.
ALTA GOLD CO.
INDEX
Page
Number
------
PART I Financial Information
Item 1 Financial Statements
Condensed Balance Sheets as
of March 31, 1998 and
December 31, 1997 3
Condensed Statements of
Operations for the
Three Months Ended
March 31, 1998 and 1997 5
Condensed Statements of
Cash Flows for the Three
Months Ended
March 31, 1998 and 1997 6
Notes to Condensed Financial
Statements 8
Item 2 Management's Discussion and
Analysis of Financial Condition
and Results of Operations 12
PART II Other Information
Item 2 Changes in Securities 16
Item 6 Exhibits and Reports on
Form 8-K 16
SIGNATURE 17
2
ALTA GOLD CO.
-------------
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
March 31, December 31,
1998 1997
---------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents $ 379,000 $ 3,330,000
Inventories 8,423,000 8,152,000
Prepaid expenses
and other 563,000 157,000
--------- -----------
Total current
assets 9,365,000 11,639,000
PROPERTY AND EQUIPMENT,
net
Mining properties
and claims 21,655,000 20,936,000
Buildings and
equipment 17,861,000 17,697,000
----------- -----------
39,516,000 38,633,000
Less - accumulated
depreciation (12,176,000) (11,705,000)
----------- -----------
Total property and
equipment, net 27,340,000 26,928,000
DEFERRED MINE
DEVELOPMENT COSTS,
net 23,835,000 22,896,000
OTHER ASSETS 892,000 1,523,000
----------- -----------
Total assets $61,432,000 $62,986,000
=========== ===========
</TABLE>
The accompanying notes to condensed financial
statements are an integral part of these
statements.
3
ALTA GOLD CO.
-------------
CONDENSED BALANCE SHEETS (continued)
-----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
March 31, December 31,
1998 1997
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 658,000 $ 829,000
Accrued liabilities 630,000 790,000
Current portion of
long-term debt 9,099,000 7,482,000
----------- -----------
Total current
liabilities 10,387,000 9,101,000
LONG-TERM DEBT, net of
current portion 6,681,000 11,910,000
DEFERRED INCOME TAXES 662,000 662,000
OTHER LONG-TERM
LIABILITIES 1,331,000 1,514,000
----------- -----------
Total liabilities 19,061,000 23,187,000
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001
par value; authorized
60,000,000 shares,
issued 31,672,525 and
30,191,639 shares,
respectively 32,000 30,000
Additional capital 48,819,000 46,615,000
Accumulated deficit (6,480,000) (6,846,000)
----------- -----------
Total stockholders'
equity 42,371,000 39,799,000
----------- -----------
Total liabilities
and stockholders'
equity $61,432,000 $62,986,000
=========== ===========
</TABLE>
The accompanying notes to condensed financial
statements are an integral part of these
statements.
4
ALTA GOLD CO.
-------------
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUE:
Sales of gold and
other metals $3,624,000 $2,858,000
OPERATING COSTS AND
EXPENSES:
Direct mining,
production,
reclamation and
maintenance costs 2,944,000 2,384,000
General and
administrative 307,000 399,000
Exploration 49,000 26,000
---------- ----------
3,300,000 2,809,000
---------- ----------
INCOME FROM OPERATIONS 324,000 49,000
---------- ----------
OTHER INCOME 42,000 30,000
---------- ----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 366,000 79,000
---------- ----------
PROVISION FOR INCOME
TAXES - -
---------- ----------
NET INCOME $ 366,000 $ 79,000
========== ==========
NET INCOME PER SHARE:
Basic and Diluted $ 0.01 $ 0.00
========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic and Diluted 35,069,096 30,617,880
========== ==========
</TABLE>
The accompanying notes to condensed financial
statements are an integral part of these
statements.
5
ALTA GOLD CO.
-------------
CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
----------- ------------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 366,000 $ 79,000
Adjustments to
reconcile net
income to net cash
provided by (used in)
operating activities:
Depreciation,
depletion and
amortization 769,000 487,000
Decrease (increase)
in -
Inventories (271,000) (488,000)
Prepaid expenses
and other 225,000 (21,000)
Increase (decrease)
in -
Accounts payable (171,000) 438,000
Accrued and other
liabilities (160,000) (202,000)
----------- -----------
Net cash provided by
operating activities 758,000 293,000
----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Additions to property,
buildings and
equipment (938,000) (67,000)
Additions to
deferred mine
development costs (1,144,000) (1,547,000)
---------- -----------
Net cash provided by
(used in) investing
activities (2,082,000) (1,614,000)
---------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from
issuance of debt - 1,400,000
Payments on debt (1,627,000) (323,000)
Proceeds from
exercise of stock
options - 20,000
---------- -----------
Net cash provided by
(used in) financing
activities (1,627,000) 1,097,000
---------- -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (2,951,000) (224,000)
CASH AND CASH
EQUIVALENTS, beginning
of period 3,330,000 518,000
---------- -----------
CASH AND CASH
EQUIVALENTS, end of
period $ 379,000 $ 294,000
========== ===========
</TABLE>
The accompanying notes to condensed financial
statements are an integral part of these
statements.
6
ALTA GOLD CO.
-------------
CONDENSED STATEMENTS OF CASH FLOWS (Continued)
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for interest,
net of amount
capitalized $ - $ -
Cash paid during the
period for income
taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Debt retired with
common stock $ 1,985,000 $ -
Interest capitalized
on zero coupon
debentures $ - $ 32,000
</TABLE>
The accompanying notes to condensed financial
statements are an integral part of these
statements.
7
ALTA GOLD CO.
-------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
(Unaudited)
Note 1. Interim Financial Statement Policies and
Disclosures
The interim, unaudited, condensed financial
statements of Alta Gold Co. (the "Company")
included herein have been prepared pursuant to the
rules and regulations of the Securities and
Exchange Commission. Certain information and
footnote disclosures normally required in
financial statements prepared in accordance with
generally accepted accounting principles have been
condensed or omitted pursuant to such rules and
regulations, although the Company believes that
the disclosures are adequate to make the
information presented not misleading.
These interim, unaudited, condensed financial
statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as filed with the
Securities and Exchange Commission. In the
opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary
for a fair presentation have been included.
Operating results for the three months ended
March 31, 1998 are not necessarily indicative of
the results that may be expected for the year
ending December 31, 1998.
Cash and Cash Equivalents
- -------------------------
For purposes of the balance sheets and
statements of cash flows, the Company considers
all investments with an original maturity of three
months or less to be cash equivalents.
Reclamation Costs
- -----------------
Minimum standards for mine reclamation have
been established by various governmental agencies
which affect certain operations of the Company.
The Company's general policy is to accrue
estimated reclamation costs during each property's
productive life based on estimated reserves using
the units of production method. As of March 31,
1998 and December 31, 1997, the Company had
reserved approximately $663,000 and $726,000,
respectively, for reclamation activities of which
approximately $28,000 is expected to be expended
during the last nine months of 1998.
Income Taxes
- ------------
No provision for income taxes was required in
either 1998 or 1997 because of the utilization of
net operating loss carryforwards. As of March 31,
1998, the Company estimates that it has
approximately $30,606,000 in remaining net
operating loss carryforwards. These net operating
loss carryforwards are scheduled to expire during
the period from 2005 to 2012.
8
Earnings per Share
- ------------------
The Company follows the provisions of SFAS
No. 128, Earnings Per Share, which is required for
financial statements issued for periods ending
after December 15, 1997, and requires restatement
of all prior-period earnings per share data
presented. SFAS No. 128 replaces previously
reported earnings per share with "basic" earnings
per share and "diluted" earnings per share. Basic
earnings per share is based on the weighted
average number of shares actually outstanding
during the year. Diluted earnings per share
includes the potential dilution for the exercise
of stock options, warrants, and debt conversions.
Note 2. Inventories
- --------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Precious metals:
Refined products $ 812,000 $ 865,000
In process 7,515,000 7,129,000
Consumable
supplies 96,000 158,000
---------- ----------
$8,423,000 $8,152,000
========== ==========
</TABLE>
Inventories of in-process metals and
consumable supplies are valued at the lower of
cost (using the first-in, first-out method) or
market. Inventories of refined products are
valued at market.
9
Note 3 - Long-Term Debt
- -------------------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Credit facility with
Gerald Metals and
BHF-Bank; interest at
LIBOR plus 2%; due
March 31, 1999;
principal payments
payable in 15 equal
installments,
commencing on
January 31, 1998;
secured by a first
priority mortgage lien
on the Kinsley and
Griffon gold
properties $ 7,083,000 $ 8,500,000
Note payable; interest
at 12% payable
quarterly; due
January 2, 1999;
secured by property 1,400,000 1,400,000
Convertible debentures;
interest at 4% payable
quarterly; due April
14, 2000; unsecured 6,265,000 8,250,000
Notes payable; interest
at various rates of
8.2% to 16.1%; due at
various dates between
April 1998 and June
2000; secured by
equipment 1,032,000 1,242,000
----------- -----------
15,780,000 19,392,000
Less - current
portion (9,099,000) (7,482,000)
----------- -----------
Total long-term debt $ 6,681,000 $11,910,000
=========== ===========
</TABLE>
The credit facility with Gerald Metals, Inc.
("Gerald Metals") and BHF-Bank Aktiengesellschaft
("BHF-Bank") contain certain covenants that impose
various restrictions on the ability of the Company
to, among other things, incur additional debt,
change the Company's corporate structure and pay
dividends on or repurchase the Company's common
stock. In addition, the Company is required to
sell 100% of its gold production to Gerald Metals
through April 1, 1999.
The convertible debentures may be converted into
the Company's common stock at a conversion price
equal to the lesser of (1) 90% of the average
closing bid prices of the Company's common stock
for the five trading days preceding a notice of
conversion or (2) $4.00. The convertible
debentures contain certain covenants that impose
restrictions on the ability of the Company to,
among other things, pay dividends on or repurchase
the Company's common stock. During the first
quarter of 1998, $1,985,000 of the convertible
debentures were converted into 1,480,986 shares of
the Company's common stock.
10
On April 16, 1998, the Company entered into
an interim loan and security agreement (the
"Interim Loan") with U.S. Bancorp Leasing &
Financial. Under the terms of the Interim Loan,
the Company can borrow up to $4,708,000 for the
purpose of financing the construction of a
crushing and conveyor system for Olinghouse. The
Interim Loan accrues interest at prime plus one
percent, with interest payable monthly. Upon
completion and acceptance by the Company of the
crushing and conveyor system, the Company has the
option of either paying off the Interim Loan or
converting the Interim Loan into an equipment
loan, which will carry an interest rate of
approximately 8.5 percent and be repaid in 60
equal monthly installments. The Interim Loan is
secured by the crushing and conveyor system. As
of May 13, 1998, the Company had borrowed
$1,020,000 under the Interim Loan.
The Company entered into a $17,000,000
revolving credit and term loan agreement (the
"Revolving Credit and Term Loan") dated as of
April 30, 1998, with Standard Chartered Bank,
Gerald Metals, Inc. and Credit Agricole Indosuez.
The Revolving Credit and Term Loan carries an
interest rate of LIBOR plus two percent, payable
monthly, and is comprised of two components, a
$6,000,000 line of credit and a $11,000,000 term
loan. The line of credit expires October 31,
1999. The term loan is to be repaid in eleven
equal installments beginning June 30, 1999. The
Company used $6,800,000 of the Revolving Credit
and Term Loan to repay certain indebtedness to
Gerald Metals and BHF-Bank. The remaining funds
are to be used for (1) site development,
construction and equipment for Olinghouse, (2)
working capital and (3) the payment of certain
expenses. The Revolving Credit and Term Loan is
secured by first priority trust deeds on
Olinghouse, Griffon, Kinsley and Copper Flat, and
a first priority security interest in all of the
Company's tangible and intangible personal
property. Covenants include restrictions on the
ability of the Company to, among other things,
change the Company's corporate structure, pay
dividends on or repurchase the Company's common
stock, and create or suffer to exist any liens
(other than permitted liens) on the Company's
assets or properties. In addition, the Company is
required to sell 100% of its gold production to
Gerald Metals through April 30, 2003. All sales
to Gerald Metals are made at the market price
prevailing at the time of sale. As of May 13,
1998, the Company had borrowed $12,000,000 under
the Revolving Credit and Term Loan.
Note 4 - Subsequent Event
- -------------------------
On May 8, 1998, the U.S. Bureau of Land
Management issued the Record of Decision on
Olinghouse. The Record of Decision is the final
permit required to begin site development and gold
production at Olinghouse.
11
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Section 21E of the Securities Exchange Act of
1934 provides a "safe harbor" for forward-looking
statements. Certain information included herein
contains statements that are forward-looking, such
as statements regarding management's expectations
about future production and development activities
as well as other capital spending, financing
sources and the effects of regulation. Such
forward-looking information involves important
risks and uncertainties that could significantly
affect anticipated results in the future and,
accordingly, such results may differ from those
expressed in any forward-looking statements made
herein. These risks and uncertainties include,
but are not limited to, those relating to the
market price of metals, production rates,
production costs, the availability of financing,
the ability to obtain and maintain all of the
permits necessary to put and keep properties in
production, development and construction
activities, dependence on existing management
and weather conditions. The Company cautions
readers not to place undue reliance on any such
forward-looking statements, and such statements
speak only as of the date made.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THREE-MONTH PERIODS ENDED MARCH 31,
1998 AND MARCH 31, 1997.
In the first quarter of 1998, the Company had
$3,624,000 in revenue from the sale of 10,800
ounces of gold at an average price of $336/oz, as
compared to $2,858,000 in revenue in the first
quarter of 1997 from the sale of 8,159 ounces of
gold at an average price of $350/oz. In the first
quarter of 1998, the Company (1) mined 408,000
tons of ore at Griffon with an average grade of
0.0338 oz/ton gold containing 13,822 ounces of
gold, (2) mined 94,000 tons of ore at Kinsley with
an average grade of 0.0334 oz/ton gold containing
3,135 ounces of gold, and (3) produced 10,610
ounces of gold, including 7,090 ounces of gold
from Griffon at an average cash cost of $145/oz
and 3,520 ounces of gold from Kinsley at an
average cash cost of $275/oz. In the first
quarter of 1997, the Company mined 417,000 tons of
ore at Kinsley with an average grade of 0.0313
oz/ton gold containing 13,051 ounces of gold and
produced 8,092 ounces of gold from Kinsley at an
average cash cost of $223/oz. Mining at Griffon
began in September 1997 and production of refined
gold began in January 1998. Mining at Kinsley was
completed in early March 1998, with gold
production from heap leaching and pad rinsing
expected to continue in declining amounts through
2000. The decrease in gold production at Kinsley
from 8,092 ounces of gold in the first quarter of
1997 to 3,520 ounces of gold in the first quarter
of 1998 is due to the diminution of the size and
the metallurgical quality of the last two
remaining ore bodies mined at Kinsley and to the
completion of mining in early March 1998. The
increase in the average cash cost at Kinsley from
$223/oz in the first quarter of 1997 to $275/oz in
the first quarter of 1998 is due to the diminution
of the size and the metallurgical quality of the
last two remaining ore bodies mined at Kinsley.
The increase in revenue from $2,858,000 in
the first quarter of 1997 to $3,624,000 in the
first quarter of 1998 is due to the initiation of
gold production at Griffon in the first quarter of
1998, as
12
partially offset by the decrease in production at
Kinsley and a decrease in the price of gold. The
average spot price of gold decreased from $352/oz
in the first quarter of 1997 to $295/oz in the
first quarter of 1998. As a result of the
Company's hedging program, in the first quarter of
1998, the Company was able to partially, but not
fully, mitigate this decrease in the price of
gold.
Direct mining, production, reclamation and
holding costs increased from $2,384,000 in the
first quarter of 1997 to $2,944,000 in the first
quarter of 1998 as the result of the initiation of
gold production at Griffon and the higher cash
cost of production at Kinsley in the first quarter
of 1998, as partially offset by the completion of
mining at Kinsley in early March 1998.
General and administrative expenses decreased
from $399,000 in the first quarter of 1997 to
$307,000 in the first quarter of 1998 as the
result of cost cutting measures taken by the
Company.
The increase in exploration expenses between
comparable periods, from $26,000 in the first
quarter of 1997 to $49,000 in the first quarter of
1998, was de minimis.
The increase in other income between
comparable periods, from $30,000 in the first
quarter of 1997 to $42,000 in the first quarter of
1998, was also de minimus.
No provision for income taxes was recognized
during either the first quarter of 1998 or the
first quarter of 1997 because of the utilization
of net operating loss carryforwards. As of March
31, 1998, the Company estimates that it has
approximately $30,606,000 in remaining net
operating loss carryforwards. These net operating
loss carryforwards are scheduled to expire during
the period 2005 to 2012.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of March 31, 1998, the Company had a
working capital deficit of $1,022,000, as compared
to $2,538,000 in positive working capital as of
December 31, 1997. The $3,560,000 decrease in
working capital is primarily due to funds used (1)
to continue the permitting and development of
Olinghouse, (2) to acquire equipment for
Olinghouse, (3) to paydown outstanding debt and
(4) to continue the permitting of Copper Flat; the
decrease was partially offset by funds generated
from gold production at Griffon and Kinsley. The
Company believes that production from Griffon and
Kinsley will provide adequate liquidity for the
Company's operational needs during the remainder
of 1998. Outside financing is required to acquire
additional equipment for Olinghouse and to begin
site development and construction at Olinghouse
and Copper Flat. See "Investing and Financing
Activities" below.
INVESTING AND FINANCING ACTIVITIES
- ----------------------------------
During the first quarter of 1998, the Company
expended (1) $1,144,000 for the permitting and
development of Olinghouse and the permitting of
Copper Flat and (2) $938,000 for the acquisition
of equipment for Olinghouse. During the same
period, the Company retired $1,627,000 in debt.
12
On April 16, 1998, the Company entered into
an interim loan and security agreement (the
"Interim Loan") with U.S. Bancorp Leasing &
Financial. Under the terms of the Interim Loan,
the Company can borrow up to $4,708,000 for the
purpose of financing the construction of a
crushing and conveyor system for Olinghouse. The
Interim Loan accrues interest at prime plus one
percent, with interest payable monthly. Upon
completion and acceptance by the Company of the
crushing and conveyor system, the Company has the
option of either paying off the Interim Loan or
converting the Interim Loan into an equipment
loan, which will carry an interest rate of
approximately 8.5 percent and be repayable in 60
equal monthly installments. The Interim Loan is
secured by the crushing and conveyor system. As
of May 13, 1998, the Company had borrowed
$1,020,000 under the Interim Loan.
The Company entered into a $17,000,000
revolving credit and term loan agreement (the
"Revolving Credit and Term Loan") dated as of
April 30, 1998, with Standard Chartered Bank,
Gerald Metals, Inc. and Credit Agricole Indosuez.
The Revolving Credit and Term Loan carries an
interest rate of LIBOR plus two percent, payable
monthly, and is comprised of two components, a
$6,000,000 line of credit and a $11,000,000 term
loan. The line of credit expires October 31,
1999. The term loan is to be repaid in eleven
equal installments beginning June 30, 1999. The
Company used $6,800,000 of the Revolving Credit
and Term Loan to repay certain indebtedness to
Gerald Metals and BHF-Bank. The remaining funds
are to be used for (1) site development,
construction and equipment for Olinghouse, (2)
working capital and (3) the payment of certain
expenses. The Revolving Credit and Term Loan is
secured by first priority trust deeds on
Olinghouse, Griffon, Kinsley and Copper Flat, and
a first priority security interest in all of the
Company's tangible and intangible personal
property. Covenants include restrictions on the
ability of the Company to, among other things,
change the Company's corporate structure, pay
dividends on or repurchase the Company's common
stock, and create or suffer to exist any liens
(other than permitted liens) on the Company's
assets or properties. In addition, the Company is
required to sell 100% of its gold production to
Gerald Metals through April 30, 2003. All sales
to Gerald Metals are made at the market price
prevailing at the time of sale. As of May 13,
1998, the Company had borrowed $12,000,000 under
the Revolving Credit and Term Loan.
The Company is in the process of obtaining an
additional $2,700,000 in equipment financing for
Olinghouse, but has not yet finalized commitments
for such financing. No assurance can be given
that the Company will be able to obtain this
additional financing.
OUTLOOK
- -------
On May 8, 1998, after having received all of
the necessary permits, the Company began site
development and construction at Olinghouse. The
property is expected to begin producing gold in
August 1998 at an annualized rate of 100,000
oz/year. The Company estimates that $17,100,000
in additional expenditures will be required to put
Olinghouse into production - (1) $11,100,000 for
additional equipment, (2) $4,300,000 for deferred
development and working capital and (3) $1,700,000
for site development and facilities. No assurance
can be given that the Company will be able to
produce gold at Olinghouse at the expected rate or
that the actual expenditures necessary to put
Olinghouse into production will not exceed the
estimated expenditures.
14
In addition to the funds necessary to put
Olinghouse into production, the Company has
budgeted the following expenditures for the
remainder of 1998: (1) $8,190,000 for debt
amortization (including $6,800,000 paid to Gerald
Metals and BHF-Bank on May 12, 1998), (2) $823,000
for permitting and holding costs, principally for
Copper Flat and Lookout Mountain, (3) $395,000 for
exploration and (4) $28,000 for reclamation.
These expenditures are expected to be funded from
(1) the $17,000,000 Revolving Credit and Term
Loan, (2) the $4,708,000 Interim Loan, (3)
$2,700,000 in additional equipment loans (see
"Investing and Financing Activities" above), and
(4) funds from revenues generated from Griffon,
Kinsley and, later in the year, Olinghouse. The
Company believes that these funding sources will
provide adequate liquidity to meet the Company's
estimated expenditure requirements through the
remainder of 1998. The Company anticipates that
it will also have the funds necessary to repay the
$1,400,000 note payable due January 2, 1999 or be
able to extend the maturity date on this note.
Under the terms of the convertible debentures
due April 14, 2000 (the "Debentures"), the Company
must not issue more than 5,779,695 shares of its
common stock (the "Maximum Share Amount"), unless
the Company has obtained stockholder approval or a
waiver by the Nasdaq Stock Market. In lieu of any
conversion of shares in excess of the Maximum
Share Amount, the Company must pay the holders of
the remaining outstanding Debentures 111% of the
remaining outstanding principal amount plus
accrued and unpaid interest (the "Penalty"). As
of May 8, 1998, $5,300,000 of the Debentures have
been converted into 3,308,802 shares of the
Company's common stock. Based on (1) the
remaining shares available under the Maximum Share
Amount - 2,470,893, (2) the remaining outstanding
principal - $4,700,000, and (3) a conversion price
of $2.13 per share (90% of the average closing bid
price of the Company's common stock for the five
trading days preceding May 8, 1998, or $2.37 per
share), the Company would not be subject to any
Penalty upon the conversion of all of the
remaining outstanding Debentures, and would only
be subject to such Penalty should the five day
average closing bid price of the Company's common
stock drop below $2.11 per share. The total
amount of any such Penalty would increase as the
five day average closing bid price decreases below
$2.11 per share. Management believes that the
Company will have sufficient funds to pay any such
Penalty, should the occasion arise; however, no
assurance can be given that the Company will have
sufficient funds to pay any such Penalty.
As of March 31, 1998, the Company had (1)
purchased put options for 72,500 ounces of gold at
$335/oz, of which options for 7,000 ounces mature
each month from April 1998 to September 1998,
options for 8,100 ounces mature each month from
October 1998 to December 1998, and options for
6,200 ounces mature in January 1999, and (2) sold
call options for 33,750 ounces of gold at $390/oz,
of which options for 3,750 ounces mature each
month from April 1998 to December 1998.
No assurance can be given that any of the
Company's mining projects will result in any
significant contribution to the Company's
reserves, cash flow or earnings.
The Company's business is subject to various
risk factors, some of which are discussed in the
Company's report on Form 10-K for the year ended
December 31, 1997, "Items 1. and 2. Business and
Properties - Risk Factors."
15
PART II OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
On March 31, 1998, the Company issued
warrants to purchase 318,222 shares of the
Company's common stock at an exercise price of
$2.3625 and within a five year exercise period.
The warrants were issued to the holders of the
Debentures that were outstanding as of March 31,
1998, in accordance with the underlying master
agreement dated November 11, 1997. The warrants
were issued pursuant to an exemption from
registration as set forth in Section 4(2) and
Regulation D of the Securities Act of 1933. For
additional information, see the Company's annual
report on Form 10-K for the fiscal year ended
December 31, 1997, Part II, "Item 5. Market for
Registrant's Common Equity and Related Stockholder
Matters - Other."
In connection with certain consulting and
financial services provided by Gerald Metals
related to the Revolving Credit and Term Loan
agreement, the Company agreed to issue to Gerald
Metals an option to acquire 450,000 shares of the
Company's common stock. The option exercise price
will be $1.78125, which is based on the closing
price of the Company's common stock as of the day
the underlying loan agreement term sheet was
executed, and the options will be exercisable for
a five year period. Other provisions to be
included in the underlying option agreement are
subject to negotiation and the completion of
definitive documentation. The option will be
issued pursuant to an exemption from registration
as set forth in Section 4(2) and Regulation D of
the Securities Act of 1933.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.45 Interim Loan and Security Agreement
dated April 16, 1998 between U.S.
Bancorp Leasing & Financial and Alta
Gold Co.
10.46 Revolving Credit and Term Loan
Agreement among Standard Chartered
Bank, Credit Agricole Indosuez, Gerald
Metals, Inc. and Alta Gold Co. dated
April 30, 1998
27.01 Financial Data Schedule
(b) No reports were filed on Form 8-K during the
three-month period ended March 31, 1998.
16
SIGNATURE
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.
ALTA GOLD CO.
-------------
(Registrant)
May 13, 1998 BY: /s/ John A. Bielun
- ------------- -------------------
(Date) John A. Bielun
Chief Financial
Officer and
Principal Accounting
Officer
17
EXHIBIT 10.45
INTERIM LOAN AND SECURITY AGREEMENT
THIS INTERIM LOAN AND SECURITY AGREEMENT
(this "Agreement") is dated as of April
16, 1998 between U.S. Bancorp Leasing & Financial,
an Oregon corporation having an office and place
of business located at 7659 SW Mohawk Street,
Tualatin, OR 97062 ("Lender") and Alta Gold Co. a
corporation organized and existing under the laws
of the the state of Nevada and having its
principal place of business at Suite 10, 601
Whitney Ranch Drive Henderson, NV 89014
("Borrower").
RECITALS:
WHEREAS Borrower desires to purchase the
equipment more particularly described in Exhibit A
hereto (the "Equipment") pursuant to a purchase
order contract, agreement and/or other document,
copies of which have been attached hereto as
Exhibit C (the "Purchase Agreement"), with Fisher
("Supplier");
WHEREAS, Borrower desires to borrow from
Lender, on the terms and conditions hereinafter
provided, the purchase price and acquisition costs
of the Equipment;
WHEREAS, to induce Lender to lend to Borrower
the purchase price and acquisition costs of the
Equipment, Borrower desires to assign to Lender,
as security for all of Borrower's obligations
hereunder, all of Borrower's right, title and
interest in and to the Equipment and the Purchase
Agreement.
NOW, THEREFORE, in consideration of these
premises and of the covenants contained herein and
other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
Section 1. Definitions. All capitalized
terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Loan
Schedule attached hereto as Exhibit D (the "Loan
Schedule").
Section 2. Agreement to Make Loans. Subject
to the terms and conditions hereof, and provided
no Default (as defined in Section 8), or event
which with the passing of time or giving of notice
or both would constitute a Default, has occurred
and is continuing, Lender agrees to advance to
Borrower, on the date hereof the amount of Four
million seven hundred eight thousand U.S. Dollars
($4,708,000.00), and, upon five (5) days written
notice, from time to time hereafter until close of
business on the Cut-Off Date to make such
additional advances in such amounts as Borrower
may request, but limited in all events in the
aggregate to the Maximum Loan Commitment amount
stated in the Loan Schedule. (Each day on which a
loan is made is hereinafter referred to as a
"Funding Date", each advance a "Loan Funding".)
Lender shall not be required or obligated to make
any Loan Funding if such Loan Funding, when added
to all previous Loan Fundings, would cause Lender
to advance to Borrower any sum in excess of the
Maximum Loan Commitment set forth in the Loan
Schedule. Lender shall have no obligation to make
any Loan Funding to any person or entity other
than Borrower, and shall have no obligation to
make any Loan Funding to Borrower if control of
Borrower shall change in any material respect.
Section 3. Promissory Note(s).
(a) Each Loan Funding shall be evidenced by
a separate demand Promissory Note, at such
interest rate as the parties may hereafter
agree,in the form of Exhibit E.
(b) Subject to the terms hereof, upon the
earlier of the (i) Cut-Off Date or (ii) the
Funding Date on which the total Loan Fundings
made as of that date total in the aggregate
the Maximum Loan Commitment, Borrower shall
(x) pay all unpaid interest due and owing
under any Promissory Note issued pursuant
hereto; and (y) execute a Consolidated
Promissory Note ("Consolidated Note") in the
form of Exhibit F in a principal amount
equal to the aggregate amount of all Loan
Fundings (Each Demand Promissory Note and the
Consolidated Promissory Note shall
hereinafter be referred to, individually or
collectively, as the "Note(s)".).
Section 4. Conditions Precedent to Loan
Fundings. The obligation of Lender to make any
Loan Funding to Borrower on the applicable Funding
Date is subject to the performance by Borrower of
all of its agreements and covenants under this
Agreement and the fulfillment of the following
conditions precedent:
(a) Borrower shall have paid to Supplier the
Borrower's Down Payment, if any, specified on
the Loan Schedule.
(b) No Default, or event which with the
passing of time or the giving of notice or
both would constitute a Default, has occurred
and is continuing on such Funding Date under
this Agreement, any Note or any other
agreement or instrument then existing between
Borrower and Lender.
(c) Lender has received such executed
financing statements, fixture filings and
other documents as it may reasonable request
to perfect a first priority security interest
in the Collateral, as that term is defined in
Section 5 below, (including, without
limitation, any lien, mortgages, landlord or
similar waivers).
(d) Borrower has executed and delivered to
Lender a Demand Promissory Note, in the form
of Exhibit E, in the principal amount of the
Loan Funding, executed by an authorized
officer of the Borrower.
(e) Lender has received such other
documents, certificates and opinions,
including but not limited to opinions of
Borrower's counsel and invoices and receipts
in connection with the Equipment, as it shall
reasonably request.
(f) There has not occurred any adverse
change in Borrower's financial situation from
the date of execution hereof to the date of
the Loan Funding which materially impairs
Borrower's ability to perform its obligations
hereunder, or under any of the Notes, or
materially impairs Lender's interest in the
Collateral.
Section 5. Grant of Security Interest.
(a) As security for the punctual payment and
performance of Borrower's obligations under
each and all of the Note(s), whether now
existing or hereinafter arising, whether the
same be totally repaid and extinguished and
thereafter reincurred or otherwise, direct or
indirect, liquidated or contingent, whether
as primary obligor or as endorser,
indemnitor, or otherwise, including any
obligation arising in connection with or
resulting from any amendment to or extension
of any Note and, further, as security for the
performance and observance by Borrower of all
representations, warranties and covenants
made by it in this Agreement, any amendment
or extension hereof or in any other
agreement, document or certificate delivered
in connection with this Agreement or any
Note, Borrower hereby gives, sets over,
assigns, transfers and grants to Lender a
security interest in and to (i) the
Equipment, (ii) the Purchase Agreement, (iii)
any and all additions, attachments,
accessories, accessions, and all
substitutions, replacements or exchanges to
the Equipment, (iv) the property described on
Schedule 1 attached hereto together with all
additions, attachments, accessories, and
accessions thereto and any substitutions,
replacements, or exchanges therefore, and (v)
any and all proceeds of any of the foregoing,
including insurance and lease proceeds ((i) -
(v) are hereinafter referred to, from time to
time, individually and collectively as
"Collateral"). Borrower warrants that such
security interest shall be the only security
interest granted by Borrower or retained by
any other person or entity other than Lender
(excluding only such security interest of
Supplier in the Equipment as Supplier may
retain to secure payment of the purchase
price of the Equipment as specifically
provided for in the Purchase Agreement) and
Borrower shall, at its own cost and expense,
promptly take such action as may be necessary
to duly discharge all liens on the Collateral
which result from claims against Borrower not
related to the transactions contemplated by
this Agreement.
(b) Additions to, reductions or exchanges
of, or substitutions for, the Collateral,
payments on account of any obligation or
liability secured hereby, or increases in the
obligations and liabilities secured hereby,
or the creation of additional obligations and
liabilities secured hereby, may from time to
time be made or occur without affecting the
provisions of this Agreement or the
provisions of any obligation or liability
which is secured hereby.
(c) Borrower hereby appoints Lender its true
and lawful attorney, with full power of
substitution, to take such action as Lender
may deem necessary to protect and preserve
its security interest in the Collateral, and
Borrower waives its right of notice, demand,
dishonor, marshalling of Collateral, place
and time of sale, advertising, statutory
method of foreclosure and all bonds,
securities and rights of redemption.
Section 6. Representations, Warranties and
Covenants of Borrower With Respect to
Organization.
Borrower hereby represents, warrants and
covenants, as of the date hereof and at all
times during the term hereof:
(a) Borrower has adequate power and capacity
to enter into each Note and this Agreement,
and any document or certificate delivered in
connection with this Agreement or any Note.
(Together the Notes, this Agreement and any
document or certificate delivered in
connection with this Agreement or any Note,
shall constitute the "Documents".)
(b) The Documents have been duly authorized,
executed and delivered by Borrower and
constitute valid, legal and binding
agreements, enforceable in accordance with
their terms, except to the extent that the
enforcement of remedies therein provided may
be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of
objections is required from any federal,
state, local or municipal governmental
authority or instrumentality with respect to
the entry into or performance by Borrower of
the Documents except such as have already
been obtained.
(d) The entry into and performance by
Borrower of the Documents will not: (i)
violate any judgment, order, law or
regulation applicable to Borrower or any
provision of Borrower's Certificate of
Incorporation or By-Laws or (ii) result in
any breach of, constitute a default under or
result in the creation of any charge,
security interest or other encumbrance upon
any unit of Equipment pursuant to any
indenture, mortgage, deed of trust, bank loan
or credit agreements or other instrument to
which Borrower is a party.
(e) There are no suits or proceedings
pending or threatened in court or before any
regulatory commission, board or other
administrative governmental agency against or
affecting Borrower, which will have a
material adverse effect on the ability of
Borrower to fulfill its obligations under the
Documents.
(f) The Borrower is, and will remain during
the term hereof, a corporation organized,
existing and in good standing, under the laws
of the State of NV. The persons executing
any of the Documents are acting with the full
authority of the Board of Directors of
Borrower and hold the offices indicated in
the Documents below their signatures which
signatures Borrower hereby acknowledges to be
genuine.
Section 7. Representations, Warranties and
Covenants of Borrower With Respect To The
Collateral.
Borrower hereby represents, warrants and
covenants, as of the date hereof and at all
times during the term hereof:
(a) Borrower is and will remain during the
term of this Agreement the sole and lawful
owner and in possession of the Equipment and
is or will become upon delivery and
installation and remain during the term of
this Agreement the sole and lawful owner and
in possession of the Collateral; Borrower
shall at all time during the term hereof keep
and maintain the Collateral in good operating
condition and repair, in accordance with
Manufacturer's recommendations therefore.
(b) The Collateral is and will remain during
the term of this Agreement free and clear of
all liens and encumbrances of every kind,
nature and description except for security
interest granted in this Agreement. Borrower
will warrant and defend the Collateral and
Lender against all claims by all persons
adverse to Lender's interest in and to the
Collateral. Borrower shall not sell, rent,
lend, mortgage, grant a security interest in
or otherwise encumber or transfer any of the
Collateral during the term hereof. Borrower
shall not remove the Equipment from the
location designated on the Loan Schedule.
(c) Borrower shall pay promptly when due all
taxes, license fees, assessments and public
and private charges levied or assessed on any
of the Collateral or on the use thereof or on
this Agreement or any Note. At its option,
Lender may discharge taxes, liens, security
interests or other encumbrances at any time
levied or placed on the Collateral and may
pay for the maintenance, insurance and
preservation of the Collateral or to effect
compliance with the terms of this Agreement.
Borrower agrees to reimburse Lender on
demand, for any payment made or any expense
incurred by Lender pursuant to the foregoing
authorization.
(d) The Collateral shall at all times during
the term hereof be held at Borrower's risk,
and Borrower shall keep it insured against
loss or damage by fire and extended coverage
perils, theft, burglary, and for any or all
Collateral which are vehicles, for risk of
loss by collision, and where requested by
Lender, against other risks as required
thereby, for the full replacement value
thereof, with companies, in amounts and under
policies acceptable to Lender, with losses
payable to Lender and Borrower as their
interests may appear. Borrower shall, if
Lender so requires, deliver to Lender policy
or certificates of insurance evidencing such
coverage. Each policy shall provide for
coverage to Lender regardless of the breach
by Borrower of any warranty or representation
made therein and shall provide for ten (10)
days written notice to Lender of the
cancellation or material modification
thereof.
Section 8. Events of Default.
Borrower shall be in Default under this
Agreement and under each Note upon the
occurrence of any of the following;
(a) Failure in the payment or performance of
any Note, or any extension or amendment
thereto by Borrower;
(b) Failure in the performance of any
obligation by Borrower of any covenant or
warranty made by it in this Agreement, any
amendment or extension hereof or in any other
agreement, document or certificate delivered
in connection with this Agreement;
(c) Any warranty, representation or
statement made or furnished to Lender by or
on behalf of Borrower, in any Note or in this
Agreement, any amendment or extension thereof
or hereof or in any other agreement, document
or certificate delivered in connection with
this Agreement or any Note, or furnished to
Lender in order to induce Lender to make any
Loan Funding hereunder, proving to be false
in any material respect;
(d) (i) Any of the Collateral being
subjected to, or threatened with,
attachment, execution, levy or seizure in any
legal proceeding, or (ii) the entry of any
judgment against, or the assessment and/or
filing of any tax lien against, or the
issuance of any writ of garnishment or
attachment against any property of Borrower;
(e) The death, incompetence, dissolution,
termination of existence, any change in
corporate structure or of controlling
ownership, insolvency, or business failure of
Borrower;
(f) The appointment of a receiver for all or
of any part of the property of Borrower, the
assignment for the benefit of creditors by or
the commencement of any proceeding under any
bankruptcy or insolvency law by or against
Borrower or any guarantor of Borrower's
obligation hereunder or under any Note; or
(g) Lender's determination, in good faith,
that the security interest granted hereunder
or the Collateral is unsafe or insecure, or
that the prospect of payment or other
performance by Borrower under any Note or
this Agreement is impaired.
Section 9. Remedies on Default.
Upon the occurrence of a Default under this
Agreement, Lender, at its option, may declare all
of the obligations and liabilities secured by this
Agreement, including without limitation the Notes,
to be immediately due and payable, without demand
or notice to Borrower or any guarantor of any
obligations of Borrower. The obligations and
liabilities accelerated thereby shall bear
interest at the lower of 18% per annum or the
maximum rate allowed by applicable law. Upon such
declaration of default, Lender shall have all of
the rights and remedies of a secured party under
the Uniform Commercial Code, or under any other
applicable law, including without limitation the
right to (i) notify any account debtor of Borrower
or any obligor on any instrument which constitutes
part of the Collateral to make payment to Lender,
(ii) with or without legal process, to enter any
premises where the Collateral may be and take
possession and/or remove said Collateral from said
premises, (iii) sell the Collateral at public or
private sale, in whole or in part, and have the
right to bid and purchase at said sale, (iv) lease
or otherwise dispose of all or part of the
Collateral, applying proceeds therefrom to the
obligations then in default. Proceeds from any
sale or lease or other disposition shall be
applied first to all costs of repossession,
storage, and disposition including without
limitation attorneys', appraisers', and
auctioneers' fees, second to discharge the
obligations then in default, third to discharge
any other obligations of Borrower to Lender under
this Agreement or any Note, whether as obligor,
endorsor, or otherwise, fourth to expenses
incurred in paying or settling liens and claims
against the Collateral, fifth to Borrower, if
there exists any surplus. Any notice which Lender
is required to give to Borrower under the Uniform
Commercial Code of the time and place of any
public sale or the time after which any private
sale or other intended disposition of the
Collateral is to be made shall be deemed to
constitute reasonable notice if such notice is
mailed by registered or certified mail to the last
known address of Borrower at least five (5) days
prior to such action.
Section 10. Miscellaneous.
(a) Borrower shall, upon request of Lender,
furnish to Lender such further information,
execute and deliver to Lender such documents,
including without limitation Uniform
Commercial Code Financing Statements, and do
such other acts and things, as Lender may at
any time reasonable request relating to the
perfection or protection of the security
interest created by this Agreement or for
the purpose of carrying out the intent of
this Agreement.
(b) Lender's rights and remedies hereunder
are cumulative. Neither the failure nor any
delay on the part of Lender to exercise any
right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any
single or partial exercise thereof or the
exercise of any other right, power or
privilege.
(c) Lender shall not be deemed to have
waived any of its rights hereunder or under
any other agreement, instrument or paper
signed by Borrower unless such waiver be in
writing and signed by Lender.
(d) Lender may correct patent errors herein
and fill in all blanks herein or in any
document provided in connection herewith or
now or hereafter attached hereto consistent
with the agreement of the parties.
(e) All notices from Lender to Borrower
shall be sufficiently given if sent by
first-class mail, postage prepaid or
delivered in hand to Borrower at Borrower's
address shown above.
(f) Time is of the essence hereof. This
Agreement shall be binding, jointly and
severally, upon all parties described as
"Borrower" and their respective heirs,
executors, representatives, successors and
assigns, and shall inure to the benefit of
Lender, its successors and assigns. If any
provision of this Agreement is in conflict
with any statute, rule or law applicable
hereto, then such provision shall be deemed
null and void to the extent that it may
conflict therewith, but without invalidating
any other provision(s) hereof. This
Agreement shall not be changed or terminated
orally, but only by a writing signed by both
parties hereto. This Agreement and the Notes
or any other document or certificate given in
connection herewith or therewith may be
assigned without notice to Borrower and
Borrower hereby waives any defense,
counterclaim or cross-complaint by Borrower
against any assignee, agreeing that Lender
shall be solely responsible therefor.
(g) Borrower hereby grants to Lender the
power to sign Borrower's name and generally
to act on behalf of Borrower to execute and
file applications for title, transfers of
title, financing statements, notices of lien
and other documents pertaining to any or all
of the Collateral. Borrower shall, if any
certificate of title be required or permitted
by law for any of the Collateral, obtain such
certificate showing the lien hereof with
respect to the Collateral and promptly
deliver same to Lender.
(h) In the event this Agreement and any Note
are placed in the hands of an attorney for
collection of money due or to become due or
to obtain performance of any provision
hereof, Borrower agrees to pay attorney's
fees actually incurred by Lender.
(i) Borrower agrees to furnish its annual
financial statements and such interim
statements as Lender may require in form
satisfactory to Lender. Any and all
financial statements submitted and to be
submitted to Lender have and will have been
prepared on a basis of generally accepted
accounting principles, and are and will be
complete and correct and fairly present
Borrower's financial condition as at the date
thereof. Lender may at any reasonable time
examine the books and records of Borrower and
make copies thereof.
(j) This Agreement and any and all
obligations and liabilities secured hereby
shall be governed by and construed under the
laws of the State of Oregon, without regard
to choice of law principles thereof, and any
provision of this Agreement or of the
obligations and liabilities secured by this
Agreement which may prove to be unenforceable
shall not affect the validity of any other
provision of this Agreement or of the said
obligations and liabilities. Borrower
acknowledges receipt of a true copy hereof
and waives acceptance hereof.
(k) This Agreement shall continue in full
force and effect for so long as there shall
remain in existence obligations or
liabilities from Borrower to Lender hereunder
or under the Notes.
(l) BORROWER HEREBY UNCONDITIONALLY WAIVES
ITS RIGHTS TO A JURY TRIAL OF ANY CAUSE OF
ACTION BASED UPON OR ARISING OUT OF, DIRECTLY
OR INDIRECTLY, THIS AGREEMENT, ANY OF THE
RELATED DOCUMENTS, ANY DEALINGS BETWEEN
BORROWER AND LENDER RELATING TO THE SUBJECT
MATTER OF THIS TRANSACTION OR ANY RELATED
TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS
BEING ESTABLISHED BETWEEN BORROWER AND
LENDER. The scope of this waiver is intended
to be all encompassing of any and all
disputes that may be filed in any court
(including, without limitation, contract
claims, tort claims, breach of duty claims,
and all other common law and statutory
claims). THIS WAIVER IS IRREVOCABLE MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT, ANY
RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING TO THIS TRANSACTION OR
ANY RELATED TRANSACTION. In the event of
litigation, this Agreement may be filed as a
written consent to a trial by the court.
Time is of the essence of this Agreement.
Lender's failure at any time to require
strict performance by Borrower of any of the
provisions hereof shall not waive or diminish
Lender's right thereafter to demand strict
compliance therewith. Borrower agrees, upon
Lender's request, to execute any instrument
necessary or expedient for filing, recording
or perfecting the interest of Lender. All
notices required to be given hereunder shall
be deemed adequately given if sent by
registered or certified mail to the addressee
at its address stated herein, or at such
other place as such addressee may have
designated in writing. This Agreement and
any, Exhibits or Annexes thereto constitute
the entire agreement of the parties with
respect to the subject matter hereof. NO
VARIATION OR MODIFICATION OF THIS AGREEMENT
OR ANY WAIVER OF ANY OF ITS PROVISIONS OR
CONDITIONS, SHALL BE VALID UNLESS IN WRITING
AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF
THE PARTIES HERETO.
IN WITNESS WHEREOF, Borrower and Lender,
intending to be legally bound hereby, have
caused their duly authorized representatives
to execute this Agreement, as of the day and
year first above-written.
LENDER
U.S. Bancorp Leasing & Financial
By:
Title: Assistant Vice President
BORROWER
Alta Gold Co.
By: John A. Bielun
Title: Senior Vice President and CFO
(Exhibits not included).
EXHIBIT 10.46
REVOLVING CREDIT AND TERM LOAN AGREEMENT
----------------------------------------
among
STANDARD CHARTERED BANK as Agent and a Lender,
CREDIT AGRICOLE INDOSUEZ as a Lender,
GERALD METALS, INC., as a Lender and
ALTA GOLD CO. as Borrower
Dated as of April 30, 1998
ARTICLE I 1
DEFINITIONS 1
ARTICLE II 13
GENERAL TERMS 13
Section 2.01. Term Loan 13
Section 2.02. Revolving Loan 15
Section 2.03. Payments of Principal and
Interest on the Loans 16
Section 2.04. Making of Advances 17
Section 2.05. Requirements of Law 18
Section 2.06. Taxes 20
Section 2.07. Use of Proceeds 21
Section 2.08. Security 21
Section 2.09. Force Majeure 22
Section 2.10. Commitment Fee 22
ARTICLE III 22
REPRESENTATIONS AND WARRANTIES 22
Section 3.01. Financial Statements 22
Section 3.02. Organization, Etc. 23
Section 3.03. Authorization, Compliance,
Etc. 23
Section 3.04. Litigation 23
Section 3.05. Title to Properties 23
Section 3.06. Filing and Payment of Taxes 24
Section 3.07. Full Disclosure 24
Section 3.08. Enforceability 24
Section 3.09. Solvency 24
Section 3.10. Environmental Matters 24
Section 3.11. Material Adverse Change 25
Section 3.12. No Legal Bar 25
Section 3.13. No Default 25
Section 3.14. Investment Company Act
and Other Regulations 25
Section 3.15. Further Representations and
Warranties 26
Section 3.16. Year 2000 Compliant 26
Section 3.17. ERISA 26
ARTICLE IV 27
CONDITIONS PRECEDENT 27
Section 4.01. Conditions Precedent to the
Initial Advance 27
Section 4.02. Conditions Precedent to
Subsequent Advances 29
ARTICLE V 29
FINANCIAL COVENANTS 29
Section 5.01. Covenants of Borrower 29
ARTICLE VI 30
AFFIRMATIVE COVENANTS 30
Section 6.01. Preservation of Assets;
Compliance with Law 30
Section 6.02. Taxes, Etc. 31
Section 6.03. Notice of Proceedings or
Adverse Change 31
Section 6.04. Notice of Default or Event
of Default 31
Section 6.05. Reimbursement of Expenses 31
Section 6.06. Insurance 31
Section 6.07. Financial Reporting 32
Section 6.08. Visitation Rights 33
Section 6.09. Environmental Matters 33
Section 6.10. Hedging 33
Section 6.11. Trading Agreement, Purchase
Contract 33
Section 6.12. Further Assurances 33
Section 6.13. Licenses 34
Section 6.14. Year 2000 Compliant 34
Section 6.15. ERISA Notices 34
Section 6.16. ERISA Compliance 35
ARTICLE VII 35
NEGATIVE COVENANTS 35
Section 7.01. Fundamental Changes 35
Section 7.02. Illegal Activities 36
Section 7.03. Dividends 36
Section 7.04. Liens 36
Section 7.05. Disposition of Assets 36
Section 7.06. Sale and Leasebacks 37
Section 7.07. Investments 37
ARTICLE VIII 37
DEFAULTS/RIGHTS AND REMEDIES OF AGENT UPON
DEFAULT 37
Section 8.01. Events of Default 37
ARTICLE IX 40
THE AGENT 40
Section 9.01. Authorization and Action 40
Section 9.02. Agent's Reliance, Etc. 41
Section 9.03. Standard as Lender 41
Section 9.04. Lender Credit Decision 41
Section 9.05. Indemnification 41
Section 9.06. Successor Agent 42
Section 9.07. Consents and Approvals 42
ARTICLE X 43
MISCELLANEOUS 43
Section 10.01. Amendment of Purchase
Contract and Trading
Agreement 43
-ii-
Section 10.02. Survival 44
Section 10.03. Indemnification 44
Section 10.04. Nonliability of Agent and
Lenders 44
Section 10.05. Governing Law; Submission to
Jurisdiction; Waiver of Jury
Trial; Waiver of Damages 45
Section 10.06. Amendments, Etc. 46
Section 10.07. Waiver 47
Section 10.08. Notices 47
Section 10.09. Assignments and
Participations 49
Section 10.10. Setoff and Ratable Sharing
of Payments 51
Section 10.11. Limitation on
Indemnification 52
Section 10.12. Successors and Assigns 53
Section 10.13. Severability 53
Section 10.14. Section Headings 53
Section 10.15. Integration 53
Section 10.16. Counterparts 53
Section 10.17. Survival of Deeds of Trust 53
SCHEDULE OF EXHIBITS
--------------------
Exhibit A-1 Request for Term Advance
Exhibit A-2 Request for Revolving Advance
Exhibit B Permitted Liens
Exhibit C Opinion of Counsel
Exhibit D Insurance Certificates
Exhibit E Description of Griffon Mine Assets
Exhibit F Description of Kinsley Mine Assets
Exhibit G Description of Olinghouse Mine
Assets
Exhibit H Description of Copper Flat Mine
Assets
Exhibit I Form of Term Note
Exhibit J Form of Revolving Note
Exhibit K Use of Loan Proceeds
Exhibit L Assignment and Acceptance
Exhibit M ERISA Information
Exhibit N Form of Assignment of Contracts
Exhibit O Purchase Contract
Exhibit P Form of Quarterly Compliance
Statement
Exhibit Q Form of Operating Report
Exhibit R Form of Trading Agreement
Exhibit S Form of Security Agreement
Exhibit T Certificate as to Warranties and
Representations
-iii-
THIS REVOLVING CREDIT AND TERM LOAN
AGREEMENT, as the same may be amended from time to
time, (this "Agreement") is made as of the 30th
day of April, 1998, among ALTA GOLD CO., a Nevada
corporation with its principal office at 601
Whitney Ranch Drive, Suite 10, Henderson, Nevada
89014 (the "Borrower") and CREDIT AGRICOLE
INDOSUEZ, with an office at 520 Madison Avenue,
New York, New York USA 10022 ("CAI") and GERALD
METALS, INC. a Delaware corporation with its
office at High Ridge Park, Stamford, Connecticut
06904 ("Gerald") and STANDARD CHARTERED BANK, with
an office at 7 World Trade Center, New York, New
York USA 10048-2627 ("Standard" and together with
CAI and Gerald collectively referred to as the
"Lenders" and each individually as a "Lender"), as
a Lender and as administrative agent and
collateral agent for the Lenders (in such
capacity, together with its successors and assigns
in such capacity, the "Agent").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
Borrower has requested that Lenders provide
it with the following credit facilities: (i) a
secured revolving credit facility in an aggregate
principal amount not to exceed Six Million Dollars
($6,000,000) in Dollars at any time outstanding
and (ii) a secured term loan facility in the
aggregate principal amount of up to Eleven Million
Dollars ($11,000,000) in Dollars (collectively,
the "Loans") and Lenders have agreed to extend
such Loans upon the terms and subject to the
conditions hereinafter set forth. Capitalized
terms used herein are defined in the recitals
above or in Article I of this Agreement.
ARTICLE I
---------
DEFINITIONS
-----------
As used herein, the following terms have the
indicated meanings:
"ADVANCE" or "ADVANCES" means the individual
or aggregate principal amount of Dollars advanced
by Lenders to Borrower pursuant to Section 2.01 or
2.02 of this Agreement, as either a Term Advance
or a Revolving Advance.
"AGENT" has the meaning ascribed thereto in
preamble of this Agreement.
"ASSIGNMENT OF CONTRACTS" means that certain
Assignment, in the form attached hereto as Exhibit
N and made a part hereof, executed by the Borrower
in favor of Agent for the benefit of Lenders of
even date herewith regarding the Purchase Contract
and the Trading Agreement.
"AVAILABLE REVOLVING LOAN COMMITMENT" means,
for each Lender at any time, an amount in Dollars
equal to the excess, if any, of such Lender's
Revolving Loan Commitment over such Lender's then
outstanding Revolving Advances. "AVAILABLE
REVOLVING LOAN COMMITMENTS" means the aggregate of
each Available Revolving Commitment for the
Lenders hereunder.
"AVAILABLE TERM LOAN COMMITMENT" means, for
each Lender at any time, an amount in Dollars
equal to the excess, if any, of such Lender's Term
Loan Commitment over such Lender's then
outstanding Term Advances. "AVAILABLE TERM LOAN
COMMITMENTS" means the aggregate of each Available
Term Loan Commitment for the Lenders hereunder.
"BORROWER" has the meaning given to such term
in the preamble.
"BREAKAGE COSTS" means the actual costs
incurred by any Lender in connection with such
Lender having match-funded any Loan as a result of
the repayment of such Loan by Borrower on any day
other than the last day of the applicable Interest
Period. Such costs shall be payable in the event
of any repayment on a day other than the last day
of the applicable Interest Period, whether such
repayment is mandatory or voluntary.
"BUSINESS DAY" means any day when commercial
banks are not authorized or required to close in
the City of New York which is also a day on which
dealings in Dollar deposits are carried out on the
London interbank market.
"CAPITAL EXPENDITURES" means, for any period,
Exploration Expenses, expenditures of funds by
Borrower for, or the purchase, contracting for the
purchase, or the lease of, capital improvements,
fixed assets or intangible assets which, in
accordance with GAAP, would be added as a debit to
the fixed assets account of Borrower.
"CODE" means the Internal Revenue Code of 1986,
as amended from time to time.
"COLLATERAL" means, collectively, any and all
assets, rights, titles and interests in or to
property of Borrower pledged or mortgaged to Agent
for the benefit of Lenders, or in which a security
interest is granted to Agent for the benefit of
Lenders, from time to time, as collateral pursuant
to the Security Documents, whether now owned or
hereafter acquired, including but not limited to
the proceeds of the Trading Agreement and the
Purchase Contract.
"COMMITMENT" means the aggregate of the Term
Loan Commitments and the Revolving Loan
Commitments.
"COMMITMENT FEES" means the aggregate of the
Term Loan Commitment Fee and the Revolving Loan
Commitment Fee.
"COMPUTER CAPACITY" means computer hardware,
firmware and software, including equipment
containing embedded microchips, used by Borrower
in the conduct of its business (whether owned or
licensed by Borrower or used by Borrower through
third-party service providers or otherwise, and
including systems and equipment supplied by others
or with which Borrower's systems interface).
"CONVERTIBLE DEBENTURES" means certain four
percent (4%) convertible debentures (with interest
payable quarterly and due April 14, 2000).
-2-
"COPPER FLAT MINE" means Borrower's mining
properties in Sierra County, New Mexico as more
particularly described on Exhibit H hereto.
"COST OF FUNDS RATE" means the per annum rate
of interest which Standard is required to pay, or
is offering to pay, for a Liability, as adjusted
for reserve requirements and such other
requirements as may be imposed by any Governmental
Authority.
"CURRENT ASSETS" means, at any date as of which
the amount thereof shall be determined, all
amounts that should, in accordance with GAAP, be
included as current assets on the balance sheet of
Borrower at such date.
"CURRENT LIABILITIES" means, at any date as of
which the amount thereof shall be determined, all
amounts that should, in accordance with GAAP, be
included as current liabilities on the balance
sheet of Borrower as at such date, plus, to the
extent not already included therein, all
Indebtedness that is payable upon demand or within
one (1) year from the date of determination
thereof unless such Indebtedness is renewable or
extendible at the option of Borrower to a date
more than one (1) year from the date of
determination.
"DEEDS OF TRUST" has the meaning ascribed
thereto in Section 2.08(b).
"DEFAULT" means an event, condition or default
which with the giving of notice, the passage of
time, or both, would be an Event of Default.
"DEFAULT RATE" means a rate per annum equal to
the Prime Rate plus three percent (3%) per annum.
"DOLLARS" and "$" means the lawful currency of
the United States of America.
"EBITDA" means, for any applicable period, the
sum for such period, as determined in accordance
with GAAP, of Net Income plus interest expense,
income taxes, depreciation, amortization, expense
arising from the forgiveness, adjustment or
negotiated settlement of any indebtedness and
charges resulting from any change in the method of
accounting of Borrower.
"ELIGIBLE ASSIGNEE" means (i) a Lender; (ii) a
commercial bank acceptable to Lenders and Borrower
with an investment grade rating from one or more
investment rating firms; (iii) the central bank of
any country which is a member of the Organization
for Economic Cooperation and Development; or (iv)
a finance company or other financial institution
acceptable to the Agent, which is regularly
engaged in making, purchasing or investing in
loans and having total assets in excess of
$2,000,000,000 and in the case of subclause (ii),
(iii) and (iv) of this defined term is otherwise
acceptable to the Agent.
-3-
"ENVIRONMENTAL REQUIREMENT(S)" means any
present or future law, statute, ordinance, rule,
regulation, order, code, license, permit, decree,
judgment or directive of or by any Governmental
Authority and relating to or addressing the
protection of human health or the environment,
including, without limitation, all laws relating
to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or
wastes into the environment (including, without
limitation, air, surface water, ground water or
land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or
hazardous substances or wastes.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to
time, and the regulations promulgated and rulings
issued thereunder.
"ERISA AFFILIATE" means (i) any corporation
which is a member of a controlled group of
corporations within the meaning of Section 414(b)
of the Code of which Borrower is a member; (ii)
any trade or business (whether or not
incorporated) which is a member of a group of
trades or businesses under common control within
the meaning of Section 414(c) of the Code of which
Borrower is a member; and (iii) any member of an
affiliated service group within the meaning of
Section 414(m) or (o) of the Code of which
Borrower, any corporation described in clause (i)
above or any trade or business described in clause
(ii) above is a member.
"EVENT OF DEFAULT" has the meaning given to
such term in Section 8.01 of this Agreement.
"EXPENSES" means all present and future
expenses incurred by or on behalf of the Agent or
Lenders in connection with this Agreement or any
of the other Loan Documents and any amendment,
supplement or other modification or waiver related
hereto or thereto or in connection with the
enforcement of any term hereof or thereof, whether
incurred heretofore or hereafter, which expenses
shall include, without being limited to, the cost
of title, lien, judgment and other record
searches, reasonable attorneys' fees,
disbursements and expenses, all reasonable costs
and expenses incurred by the Agent or any Lender
in opening bank accounts, depositing checks,
receiving and transferring funds, and any charges
due to "insufficient funds" of deposited checks
and the applicable Agent's or any Lender's
standard fee relating thereto, reasonable fees and
expenses of accountants, appraisers or other
experts or advisors retained by Agent or any
Lender, fees and taxes relative to the filing of
financing statements, costs of preparing and
recording the Security Documents and all expenses,
costs and fees set forth in Articles VI, VIII or
IX of this Agreement.
"EXPLORATION EXPENSES" means all present and
future expenses incurred by or on behalf of
Borrower in connection with exploration for ore
(including,
-4-
without limitation, test work, drilling expenses,
geological surveying, assaying, prospecting, trial
pits and bore holes).
"FEDERAL FUNDS 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 on such day, as
published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a
Business Day, the average of the quotations for
such day on such transactions received by the
Agent from three Federal funds brokers of
recognized standing selected by it.
"Financial Statements" means the balance sheet,
income statement, statement of cash flows and
retained earnings statement of Borrower, as
presented in its 10K and 10Q Filings with the
Securities and Exchange Commission, for the year
or other period then ended, together with
supporting schedules, audited (without
qualification) by independent certified public
accountants approved by Agent (except that, in the
case of quarterly statements, such statements may
be unaudited) and prepared in accordance with
GAAP.
"FORCE MAJEURE" means any delay due to strikes,
lockouts or other labor or industrial disturbance,
civil disturbance, future order or delay caused by
any government, court or regulatory body claiming
jurisdiction (including, without limitation delays
in processing or release of necessary permits),
act of the public enemy, war, riot, sabotage,
blockade, embargo, failure or inability to secure
materials, supplies or labor through ordinary
courses by reason of shortages or priority or
similar regulation or order of any Governmental
Authority, lightning, earthquake, fire, storm,
hurricane, tornado, flood, washout, explosion
other acts of G-d, or other delays reasonably
beyond the control of Borrower.
"GAAP" means generally accepted accounting
principles in the United States of America, as
promulgated by the Financial Accounting Standards
Board and in effect from time to time,
consistently applied with past financial
statements of Borrower.
"GOLD" means gold in the form of bullion with
hallmarks acceptable to Lenders and an assayed
fineness of not less than .995.
"GOVERNMENTAL AUTHORITY" means the federal
government of the United States of America or the
government of any other nation or principality, or
any province, state, county, parish, municipality
or other political subdivision of any thereof or
any governmental body, agency, authority,
department or commission (including, without
limitation, any taxing authority) or any
instrumentality or officer of any thereof
(including, without limitation, any court or
tribunal) exercising executive, legislative,
judicial, regulatory or administrative functions
of
-5-
or pertaining to government and any corporation,
partnership or other entity directly or indirectly
owned by or controlled by the foregoing.
"GRIFFON MINE" means Borrower's mining
properties in White Pine County, Nevada as more
particularly described on Exhibit E hereto.
"HAZARDOUS MATERIAL" means each and every
element, compound, chemical mixture, contaminant,
pollutant, material, waste or other substance
which is defined, determined or identified as
hazardous or toxic under any Environmental
Requirements but taking into account exceptions
and exclusions applicable to the mining industry
in general. Without limiting the generality of
the foregoing, the term shall mean and include:
(i) "chemical substance or mixture" as
defined in the Toxic Substances Control Act,
as amended, and regulations promulgated
thereunder;
(ii) "hazardous materials" as defined in the
Hazardous Materials Transportation Act, as
amended, and regulations promulgated
thereunder;
(iii) "hazardous substances" as defined in
the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the
Superfund Amendment and Reauthorization Act of
1986, or Title III of the superfund Amendment
and Reauthorization Act, each as amended, and
regulations promulgated thereunder;
(iv) "hazardous waste" as defined in the
Resource Conservation and Recovery Act of 1976,
as amended, and regulations promulgated
thereunder.
"INDEBTEDNESS" means all indebtedness,
obligations and liabilities of Borrower,
contingent or otherwise, direct or indirect and
howsoever evidenced or incurred, that should be
reflected as a liability on the balance sheet of
Borrower prepared in accordance with GAAP.
"INTEREST PAYMENT DATE" means the last Business
Day of each March, June, September and December.
"INTEREST PERIOD" means with respect to any
Loan, each period commencing on the date such Loan
is made or converted or on the last day of the
immediately preceding Interest Period for such
Loan, and ending on the numerically corresponding
day in the first, second third, fourth, fifth,
sixth or (with the approval of all of the Lenders
with regard to any Term Advances) twelfth calendar
month thereafter as the Borrower may select in as
provided in Section 2.01 or Section 2.02 hereof,
as applicable, except that each Interest Period
which commences on the first Business Day of a
calendar month or any day for which there is no
numerically
-6-
corresponding day in the appropriate
subsequent calendar month (i.e., there is no
February 30th) shall end on the last Business Day
of the appropriate subsequent calendar month.
Notwithstanding the foregoing, (a) no Interest
Period may be selected by Borrower that would end
(i) after the applicable Revolving Loan Maturity
Date or the Revolving Loan Termination Date in the
case of a Revolving Loan or (ii) after the Term
Loan Maturity Date in the case of a Term Loan; (b)
each Interest Period which would otherwise end on
a day which is not a Business Day shall end on the
next succeeding Business Day (or, if such next
succeeding Business Day falls in the next
succeeding calendar month, on the immediately
preceding Business Day); and (c) notwithstanding
clause (a) above, no Interest Period shall have a
duration of less than one (1) month and, if the
Interest Period of any Loan would otherwise be a
shorter period, such Loan shall bear interest at
the Cost of Funds Rate for such period.
"KINSLEY MINE" means Borrower's mining
properties in Elko County, Nevada as more
particularly described on Exhibit F hereto.
"LENDER" and "LENDERS" have the meaning given
to such term in the Preamble of this Agreement.
"LEVERAGE RATIO" means, for any applicable
period, the ratio of (a) the aggregate amount of
all Indebtedness (less the Convertible Debentures)
outstanding at the end of such period to (b) Net
Worth of Borrower for such period.
"LIABILITY" means, with regard to the Cost of
Funds Rate and any Loan for which LIBOR is
unavailable, any wholesale liability which
Standard could incur for obligations for the
applicable Interest Period in the approximate
principal amount of such Loan. The choice of
which Liabilities to use in determining the Cost
of Funds Rate shall be made by Agent. Neither
Agent nor any Lender shall be obligated to incur
the particular Liability on which the Cost of
Funds Rate is based, but each may do so in its
sole and absolute discretion.
"LIEN(S)" means any lien, claim, charge,
pledge, security interest, mortgage, deed of trust
or other encumbrance.
"LIBOR" means with respect to any Loan for any
Interest Period therefor and as adjusted for
reserve requirements as set forth below, the
arithmetic mean, as determined by Agent, of the
rates per annum (rounded upwards if necessary to
the whole one-sixteenth of one percent (1/16%)
equal to (i) the arithmetic mean of the offered
rates at approximately 11:00 a.m. London time (or
as soon as practicable thereafter) on the date two
(2) Business Days prior to the first day of such
Interest Period appearing on the display
designated as page "LIBO" on the Reuters Monitor
Money Rates Service (or such other page as may
replace the LIBO page on that service for the
purpose of displaying London Interbank offered
rates of major banks) having a term comparable to
such Interest Period and in an amount comparable
to the principal amount of the Loan to which such
Interest
-7-
Period relates, or (ii) if fewer than two
(2) offered rates appear on the display referred
to in (i) above, the rate determined by Agent
(which determination shall be conclusive in the
absence of manifest error) to be the arithmetic
mean of the rates at which banks are offering
dollar deposits for a term comparable to such
Interest Period in amounts comparable to the
principal amount of such Loan in the Interbank
Eurodollar market at approximately such time and
date. Such rate determined by Agent as set forth
above for any Interest Period shall be adjusted by
Agent by dividing (i) the rate determined above,
by (ii) a percentage equal to one hundred percent
(100%) minus the aggregate maximum reserve
percentage (without duplication) applicable during
such Interest Period under regulations issued from
time to time by the Board of Governors of the
Federal Reserve System (including, without
limitation, any basic, supplemental, marginal and
emergency reserve requirements) for CAI and
Standard (or of any subsequent holder of a Note
which is subject to such reserve requirements) in
respect of Eurocurrency funding (currently
referred to as Eurocurrency Liabilities in
Regulation D of the Board of Governors of the
Federal Reserve System).
"LOANS" has the meaning given to such term in
the Preamble to this Agreement.
"LOAN DOCUMENTS" means this Agreement, the
Notes, the Security Documents and all other
documents or instruments executed and delivered by
or on behalf of Borrower in connection with the
Loans and the transactions contemplated hereby, as
the same may hereafter be amended, supplemented,
restated or otherwise modified from time to time.
"MAJORITY LENDERS" means on any date of
determination, Lenders who, collectively, on such
date (i) hold at least 66 2/3% of the then
aggregate unpaid principal amount of the aggregate
of Lenders' Commitments owing to the Lenders and
all obligations owing under the Trading Agreement
and (ii) have Percentages in the aggregate of at
least 66 2/3%. Determination of those Lenders
satisfying the criteria specified above for any
action by the Majority Lenders shall be made by
the Agent and shall be conclusive and binding on
all parties absent manifest error.
"MATERIAL ADVERSE CHANGE" means a material
adverse change in (i) the business, prospects,
operations, results of operations, assets,
liabilities or condition (financial or otherwise)
of Borrower or (ii) the Collateral, in each case
as reasonably determined by Majority Lenders in
good faith.
"MATERIAL ADVERSE EFFECT" means (i) a Material
Adverse Change, (ii) a material adverse effect on
Borrower's ability to perform its obligations
under this Agreement or any of the other Loan
Documents to which it is a party or (iii) a
material adverse effect on the rights and remedies
of the Agent under any of the Loan Documents, in
each case as reasonably determined by Majority
Lenders in good faith.
-8-
"MINES" means, collectively, the Griffon Mine,
the Kinsley Mine, the Olinghouse Mine and the
Copper Flat Mine.
"MULTIEMPLOYER PLAN" means a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA to
which Borrower or any ERISA Affiliate is making or
accruing an obligation to make contributions, or
has within any of the preceding five plan years
made or accrued an obligation to make
contributions.
"MULTIPLE EMPLOYER PLAN" means an employee
benefit plan, other than a Multiemployer Plan,
subject to Title IV of ERISA to which Borrower or
any ERISA Affiliate, and at least one employer
other than Borrower or an ERISA Affiliate, is
making or accruing an obligation to make
contributions or, in the event that any such plan
has been terminated, to which Borrower or any
ERISA Affiliate made or accrued an obligation to
make contributions during any of the five plan
years preceding the date of termination of such
plan.
"NET INCOME" means, for any period, the net
income (or loss) of Borrower, excluding any
extraordinary income (or loss) of Borrower for
such period (taken as a cumulative whole), after
deducting all operating expenses, provisions for
all taxes and reserves (including reserves for
deferred income taxes) and all other proper
deductions, all determined in accordance with
GAAP.
"NET WORTH" means, at any date as of which the
amount thereof shall be determined for Borrower,
the total assets of Borrower determined in
accordance with GAAP minus (i) the sum of any
amounts attributable to (a) intangible assets,
including, without limitation, goodwill,
unamortized debt, discount and expense, patents,
trademarks, service marks, tradenames, customer
lists, and copyrights, but excluding deferred
development costs, (b) all reserves not already
deducted from assets and (c) to the extent not
otherwise approved in advance by Majority Lenders,
any write-up in the book value of assets resulting
from any revaluation thereof subsequent to the
December 31, 1997 Financial Statements of
Borrower, minus (ii) Total Liabilities.
"NOTES" means the Term Notes and the Revolving
Notes of even date herewith made by Borrower in
favor of any Lender to evidence the Loans, as the
same may be amended, supplemented, restated or
otherwise modified from time to time.
"OBLIGATIONS" means the Loans, together with
interest thereon (including interest which would
be payable as post-petition interest in connection
with any bankruptcy or similar proceeding).
Obligations shall also include (i) any other
indebtedness owing to the Lenders by Borrower
under this Agreement, the Notes, the Security
Documents or under any other agreement or
arrangement now or hereafter entered into between
Borrower and the any Lender with respect to the
Loans and (ii) any and all of the obligations and
indebtedness of Borrower owing to Gerald under the
Trading Agreement and specifically including the
margin line up to $5,000,000 available to Borrower
thereunder.
-9-
"OLINGHOUSE MINE" means Borrower's mining
properties in Washoe County, Nevada as more
particularly described on Exhibit G attached.
"PERCENTAGES" means, in respect of any Lender
on any date of determination, the product
expressed as a percentage obtained by dividing (x)
the aggregate of such Lender's Commitment and all
obligations owing to such Lender (if any) under
the Trading Agreement by (y) the total of all
Lenders' Commitments and all obligations owing
under the Trading Agreement, and multiplying the
quotient expressed as a decimal by 100.
"PERMITTED LIENS" has the meaning ascribed
thereto on Exhibit B attached hereto and made a
part hereof.
"PERSON" means any individual, sole
proprietorship, partnership, joint venture, trust,
unincorporated organization, association,
corporation, limited liability company,
institution, entity, party or government
(including any division, agency or department
thereof), and, as applicable, the successors,
heirs and assigns of each.
"PLAN" means an employee benefit plan, other
than a Multiemployer Plan, maintained for or
covering any employees of Borrower or any ERISA
Affiliate and subject to Title IV of ERISA.
"PRIME RATE" means the rate which Standard
quotes or advises from time to time at its
principal office in New York, New York as its
prime lending rate, as in effect from time to
time. The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate
actually charged to any customer.
"PURCHASE CONTRACT" means that certain
Purchase/Refining Agreement dated as of April 30,
1998, Contract No. 41-5539-98LS, entered into
between Gerald, as buyer, and Borrower, as seller,
with respect to Gerald's purchase of one hundred
percent (100%) of Borrower's gold/silver dore'
production from the Mines (other than the Copper
Flat Mine) for a period of five (5) years from the
date of execution and delivery of this Agreement,
a copy of which Purchase Contract is attached
hereto as Exhibit O and made a part hereof.
"PURCHASE MONEY LIEN" means a lien given to
secure indebtedness incurred in connection with
purchase money financing or capital lease
obligations.
"REAL PROPERTY" means all real property leased
or owned by the Borrower.
"RELEASE" means any material reportable
spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, storing,
escaping, leaching, dumping, or discarding,
burying, abandoning, or disposing into the
environment.
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"REPORTABLE EVENT" means a "reportable event"
within the meaning of Section 4043 of ERISA (other
than a "reportable event" for which the 30-day
notice to PBGC requirement has been waived by
regulation).
"REVOLVING ADVANCE" or "REVOLVING ADVANCES"
means an Advance or Advances under the Revolving
Loan as set forth in Section 2.02.
"REVOLVING LOAN" means that certain $6,000,000
revolving credit facility made available from
Lenders to the Borrower pursuant to Section 2.02
hereof.
"REVOLVING LOAN COMMITMENT" means, for each
Lender, the aggregate amount set forth therefor
opposite such Lender's name on the signature pages
hereof. "REVOLVING LOAN COMMITMENTS" means the
aggregate of all Lenders' Revolving Loan
Commitments.
"REVOLVING LOAN COMMITMENT FEE" means one-half
percent (.50%) per annum of the undrawn portion of
the Revolving Loan Commitment.
"REVOLVING LOAN MATURITY DATE" means for each
Revolving Loan the earlier of (i) the maturity
date specified in the Request for Revolving
Advance related to such Revolving Loan or (ii) if
an Event of Default shall have occurred and such
Revolving Loan shall become immediately due and
payable prior to such date, the date on which such
Revolving Loan shall become immediately due and
payable or (iii) the Revolving Loan Termination
Date.
"REVOLVING LOAN TERMINATION DATE" means the
earlier of (i) October 31, 1999 or (ii) if an
Event of Default shall have occurred and the
Revolving Loan shall become immediately due and
payable prior to such date, the date on which the
Revolving Loan shall become immediately due and
payable, provided, however, that so long as no
Default or Event of Default has occurred and is
continuing hereunder, the Revolving Loan
Termination Date shall be extended by six months
on October 31, 1998, upon the written request of
Borrower received at least three (3) days prior to
October 31, 1998 and upon the written request of
Borrower received at least three (3) days prior to
each six month anniversary thereafter, at the sole
discretion of each Lender, but in no event shall
the Termination Date extend beyond December 31,
2001. In the event either Lender elects not to
extend the Revolving Loan Termination Date (such
Lender being referred to herein as a
"Non-Extending Lender"), the other Lender shall
have the option of increasing its Revolving Loan
Commitment, at the sole discretion of such Lender,
in an amount less than or equal to the Revolving
Loan Commitment of the Non-Extending Lender. The
Revolving Loan of the Non-Extending Lender shall
become immediately due and payable on the
Revolving Loan Termination Date, as the same may
have been previously extended.
"REVOLVING NOTE" means a promissory note of the
Borrower payable to the order of a Lender, in
substantially the form of Exhibit J hereto,
evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from Revolving
Advances made
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by such Lender. "Revolving Notes" means
collectively the Revolving Notes of Borrower
to all Lenders.
"SECURITY AGREEMENT" means that certain
Security Agreement of even date herewith made by
Borrower in favor of Agent for the benefit of
Lenders, in the form attached hereto as Exhibit S,
as the same may be amended, supplemented, restated
or otherwise modified from time to time.
"SECURITY DOCUMENTS" has the meaning given to
such term in Section 2.08 of this Agreement.
"TERM ADVANCE" or "TERM ADVANCES" means an
Advance under the Term Loan as set forth in
Section 2.01.
"TERM LOAN" means that certain $11,000,000 term
loan made from Lenders to the Borrower pursuant to
Section 2.01 hereof.
"TERM LOAN COMMITMENT" means, for each Lender,
the aggregate amount set forth therefor opposite
such Lender's name on the signature pages hereof.
"TERM LOAN COMMITMENTS" means the aggregate of all
Lenders' Term Loan Commitments.
"TERM LOAN COMMITMENT FEE" means one-half
percent (.50%) per annum of the undrawn portion of
the Term Loan Commitment.
"TERM LOAN MATURITY DATE" means (i) December
31, 2001 or (ii) if any Event of Default shall
have occurred and the Term Loan shall become due
and payable prior to such date, the date on which
the Term Loan shall become due and payable.
"TERM NOTE" means a promissory note of the
Borrower payable to the order of a Lender, in
substantially the form of Exhibit I hereto,
evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from Term
Advances made by such Lender. "Term Notes" means
collectively all of the Term Notes of Borrower to
all Lenders.
"TERMINATION EVENT" means (i) a Reportable
Event or an event described in Section 4062(e) of
ERISA, or (ii) the withdrawal of Borrower or any
ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a "substantial
employer", as such term is defined in Section
4001(a)(2) of ERISA, or the incurrence of
liability by Borrower or any ERISA Affiliate under
Section 4064 of ERISA upon the termination of a
Multiple Employer Plan, (iii) the filing of a
notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination
under Section 4041 of ERISA, (iv) the institution
of proceedings to terminate a Plan by the PBGC
under Section 4042 of ERISA, (v) the withdrawal of
Borrower or any ERISA Affiliate from any
Multiemployer Plan, or (vi) any other event or
condition which might constitute grounds under
Section 4042 of
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ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.
"THREAT OF RELEASE" shall mean a substantial
likelihood of a Release which requires action to
prevent or mitigate damage to the environment
which may result from such Release.
"TOTAL LIABILITIES" means, at any date as of
which the amount thereof shall be determined, all
obligations that should be classified as
liabilities on the balance sheet of the Borrower,
including in any event, all Indebtedness as shown
on the balance sheet of the Borrower.
"TRADING AGREEMENT" means that certain Trading
Agreement of even date herewith between Gerald and
Borrower in the form attached hereto as Exhibit R
and made a part hereof, as amended or modified
from time to time in accordance with the
provisions herein.
"YEAR 2000 COMPLIANT" means that the Computer
Capacity records, stores, processes, compares,
sequences and presents calendar dates falling on
or after the date hereof, including without
limitation on and after December 31, 1999, without
error consistently with the actual calendar dates
entered or included in any calculation and,
without limitation, recognizes and correctly
calculates dates, calendar date dependent
calculations and differences between dates,
including dates in different centuries, and
correctly identifies leap years, including the
year 2000, and otherwise correctly performs any
and all calendar-date related functions that are
part of its intended functions, regardless of
whether a date or two or more dates entered or
included in a data base or calculation fall(s)
before, on or after December 31, 1999 or in
different centuries, and that it performs all
calendar related functions correctly without
impairing the accuracy or functionality of the
other intended functions of the Computer Capacity.
ARTICLE II
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GENERAL TERMS
-------------
SECTION 2.01. TERM LOAN. Subject to all of
the terms and conditions contained in this
Agreement and provided no Default or Event of
Default has occurred, Lenders agree to make Term
Advances to Borrower from time to time until
December 31, 1998 in an amount not to exceed the
Available Term Loan Commitments. Within the
limits of each Lender's Available Term Loan
Commitment, Borrower may request Term Advances of
Dollars from Lenders. Borrower shall have the
option at any time, and from time to time, to
irrevocably reduce the Term Loan Commitments by an
amount not more than the Lenders' Available Term
Loan Commitments, in increments of $500,000, upon
five (5) days prior written notice to Agent and
Lenders.
(i) Minimum Amount. Each Term Advance
in Dollars shall be in an amount of at least One
Million Dollars ($1,000,000).
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(ii) Term Notes. The Term Advances
shall be evidenced by the Term Notes, which Term
Notes are hereby incorporated herein by reference
and made a part hereof. No Term Advances will be
made after December 31, 1998.
(iii) Request Procedure. Prior to
December 31, 1998, upon three (3) Business Days'
prior written, irrevocable notice to Agent,
received no later than 2:00 p.m. New York time,
Borrower may request Term Advances from Lenders in
accordance with the terms of this Agreement, to be
made by transfer to the Operating Account
(referenced in Section 2.04 hereof). Such written
request shall be made, in the form of a Request
for Term Advance as set forth in Exhibit A-1
indicating the date, Interest Period and the
amount of the Term Advance requested, and
acknowledging the principal balance outstanding on
the Term Loan as of such date after taking into
consideration the amount of the Term Advance so
requested, by an officer of Borrower who has been
duly authorized by its board of directors and
whose name, along with a certified copy of such
resolutions, has been transmitted to Agent.
The Borrower agrees that each Lender is
authorized to record on its Term Note (i) the date
and amount of each Term Advance made by such
Lender pursuant hereto, (ii) the date and amount
of each payment of principal of such Term Advance,
and (iii) the interest rate and Interest Period
applicable thereto, in the books and records of
such Lender in such manner as is reasonable and
customary for such Lender, and that a certificate
of an officer of such Lender, setting forth in
reasonable detail the information so recorded,
shall constitute prima facie evidence of the
accuracy of the information so recorded, absent
manifest error; provided that the failure to make
any such recording shall not in any way affect the
Term Notes or the rights of such Lender hereunder
or under such Term Note.
(iv) Payment of Interest. Unless the
Default Rate shall apply, the Borrower hereby
promises to pay to Lenders interest on the unpaid
principal amount of each Term Advance for the
period from and including the date of such Term
Advance to but excluding the date such Advance
shall be paid in full, at a rate per annum equal
to LIBOR plus two percent (2%). Interest will be
computed based on a three hundred sixty (360) day
year counting the actual number of days elapsed
and will be payable in arrears on each Interest
Payment Date. After the occurrence and only
during the continuance of an Event of Default,
interest shall accrue on the Term Loans at the
Default Rate and shall be payable upon demand.
(v) Payment of Principal. Commencing
June 30, 1999 and continuing on the last Business
Day of each calendar quarter thereafter, Borrower
will remit to Agent quarterly installments of
principal each in an aggregate amount equal to
one-eleventh (1/11) of the aggregate principal
amount outstanding under the Term Notes on
December 31, 1998, provided that the final
installment shall in any event be made in an
amount equal to all remaining principal and
accrued interest. All payments to be made by
Borrower of principal of, and interest on, the
Notes and all Expenses payable by Borrower
hereunder, shall be made in such manner as may be
designated by Agent in accordance with Section
2.03(d) hereof or in writing to Borrower, and in
any event all such payments shall be made to Agent
in Dollars in immediately available funds prior to
12:00 o'clock noon (New York City time) on or
before the day that such payment is due. If at
any time the outstanding principal balance of the
Term Loan exceeds the Term Loan Commitment,
Borrower shall immediately pay to Agent the amount
of such excess. Any Term
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Advances repaid or prepaid may not be reborrowed.
All prepayments with respect to principal of the
Term Loans shall be applied to the principal
installment closest to the Term Loan Maturity Date
and shall be subject to payment by the Borrower of
all Breakage Costs.
SECTION 2.02. REVOLVING LOAN. Subject to
the terms and conditions hereof, Lenders agree to
make Revolving Advances to the Borrower prior to
the Revolving Loan Termination Date in an amount
not to exceed the Available Revolving Loan
Commitments. Borrower shall have the option at
any time to reduce the Revolving Loan Commitments
by an amount not more than the Lenders' Available
Revolving Loan Commitments upon five (5) days
prior written notice to Agent and Lenders.
(i) Revolving Notes. The Revolving
Advances shall be evidenced by the Revolving
Notes, which Revolving Notes are hereby
incorporated herein by reference and made a part
hereof.
(ii) Request Procedure. Prior to the
Revolving Loan Termination Date and upon three (3)
Business Days' prior written irrevocable notice to
Agent, Borrower may request Revolving Advances
from Lenders in accordance with the terms of this
Agreement, to be made by transfer to the Operating
Account (referenced in Section 2.04 hereof). Such
written request shall be in the form of a Request
for Revolving Advance as set forth in Exhibit A-2
hereto indicating (i) the Dollar amount of the
Revolving Advance to be borrowed, (ii) the
requested Borrowing Date, (iii) the requested
Interest Period for such Revolving Advance and
(iv) acknowledging the principal balance
outstanding on the Revolving Loan as of such date
after taking into consideration the amount of the
Revolving Advance so requested, and be made by an
officer of Borrower who has been duly authorized
by its board of directors and whose name, along
with a certified copy of such resolutions, has
been transmitted to Agent.
The Borrower agrees that each Lender is
authorized to record on its Revolving Note (i) the
date and amount of each Revolving Advance made by
such Lender pursuant hereto, (ii) the date and
amount of each payment of principal of such
Revolving Advance, (iii) in the case of each
Revolving Loan, the Revolving Loan Maturity Date
and (iv) the interest rate applicable thereto, in
the books and records of such Lender in such
manner as is reasonable and customary for such
Lender, and that a certificate of an officer of
such Lender, setting forth in reasonable detail
the information so recorded, shall constitute
prima facie evidence of the accuracy of the
information so recorded, absent manifest error;
provided that the failure to make any such
recording shall not in any way affect the
Revolving Notes or the rights of such Lender
hereunder or under such Revolving Note.
(iii) Minimum Amounts Each Revolving Advance
shall be in a minimum aggregate principal amount
of at least $500,000 or any larger whole multiple
of $100,000. Notwithstanding any other provision
of this Agreement, the aggregate principal amount
of Revolving Loans having the same Interest Period
shall be in an amount at least equal to $500,000
or any larger whole multiple of $100,000.
(iv) Payment of Interest. The Borrower
hereby promises to pay to Agent interest on the
unpaid principal amount of each Revolving Advance
for the period from and
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including the date of such Revolving Advance to
but excluding the date such Revolving Advance
shall be paid in full, at a rate per annum equal
to LIBOR plus 2.0% per annum. Such interest shall
be payable with respect to each Revolving Advance
in arrears on each Interest Payment Date and on
the Revolving Loan Maturity Date with regard to
each such Advance. After the occurrence and only
during the continuance of an Event of Default,
interest shall accrue on each Revolving Advance at
the Default Rate and shall be payable upon demand.
(v) Payment of Revolving Advances. The
Borrower hereby promises to pay to the Agent the
entire outstanding principal balance of each
Revolving Advance, together with interest thereon,
on the Revolving Loan Maturity Date. Any
Revolving Advances repaid or prepaid may be
reborrowed up to the Available Revolving Loan
Commitment. All prepayments with respect to
principal of a Revolving Loan shall be subject to
payment by the Borrower of all Breakage Costs.
SECTION 2.03. PAYMENTS OF PRINCIPAL
AND INTEREST ON THE LOANS.
(a) It is expressly stipulated and
agreed to be the intent of the Lenders and the
Borrower to, at all times, conform to and contract
in strict compliance with applicable usury law
from time to time in effect. All agreements
between the Lenders, Agent and the Borrower,
including, without limitation, this Agreement, the
Notes and any other Loan Document, are hereby
limited by the provisions of this Section 2.03
which shall override and control all such
agreements, whether now existing or hereafter
arising and whether written or oral. In no way,
nor in any event or contingency (including, but
not limited to, prepayment, default, demand for
payment or acceleration of maturity), shall the
interest taken, reserved, contracted for, charged,
chargeable, received or collected under this
Agreement or any other Loan Document (including,
without limitation, the Notes) exceed the maximum
nonusurious amount permitted by applicable law
(the "MAXIMUM AMOUNT"). If, from any possible
construction of any agreement, document or
instrument (including, without limitation, this
Agreement or any other Loan Document), interest
would otherwise be payable in excess of, or is
adjudicated to be payable in excess of, the
Maximum Amount, any such construction shall be
subject to the provisions of this Section 2.03,
and, ipso facto, such agreement, document or
instrument shall be reformed and the interest
payable shall be reduced to the Maximum Amount,
without the necessity of execution of any
amendment or new document. If any Lender or
Lenders shall ever receive anything of value that
is characterized as interest under applicable law
and that would apart from this provision be in
excess of the Maximum Amount, an amount equal to
the amount that would have been excessive interest
shall, without penalty, be applied first to the
reduction of the outstanding principal amount of
the Loans, and second to the reduction of any
other amounts due and payable under any Loan
Document, and not to the payment of interest, or
promptly refunded to the Borrower or the other
payor thereof if and to the extent such amount
that would have been excessive exceeds such unpaid
principal amount or such other amounts. The right
to accelerate maturity of any Loans or any other
indebtedness does not include the right to
accelerate any interest that has not otherwise
accrued on the date of such acceleration, and the
Lenders do not intend to take, reserve, contract
for, charge, receive or collect any unearned
interest in the event of acceleration. All
interest paid or agreed to be paid to the Lenders
shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread
throughout the full stated term (including any
-16-
renewal or extension) of the indebtedness to which
it relates so that the amount of interest thereon
does not exceed the Maximum Amount.
(b) If the due date of any payment of
any Obligation would otherwise fall on a day that
is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest
shall be payable for any principal so extended for
the period of such extension,
(c) All payments in respect of the
Notes shall be applied as follows: (i) first, to
the payment of Expenses owing to the Agent and
Lenders; (ii) second, to the payment of interest
and all other non-principal amounts (other than
Expenses) owing with respect to each Loan; and
(iii) third, to the payment principal installments
owing with respect to each Loan.
(d) All payments to Agent in respect of
the Notes, this Agreement and the other Loan
Documents shall be made to the Agent at Agent's
address set forth in Section 10.08 hereof or by
wire transfer to Standard Chartered Bank, ABA No.
026002561, Re: Alta Gold Co. in accordance with
the instructions provided by Agent to Borrower for
such purpose.
SECTION 2.04. MAKING OF ADVANCES.
Agent shall immediately deliver to Lenders the
Request for Term Advance or Request for Revolving
Advance, as applicable, upon its receipt of either
of same, and advise each Lender of its pro rata
share to be funded. At least two (2) Business
Days prior to each Advance, Agent shall notify
each Lender of the interest rate set for each
Advance, and thereafter shall notify each Lender
at least two (2) Business Days prior to each
change in such rate. (a) Each Lender shall,
before 12:00 noon (New York City time) on the date
of each Advance, deliver to the Agent at the
Agent's address referred to in Section 10.08 a
confirmation of availability of funds for such
Lender's portion of such Advance. Advances shall
be made by the Lenders pro rata. After the
Agent's receipt of such confirmation and upon
fulfillment of the applicable conditions precedent
to making Advances hereunder, the Agent will make
such funds available to the Borrower for transfer
to the Borrower's operating account, No.
8470003214 at USBank, Las Vegas, Nevada (ABA No.
121201694) (the "Operating Account").
(b) Unless the Agent shall have received
written notice from a Lender prior to the date of
any Advance stating the reason why such Lender is
not able to make available to the Agent such
Lender's Percentage of such Advance, the Agent may
assume that such Lender has made such portion
available to the Agent on the date of such Advance
in accordance with subsection (a) of this Section
2.04, and the Agent may, in reliance upon such
assumption, make available to the Borrower on such
date a corresponding amount. Nothing herein shall
in any way limit, waive or otherwise reduce any
claims that any party hereto may have against any
non-performing Lender.
(c) The failure of any Lender to make its
portion of an Advance shall not relieve any other
Lender of its obligation, if any, hereunder to
make its Advance on the date of such Advance, but
no Lender shall be responsible for the failure of
any other Lender to make its portion of an
Advance.
SECTION 2.05. REQUIREMENTS OF LAW.
(a) In the event that the adoption of or any
change in law, rule, regulation, treaty or
directive or in the interpretation or application
thereof,
-17-
or compliance by the Lenders with any
request or directive (whether or not having the
force of law) issued after the date hereof from
any Governmental Authority:
(i) imposes upon the Lenders any tax of
any kind whatsoever with respect to this
Agreement, the Notes or the Loans, or changes
the basis of taxation of payments to the
Lenders of principal, interest or any other
amount payable hereunder (except for (x)
income and franchise taxes imposed on the
Lenders by the jurisdiction under the laws of
which a Lender is organized or any political
subdivision or taxing authority thereof or
therein, or by any jurisdiction in which a
Lender is located or doing business (other
than solely by virtue of the performance of
this Agreement) or any political subdivision
or taxing authority thereof or therein, (y)
taxes resulting from the substitution of any
such system by another system of taxation,
and (z) taxes imposed by way of deduction or
withholding, which shall be exclusively
governed by subsection 2.06);
(ii) imposes, modifies or holds
applicable any reserve, special deposit,
compulsory loan or similar requirement
against the Loans, or assets held by, or
credit extended by, or deposits or other
liabilities in or for the account of, or
acquisition of funds by or for the account
of, any office of the Lenders, which is
not otherwise included in the determination
of the interest rate applicable to the Loans;
or
(iii) imposes on the Lenders any other
condition;
and the result of any of the foregoing is (x) to
increase the cost to the Lenders of making,
converting, renewing or maintaining the Loans or
(y) to reduce any amount receivable by such Lender
in respect of the Loans, then, in any such case,
the Borrower shall promptly pay the Agent any
additional amounts necessary to compensate the
Lenders for such additional cost or reduced amount
receivable as reasonably determined by the Agent
with respect to this Agreement, the Notes or the
Loans after taking into account any amounts paid
or payable pursuant to the Notes. If the Lenders
become entitled to claim any additional amounts
pursuant to this Section 2.05(a), it shall
promptly notify the Borrower, of the event by
reason of which it has become so entitled. A
certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by an
officer of the Agent to the Borrower shall be
conclusive, in the absence of manifest error.
(b) In the event that the Agent shall have
determined that the adoption of or any change in
any requirement of law regarding capital adequacy
or in the interpretation or application thereof or
compliance by a Lender with any request or
directive regarding capital adequacy (whether or
not having the force of law) from any Governmental
Authority, does or shall have the effect of
reducing the rate of return on such Lender's
capital as a consequence of its obligations
hereunder to a level below that which such Lender
could have achieved but for such adoption, change
or compliance (taking into consideration such
Lender's policies with respect to capital
adequacy) by an amount which is deemed by such
Lender to be material, then from time to time,
promptly after submission to the Agent by such
Lender and by the Agent to the Borrower of a
written request therefor, the Borrower shall
promptly pay to the Agent such additional amount
or amounts as will compensate the Agent for such
reduction; provided, however, that any such
additional amounts shall be determined on a
reasonable basis and be
-18-
similarly charged to corporations or other
entities similar to the Borrower who are then
borrowers from such Lender pursuant to agreements
having provisions similar to this Section 2.05(b),
to the extent permitted by such provisions. The
Agent agrees to notify the Borrower promptly of
any circumstances that would cause the Borrower to
pay additional amounts pursuant to this
subsection, provided that the failure to give such
notice shall not affect the Borrower's obligation
to pay such additional amounts hereunder.
(c) Notwithstanding anything to the contrary
herein contained, in the event that any
requirements of law or any change in any existing
requirements of law or in the interpretation
thereof by any Governmental Authority charged with
the administration thereof, in any case adopted,
issued or effective after the date hereof, shall
make it unlawful for any Lender to fund any
portion of the Loans at LIBOR or to give effect to
its obligations as contemplated hereby with
respect to its making Loans at LIBOR, Agent shall,
upon the happening of such event, notify Borrower
thereof in writing stating the reason therefor and
the effective date of such event, and upon the
effectiveness of any such event the obligation of
such Lender to make or maintain its Loans at LIBOR
to Borrower shall forthwith be suspended for the
duration of such illegality and during such
illegality such Lender shall, upon payment of any
amounts owing hereunder with respect to such
conversion, convert its share of the Loans to
(upon effectiveness of any such event and during
the continuance of such event) Loans at the Cost
of Funds Rate. If and when such illegality with
respect thereto ceases to exist, such suspension
shall cease and Agent shall notify Borrower that
the Loans at the Cost of Funds Rate into which
such share of the Loans at LIBOR were converted
pursuant to this Section 2.05 was converted to a
Loan at LIBOR, respectively, on the first day of
the next succeeding Interest Period.
(d) In the event, and on each occasion, that
on the Business Day two (2) Business Days prior
to the commencement of any Interest Period for the
Loans, Agent shall have determined in good faith
(which determination shall, in the absence of
manifest error, be conclusive and binding upon
Borrower) that Dollar deposits in the amount of
the principal amount of the Loans which is to have
such Interest Period are not generally available
in the London interbank market, or that the rate
at which such Dollar deposits are being offered
will not accurately reflect the cost to any Lender
making or funding such principal amount of such
Loans during such Interest Period, or that
reasonable means do not exist for ascertaining
LIBOR, Agent shall, as soon as practicable
thereafter, give written or telephonic notice of
such determination to Borrower and Lenders and (i)
such principal amount of such Loans shall
automatically be converted, as of the last day of
the Interest Period during which such
determination is made, to Loans at the Cost of
Funds Rate and (ii) any request by Borrower for
such Loans at LIBOR pursuant to Sections 2.01 and
2.02 hereof shall thereupon, and until the
circumstances giving rise to such notice no longer
exist (as notified by Agent to Borrower) be deemed
a request for the making of Loans at the Cost of
Funds Rate. If at any time Agent shall have
determined in good faith (which determination
shall, in the absence of manifest error, be
conclusive and binding upon Borrower) that any
contingency has occurred which adversely affects
the London interbank market or that any
requirement of law or any change in any existing
requirement of law or in the interpretation
thereof, in any case adopted, issued or effective
after the date hereof, or other circumstance
affecting any Lender or the London interbank
market makes the funding of the Loans at LIBOR
impracticable, Agent shall, as soon as practicable
thereafter, give written or telephonic notice of
such determination to Borrower and Lenders and (i)
the Loans at LIBOR
-19-
shall automatically be converted, as of the last
day of each Interest Period during which such
determination is made and in each case in respect
of the principal amount of the Loans at LIBOR
having an Interest Period ending on such date, to
Loans at the Cost of Funds Rate and (ii) any
request by Borrower for the Loans pursuant to
Sections 2.01 and 2.02 hereof shall thereupon, and
until the circumstances giving rise to such notice
no longer exist (as notified by Agent to Borrower
and Lenders), be deemed a request for the making
of Loans at the Cost of Funds Rate. Upon such
circumstances no longer existing, Borrower may
thereafter request Loans at LIBOR in accordance
with the terms hereof.
(e) The agreements in this Section 2.05
shall survive the termination of this Agreement
and repayment of the Loans and the Notes and all
other amounts payable hereunder.
SECTION 2.06. TAXES. (a) All payments
made by the Borrower under this Agreement shall be
made free and clear of, and without reduction for
or on account of, any present or future income,
stamp, documentary, property, excise or other
taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding, in the
case of the Lenders, income and franchise taxes
imposed on the Lenders by the jurisdiction under
the laws of which each Lender is organized or any
political subdivision or taxing authority thereof
or therein, or by any jurisdiction in which each
Lender is located or is doing business (other than
solely by virtue of the performance of this
Agreement) or any political subdivision or taxing
authority thereof or therein (such non-excluded
taxes being called "TAXES"). If any Taxes are
required to be withheld from any amounts payable
to the Lenders hereunder or under the Notes, the
amounts so payable to the Lenders shall be
increased to the extent necessary to yield to the
Lenders (after payment of all Taxes) interest or
any such other amounts payable hereunder at the
rates or in the amounts specified in this
Agreement and the Notes. Whenever any Taxes are
payable by the Borrower, as promptly as possible
thereafter, the Borrower shall send to the Agent a
certified copy of an original official receipt or
other evidence reasonably satisfactory to the
Agent showing payment thereof. If the Borrower
fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent
the required receipts or other required
documentary evidence, the Borrower shall indemnify
the Agent and Lenders for any incremental taxes,
interest or penalties that, under applicable law,
become payable by any Lender as a result of any
such failure. If any such Taxes are paid by the
Agent or any such Lender to any Governmental
Authority, the Borrower shall indemnify the Agent
and Lenders within 30 days after written demand
for any amounts so paid (together with proof of
payment thereof) shall have been delivered to the
Borrower. Each Lender hereby represents to the
best of its knowledge that as of the date of
execution of this Agreement, there are no such
Taxes being assessed against such Lender to which
Borrower's indemnification would apply.
(b) The agreements in this subsection
2.06 shall survive the termination of this
Agreement and the repayment of the Loans and the
Notes, and all other amounts payable hereunder.
SECTION 2.07. USE OF PROCEEDS. The
proceeds of the Loans shall be used exclusively by
Borrower for construction of the Olinghouse Mine,
working capital, hedging costs, repayment of
-20-
existing secured debt and payment of Expenses in
accordance with the terms of Exhibit K attached
hereto.
SECTION 2.08. SECURITY.
(a) Security Documents. Payment and
performance of the Obligations and any other
indebtedness and liabilities of Borrower to the
Lenders, whether under the Notes or otherwise,
shall be secured by:
(i) a first priority security
interest in tangible and intangible personal
property of Borrower pursuant to the terms of
the Security Agreement;
(ii) deeds of trust, assignments
of rents and royalties, security agreements
and financing statements or mortgages,
assignments of rents and royalties, security
agreements and financing statements executed
by Borrower granting thereby a first priority
mortgage lien on the real estate and all
improvements thereon owned by Borrower and
located at or used in connection with the
Mines (the "Deeds of Trust");
(iii) the Assignment of Contracts;
and
(iv) such other agreements as may
be required by the Agent and necessary to
attach or perfect a Lien in the items covered
by Subsections (i) and (ii) above.
All agreements and instruments
described in this Section 2.08(a), together
with any and all other agreements and
instruments now or hereafter securing the
Notes, are sometimes hereinafter referred to
collectively as the "Security Documents" and
individually as a "Security Document".
(b) Cash Collateral Account. The Borrower
hereby establishes a cash collateral account with
the Agent (Account No. 3582-021182-001) (the
"Account") into which there shall be deposited
from time to time certain amounts described in
subsection (c) of this Section.
(c) Payments under Purchase Contract/Trading
Agreement. The Borrower hereby irrevocably
instructs and authorizes Gerald, as of the date
hereof and notwithstanding anything to the
contrary contemplated or required by the Purchase
Contract or the Trading Agreement, to make, and
Gerald agrees to make, any and all payments and
other amounts owing by Gerald under the Purchase
Contract in connection with the delivery of any
Gold to Gerald pursuant to the Purchase Contract,
or in connection with any amounts payable by
Gerald under the Trading Agreement, by depositing
the amount of such payments directly into the
Account not later than 3:00 p.m. (New York time)
on the date on which such payment shall be due
pursuant to the Purchase Contract or the Trading
Agreement. All such payments shall be in
immediately available funds. If the Borrower
shall, for any reason, directly receive any such
payment, the Borrower, not later than one (1)
Business Day after the receipt of such payment,
shall deposit such payment into the Account.
Unless the Lenders shall otherwise consent, no
funds other than funds received in respect of the
Purchase Contract or the Trading Agreement shall
be deposited, or shall be permitted to be
deposited into, the Account.
-21-
(d) Pledge of Cash Collateral Account. As
collateral security for the prompt payment in full
when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations, the
Borrower hereby pledges and grants to the Agent
for the benefit of the Lenders a security interest
in and right of setoff against all of the right,
title and interest of the Borrower in and to the
Account and the balances from time to time in such
Account. The balance in the Account, however,
shall not constitute payment of any Obligations
until so applied as hereinafter provided.
(e) Release of Funds. Upon Borrower's
request and provided that Agent shall have
determined that no Default or Event of Default has
occurred and is continuing, the Agent shall, at
Borrower's request (standing instructions
acceptable), consent to the withdrawal by Borrower
of funds deposited in the Account.
(f) Retention of Funds. If a Default or
Event of Default has occurred and is continuing,
the Majority Lenders may, in the sole discretion
of such Majority Lenders, retain all sums in the
Account or withdraw any sums deposited in the
Account and apply such sums to any Obligations
then due and payable pro-rata based on each
Lender's Percentage.
SECTION 2.09. FORCE MAJEURE. The
payment obligations of the Borrower under this
Agreement are absolute and unconditional and shall
not be affected by reason of, but not limited to a
declaration of force majeure.
SECTION 2.10. COMMITMENT FEES. The
Borrower shall pay to the Agent the Term Loan
Commitment Fee on the last day of each quarter,
for the quarter then ending, commencing on June
30, 1998 and ending on December 31, 1998. The
Borrower shall pay to the Agent the Revolving Loan
Commitment Fee on the last day of each quarter,
for the quarter then ending, commencing on June
30, 1998 and continuing until the Revolving Loan
Termination Date. The Agent shall deliver to each
Lender its pro rata share of each such Commitment
Fee payments, at the latest, on the next Business
Day following its receipt of same.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Agent and Lenders to enter into
this Agreement and to make the Loans, Borrower
hereby represents and warrants to Agent and
Lenders (which representations and warranties
shall survive the delivery of the Notes and the
making of the Loans and shall continue until
payment in full of the Obligations) that:
SECTION 3.01. FINANCIAL STATEMENTS.
Borrower has heretofore furnished to Agent
Borrower's audited Financial Statements dated
December 31, 1997 and its unaudited Financial
Statements dated March 31, 1998 which fairly
present the financial condition of Borrower as of
their date, and the results of its operations for
the year or other period then ended. To the best
of Borrower's knowledge and belief, Borrower does
not have any contingent obligations, liabilities
for taxes or unusual forward or long-term
commitments except as specifically mentioned in
the
-22-
Financial Statements. Since the date of the
March 31, 1998 Financial Statements, there has
been no Material Adverse Change and no dividends
or other distributions have been declared or paid
or made to the shareholders of Borrower.
SECTION 3.02. ORGANIZATION, ETC.
Borrower (a) is duly organized, validly existing
and in good standing under the laws of the State
of Nevada, (b) is duly qualified to transact
business in every jurisdiction where, because of
the nature of its business or property, such
qualification is required, (c) has full power and
authority to own its property and assets and to
carry on its business as now conducted, and (d)
has full power to execute, deliver and perform its
obligations under the Loan Documents to which it
is a party.
SECTION 3.03. AUTHORIZATION,
COMPLIANCE, ETC. The execution and delivery of,
and the performance by Borrower of its obligations
under, the Loan Documents (a) are within its
corporate powers, (b) have been duly authorized by
all requisite corporate action, (c) do not violate
any provision of law, any order of any court or
other agency of government, the corporate charter
or by-laws of Borrower, and (d) do not violate any
indenture, agreement or other instrument to which
Borrower is a party, or by which it is bound, or
be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or
both) a default under, or except as may be
provided by this Agreement, result in the creation
or imposition of any Lien upon any of the property
or assets of Borrower pursuant to, any such
indenture, agreement or instrument. Borrower is
not required to obtain any consent, approval or
authorization from, or to file any declaration or
statement with, any Governmental Authority in
connection with or as a condition to the
execution, delivery or performance of the Loan
Documents.
SECTION 3.04. LITIGATION. There is no
action, suit or proceeding at law or in equity or
by or before any Governmental Authority now
pending or, to the knowledge of Borrower,
threatened against or affecting Borrower which, if
adversely determined, would have a Material
Adverse Effect.
SECTION 3.05. TITLE TO PROPERTIES;
CLAIMS; PERMITS. Borrower has good title to all
Collateral, free and clear of all Liens of any
kind, except Permitted Liens and restrictions,
easements and minor irregularities in title which
do not and will not interfere with the occupation,
use and enjoyment by Borrower of such properties
and assets in the normal course of its business as
presently conducted or materially impair the value
of such properties and assets for the purpose of
such business. Borrower is the holder of all
mining claims, patented and unpatented, leases,
easements, rights of way, water rights, permits,
licenses, consents and authorizations, and all
other rights necessary to operate the Mines (other
than Copper Flat Mine).
SECTION 3.06. FILING AND PAYMENT OF
TAXES. Borrower has filed all tax returns required
to be filed by Borrower, and has paid, or made
adequate provision for the payment of, all taxes,
charges and assessments due and payable by
Borrower and has paid all rents, profits, lease
fees, royalties and other charges due and payable
in connection with the operation of the Mines
including, but not limited to having made all
payments for unpatented claims' fees.
SECTION 3.07. FULL DISCLOSURE. Neither
the Financial Statements referred to in Section
3.01, nor any statement of fact made by or on
behalf of Borrower in this Agreement or any of the
other Loan Documents or any certificate, written
statement or schedule furnished to the Agent
pursuant hereto,
-23-
contains any untrue statement of a material fact
or omits to state any material fact necessary to
make statements contained herein or therein not
misleading. There is no fact known to Borrower
which has not been disclosed to Agent in writing,
which could have a Material Adverse Effect.
SECTION 3.08. ENFORCEABILITY. This
Agreement and all of the other Loan Documents
executed and delivered in connection herewith are
legal, valid and binding obligations of Borrower
and are enforceable against Borrower, in
accordance with their terms except as such
enforceability may be limited by (i) the effect of
any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws
affecting creditors' rights generally and (ii)
general principles of equity.
SECTION 3.09. SOLVENCY. The fair
saleable value of Borrower's assets exceeds all
probable liabilities of Borrower; Borrower, to the
best of its knowledge, does not have unreasonably
small capital in relation to the business in which
it is or proposes to be engaged; and Borrower has
not incurred, nor believes that it will incur
after giving effect to the transactions
contemplated by this Agreement, debts beyond its
ability to pay such debts as they become due.
SECTION 3.10. ENVIRONMENTAL MATTERS. The
Borrower:
(a) has obtained all material permits,
licenses and other authorizations which are
required under all Environmental
Requirements;
(b) is in compliance in all material
respects with all terms and conditions of the
required permits, licenses and
authorizations, and is also in compliance
with all other Environmental Requirements or
requirements contained in any regulation,
code, plan, order, decree, judgment,
injunction, notice or demand letter issued,
entered, promulgated or approved thereunder;
(c) To Borrower's knowledge, no condition,
activity or conduct currently exists on or in
connection with the Mines which constitutes a
material violation of any Environmental
Requirements.
(d) During Borrower's ownership and, to
Borrower's knowledge prior to its ownership,
and except as permissible in accordance with
Environmental Requirements, there has been no
Release or Threat of Release of any Hazardous
Materials on, upon or into the Mines which
have not been corrected, nor, to Borrower's
knowledge, has there been any such Release or
Threat of Release of any Hazardous Materials
on, upon or into any real property in the
vicinity of the Mines which, through soil or
groundwater migration, could reasonably be
expected to come to be located on the Mines.
(e) To Borrower's knowledge, none of the
following are or will be located in, on,
under or constitute a part of the Mines:
asbestos or asbestos-containing material in
any form or condition; urea formaldehyde
insulation; transformers or other equipment
which contain dicletric fluid containing
polychlorinated biphenyls; or leaded paint.
-24-
(f) To Borrower's knowledge, and except as
permissible in accordance with Environmental
Requirements, there are no existing or closed
sanitary landfills (other than any existing,
licensed and active sanitary landfill on the
Mines), solid hazardous waste disposal sites,
or hazardous waste treatment, storage or
disposal facilities on or affecting the
Mines.
(g) No notice has been issued to Borrower by
any agency, authority, or unit of government
that Borrower has been identified as a
potentially responsible party under any
Environmental Requirements which would have a
Material Adverse Effect with respect to the
Mines.
(h) There exists no investigation, action,
proceeding, or claim by any agency,
authority, or unit of government or by any
third party which could result in any
material liability, penalty, sanction, or
judgment under any Environmental Requirements
with respect to any condition, use or
operation of the Mines.
SECTION 3.11. MATERIAL ADVERSE CHANGE.
Since December 31, 1997 and March 31, 1998, there
has been no development or event nor any
prospective development or event, which has had or
could have a Material Adverse Effect.
SECTION 3.12. NO LEGAL BAR. The
execution, delivery and performance by the
Borrower of this Agreement and the other Loan
Documents will not violate any requirement of law
or material agreement or instrument to which the
Borrower is a party, or by which the Borrower or
any of its properties or assets may be bound, and
will not result in the creation or imposition of
any Lien on any such properties or assets pursuant
to the provisions thereof.
SECTION 3.13. NO DEFAULT. As of the date
hereof, no Default or Event of Default has
occurred and is continuing.
SECTION 3.14. INVESTMENT COMPANY ACT AND
OTHER REGULATIONS. The Borrower is not an
"investment company" nor is it "controlled" by an
investment company within the meaning of the
Investment Company Act of 1940, as amended. The
Borrower is not and, the Borrower will not be
subject to regulation under any federal or state
statute which limits its ability to incur or repay
indebtedness.
SECTION 3.15. FURTHER REPRESENTATIONS
AND WARRANTIES. The Borrower reaffirms each of
the representations and warranties made in each
Deed of Trust, including, but not limited to,
those representations and warranties contained in
the specific paragraphs referred to in Section
10.17 of this Agreement.
SECTION 3.16. YEAR 2000 COMPLIANT. The
Computer Capacity is and will be at all times Year
2000 Compliant, except insofar as any failure to
be Year 2000 Compliant will not result in a
Material Adverse Effect. The cost to the Borrower
of any reprogramming and testing or upgrading,
repairing or replacing of any part of the Computer
Capacity necessary to assure that the Computer
Capacity is Year 2000 Compliant, and of the
reasonably foreseeable
-25-
consequences to the Borrower of any failure, and
of all failures in the aggregate, of the Computer
Capacity to be Year 2000 Compliant (including,
without limitation, reprogramming errors and the
failure of others' systems or equipment), will not
result in a Default or a Material Adverse Effect.
SECTION 3.17. ERISA. Neither Borrower
nor any ERISA Affiliate maintains or contributes
to any Plan or Multiemployer Plan other than those
listed on Exhibit M hereto. Each such Plan which
is intended to be qualified under Section 401(a)
of the Internal Revenue Code as currently in
effect has been determined by the IRS to be so
qualified, and each trust related to any such Plan
has been determined to be exempt from federal
income tax Section 501(a) of the Internal Revenue
Code as currently in effect. Except as disclosed
in Exhibit M, Borrower does not maintain or
contribute to any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA.
Borrower is in compliance in all material respects
with the responsibilities, obligations and duties
imposed on it by ERISA, the Internal Revenue Code
and regulations promulgated thereunder with
respect to all Plans. No Benefit Plan has
incurred any accumulated funding deficiency (as
defined in Sections 302 (a) (2) of ERISA and 412
(a) of the Internal Revenue Code) whether or not
waived. Neither Borrower nor any ERISA Affiliate
nor any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in an nonexempt
prohibited transaction described in Sections 406
of ERISA or 4975 of the Internal Revenue Code or
(ii) has taken or failed to take any action which
would constitute or result in a Termination Event.
Neither Borrower nor any ERISA Affiliate are
subject to any liability under Sections 4063,
4064, 4069, 4204 or 4212 (c) or ERISA. Neither
Borrower nor any ERISA Affiliate has incurred any
liability to the PBGC which remains outstanding
other than the payment of premiums. Schedule B to
the most recent annual report filed with the IRS
with respect to each Plan is complete and accurate
in all material respects. Since the date of each
such Schedule B, there has been no material
adverse change in funding status or financial
condition of the Plan relating to such Schedule B.
Neither Borrower nor any ERISA Affiliate has (i)
failed to make a required contribution or payment
to a Multiemployer Plan or (ii) made a complete or
partial withdrawal under Sections 4203 or 4205 of
ERISA from a Multiemployer Plan. Neither Borrower
nor any ERISA Affiliate has failed to make a
required installment or any other required payment
under Section 412 of the Internal Revenue Code on
or before the due date for such installment or
other payment. Neither Borrower nor any ERISA
Affiliate is required to provide security to a
Plan under Section 401 (a) (29) of the Internal
Revenue Code due to a Benefit Plan amendment that
results in an increase in current liability for
the plan year. Except as disclosed on Exhibit M,
Borrower has not, by reason of the transactions
contemplated hereby, any obligation to make any
payment to any employee pursuant to any Plan or
existing contract or arrangement.
ARTICLE IV
----------
CONDITIONS PRECEDENT
--------------------
SECTION 4.01. CONDITIONS PRECEDENT TO
THE INITIAL ADVANCE. The obligation of Lenders to
make the initial Advance hereunder is subject to
the satisfaction of the following conditions
precedent:
-26-
(a) The representations and warranties set
forth in Article III hereof and in all other
Loan Documents shall be true and correct.
(b) Borrower shall have executed and
delivered to Agent and Lenders, or caused to
be executed and delivered to Agent and
Lenders, on or prior to the date of execution
of this Agreement, the following:
(i) The Notes;
(ii) A certificate of the Secretary or
Assistant Secretary of Borrower
certifying to the votes of Borrower's
Board of Directors authorizing the
execution and delivery of and
performance by the Borrower of its
obligations under, this Agreement, the
Notes and the other Loan Documents to
which it is a party (or any other
evidence of such Person's corporate
authority to enter into the transactions
contemplated hereby that shall be in
form and substance satisfactory to the
Agent);
(iii) A certificate of the Secretary or
Assistant Secretary of Borrower which
shall certify the names of the officers
of Borrower authorized to sign this
Agreement, the Notes, and any other
documents or certificates to be
delivered pursuant to this Agreement by
Borrower or any of its officers,
together with the true signatures of
such officers. Agent may conclusively
rely on such certificate until they
shall receive a further certificate of
the Secretary or an Assistant Secretary
of Borrower canceling or amending the
prior certificate and submitting the
signatures of the officers named in such
further certificate;
(iv) Good Standing Certificates, dated
reasonably near the date of the Loans,
of the Nevada Secretary of State and the
New Mexico State Corporation Commission
stating that Borrower is duly
incorporated (or qualified) and in good
standing in such jurisdiction and has
filed all annual reports and has paid
all franchise and other taxes required
to be filed or paid to the date of such
certificate;
(v) A favorable written opinion of
Borrower's counsel in favor of Agent,
dated the date of this Agreement, in the
form attached hereto as Exhibit C;
(vi) The Loan Documents, together with
any other documents required by the
terms thereof;
(vii) Insurance certificates showing
compliance with the provisions of
Section 6.06 hereof; and
(viii) Such other supporting
documents, legal opinions, agreements
and certificates as the Agent or its
counsel may request.
-27-
(c) All legal matters incident to the
transactions hereby contemplated shall be
satisfactory to counsel of Agent.
(d) No Default or Event of Default shall
have occurred and be continuing or would
result from the making of the Loans, as
determined by Majority Lenders.
(e) No Material Adverse Change, or
development reasonably likely to have a
Material Adverse Effect, shall have occurred
and be continuing, as determined by Majority
Lenders.
(f) Borrower shall have established a gold
floor program with Gerald (to remain in
effect during the term of this Agreement)
covering 340,000 troy ounces of gold at a
minimum price of $280.00 per troy ounce and
75,000 troy ounces of gold at a minimum price
of $335.00 per troy ounce.
(g) Borrower shall have entered into the
Purchase Contract.
(h) Borrower shall have entered into the
Trading Agreement.
(i) Borrower shall have obtained all
permits, licenses, consents and
authorizations (including, without
limitation, environmental and mining permits)
necessary (as determined by Majority Lenders)
to conduct its business at the Mines (other
than the Copper Flat Mine).
(j) Borrower shall have paid all agreed upon
closing Expenses.
(k) The representations and warranties set
forth in Article III hereof and in all other
Loan Documents shall be true and correct, as
certified by a certificate with regard
thereto in the form of Exhibit T signed by an
authorized officer of Borrower.
(l) Borrower has satisfied all conditions
precedent for the initial advance under
equipment loans existing on the date hereof.
SECTION 4.02. CONDITIONS PRECEDENT TO
SUBSEQUENT ADVANCES. The obligation of Lenders to
make any Advance following the initial Advance
hereunder (each a "Subsequent Advance") is subject
to the satisfaction of the following conditions
precedent:
(a) No Default or Event of Default shall
have occurred and be continuing or would
result from the making of such Subsequent
Advance, as determined by Majority Lenders.
(b) No Material Adverse Change, or
development reasonably likely to have a
Material Adverse Effect, shall have occurred
and be continuing, as determined by Majority
Lenders.
(c) Borrower shall have obtained all
permits, licenses, consents and
authorizations (including, without
limitation, environmental and mining permits)
-28-
necessary (as determined by Agent and
Lenders) to conduct its business at the
Olinghouse Mine and provided evidence
satisfactory to Agent and Lenders that
construction at the Olinghouse Mines is
substantially on budget and on schedule.
(d) Borrower shall have provided evidence
satisfactory to Agent that the Griffon Mine
continues to operate in accordance with the
plan of operation delivered to Agent and
Lenders prior to the date hereof, as the same
may hereafter be amended with the prior
written consent of Agent and Lenders.
(e) The representations and warranties set
forth in Article III hereof and in all other
Loan Documents shall be true and correct, as
certified by a certificate with regard
thereto in the form of Exhibit T signed by an
authorized officer of Borrower.
(f) Borrower has satisfied all conditions
precedent for the initial advance under
equipment loans existing on the date hereof.
ARTICLE V
---------
FINANCIAL COVENANTS
-------------------
SECTION 5.01. COVENANTS OF BORROWER.
Borrower covenants and agrees that, until payment
and satisfaction in full of all Obligations,
whether now existing or arising hereafter,
Borrower will, beginning September 30, 1998:
(a) Maintain at all times a Net Worth
(tested quarterly) of not less than
Thirty-five Million Dollars ($35,000,000);
(b) Not permit the ratio of Current Assets
to Current Liabilities at any time (tested
quarterly) to be less than 1.25: 1.00;
(c) Not make or incur Capital Expenditures
during the calendar year 1998 and each
calendar year thereafter (or any portion
thereof), tested at the end of such year, in
excess of:
1998 $25,000,000
Thereafter $5,000,000;
(d) For each fiscal quarter during this
Agreement, maintain a ratio of EBITDA to
total interest expense on all Indebtedness of
not less than:
September 30, 1998 2.00:1.00
December 31, 1998
and thereafter 3.00:1.00;
(e) For each fiscal quarter during this
Agreement, maintain a Leverage Ratio of not
more than 0.75: 1.00;
-29-
(f) For each fiscal quarter during this
Agreement, maintain a ratio of EBITDA to
total interest expense and principal payments
of Indebtedness of not less than 1.50: 1.00;
and
(g) Within forty-five (45) days after the
end of each fiscal quarter beginning with the
fiscal quarter ending June 30, 1998, provide
Financial Statements for such period and the
fiscal year to date, and a written report, in
the form attached hereto as Exhibit P and
made a part hereof, for such quarter as to
compliance with the provisions of this
Article V.
ARTICLE VI
----------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until
payment and satisfaction in full of all
Obligations, whether now existing or arising
hereafter, Borrower will:
SECTION 6.01. PRESERVATION OF ASSETS;
COMPLIANCE WITH LAW. (a) Do or cause to be done
all things necessary to preserve, renew and keep
in full force and effect its corporate existence,
rights, licenses, permits and franchises; at all
times maintain, preserve and protect all
franchises, leases, patents, trademarks, service
marks, copyrights, contracts and trade names and
preserve all the remainder of its property used or
useful in the conduct of its business and keep the
same in good repair, working order and condition,
and from time to time, make, or cause to be made,
all needful and proper repairs, renewals,
replacements, betterments and improvements
thereto, so that the business carried on in
connection therewith may be properly and
advantageously conducted at all times; and
(b) Comply with all applicable laws, rules,
regulations and orders, whether now in effect or
hereafter enacted or promulgated by any applicable
Governmental Authority.
(c) Pay any and all rents, profits, lease
fees, licenses, royalties, water rights fees, and
any other charges necessary to ensure the
continued and uninterrupted operation of the
Mines.
SECTION 6.02. TAXES, ETC. Pay and
discharge or cause to be paid and discharged, when
due, all taxes, assessments and governmental
charges or levies imposed upon it or upon its
respective income and profits or upon any of its
property, real, personal or mixed, (including
without limitation, the Collateral) or upon any
part thereof, as well as an lawful claims for
labor, materials and supplies or otherwise, which,
if unpaid, might become a Lien upon such
properties or any part thereof. Notwithstanding
any provision of this Section 6.02 to the
contrary, Borrower shall be permitted to contest
any such taxes, assessments and governmental
charges or levies, provided (i) the same shall be
contested currently, diligently and in good faith
by appropriate proceedings; (ii) Borrower shall
have adequate unencumbered (except in favor of
Agent and Lenders) cash reserves with respect
thereto; (iii) that such contest does not create a
Material Adverse Change; and (iv) that Borrower
shall pay all taxes, assessments, charges, levies
or obligations immediately upon the commencement
of proceedings to enforce any lien which may have
attached as security therefor, unless such
proceeding is stayed by proper court order pending
the outcome of such contest.
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SECTION 6.03. NOTICE OF PROCEEDINGS OR
ADVERSE CHANGE. Give written notice to Agent, as
soon as possible and in any event within five (5)
days after Borrower has knowledge, of (i) any
proceedings or investigations being instituted by
or against Borrower in any federal or state court
or before any commission or other regulatory body,
whether federal, state or local which, if
adversely determined, would have a Material
Adverse Effect and (ii) any Material Adverse
Change.
SECTION 6.04. NOTICE OF DEFAULT OR
EVENT OF DEFAULT. Immediately advise Agent of the
occurrence of any Default or Event of Default.
SECTION 6.05. REIMBURSEMENT OF
EXPENSES. On the date of execution of this
Agreement, reimburse Agent and Lenders for all
Expenses incurred by Agent and Lenders on or prior
to such date. From and after such date, Borrower
shall promptly reimburse Agent and Lenders for all
Expenses as the same are incurred by Agent and
Lenders and upon receipt of invoices therefor.
SECTION 6.06. INSURANCE. Maintain at
all times insurance coverage in respect of the
properties and assets of Borrower in amounts, on
terms and with such financially sound and
reputable insurers reasonably acceptable to Agent
and Majority Lenders, as is consistent with
Borrower's ordinary course of business. Such
coverage shall include, without limitation, fire
and extended coverage insurance for the full
insurable value of all buildings and other
improvements located on property constituting
Collateral and, comprehensive general public
liability insurance against claims for bodily
injury or death or property damage arising out of
or related to the Borrower's activities or
operation, in such amounts as will adequately
protect the Borrower and the Lenders from any and
all claims, liabilities and damages that may
arise, and all and worker's compensation
insurance, all in amounts under policies in form
and content reasonably acceptable to Agent and
Majority Lenders. All policies of insurance shall
name Agent for the benefit of Lenders as loss
payee and additional insured pursuant to
non-contributory loss payable provisions.
Evidence of such insurance policies shall be in
the form of the certificates attached hereto as
Exhibit D and shall otherwise be satisfactory in
all respects to Agent and Majority Lenders.
Any surplus remaining from any such insurance
in excess of all indebtedness, liabilities and
obligations of Borrower to any Lender shall be
delivered to Borrower, or its successors or
assigns.
Borrower shall furnish Agent and Lenders with
a copy of all policies of insurance or
certificates thereof. If Agent permits Borrower
to provide any of the required insurance through
blanket policies, Borrower shall furnish Agent and
Lenders with a certificate of insurance for each
such policy setting forth coverage, the limits of
liability, the name of the carrier, the policy
number, and the expiration date.
SECTION 6.07. FINANCIAL REPORTING.
Furnish directly to each Lender, signed, dated and
certified as true and correct by the Chief
Executive Officer or Chief Financial Officer:
(a) Within ninety (90) days of the end of
each fiscal year (beginning December 31,
1998), Financial Statements showing the
financial condition at the
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close of such fiscal year, the results of
operations during such year and containing a
statement to the effect that its independent
certified public accountants have examined
the provisions of this Agreement and that no
Default or Event of Default has occurred,
together with a copy of the management letter
and any other written reports delivered by
such accountants to Borrower with respect to
such Financial Statements and the audit
thereof conducted by such accountants;
(b) Within forty-five (45) days after the
end of each quarter (beginning June 30, 1998)
in each such fiscal year, Financial
Statements for such period and the fiscal
year to that date, subject to changes
resulting from routine year-end audit
adjustments, together with a comparison to
the Financial Statements for the same period
in the prior year in form satisfactory to
Agent;
(c) Within forty-five (45) days prior to the
commencement of each of Borrower's fiscal
years, a pro forma business plan (including
financial projections and budgeted gold
production figures) for Borrower's operations
for such upcoming fiscal year, which business
plan shall be in form and substance
satisfactory to the Agent and shall be
certified by the chief financial officer of
the Borrower;
(d) within thirty (30) days after the end of
each calendar month, operating reports
including gold shipped, cash operating costs
and a comparison of actual versus budgeted
performance, in the form attached hereto as
Exhibit Q, on Olinghouse Mine, Kinsley Mine
and Griffon Mine for the calendar month just
ended; and
(e) Copies of all reports filed with the
Securities Exchange Commission.
SECTION 6.08. VISITATION RIGHTS. Permit
the Lenders to discuss the affairs, finances and
accounts of the Borrower with its officers, at any
time and from time to time during normal business
hours and without notice, and inspect (i) the
Collateral and (ii) the Borrower's books and
records and to make abstracts or reproductions
thereof and to duplicate, reduce to hard copy or
otherwise use any and all computer or
electronically stored information or data.
SECTION 6.09. ENVIRONMENTAL MATTERS.
With respect to environmental matters, the
Borrower will:
(a) comply in all material respects with all
applicable Environmental Requirements;
(b) not store, dispose of, release or allow
the release of any Hazardous Materials on any
of the Mines (except in material compliance
with all applicable Environmental
Requirements pertaining thereto); and
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(c) neither directly nor indirectly
transport or arrange for the transport of any
Hazardous Materials (except in material
compliance with all applicable Environmental
Requirements pertaining thereto).
SECTION 6.10. HEDGING. Maintain at all
times a Gold-sales hedging program with Gerald
that shall be satisfactory to the Lenders.
Lenders hereby acknowledge that the Gold-sales
hedging program in effect on the date hereof, as
established with Gerald under Section 4.01(f)
hereof, is satisfactory to Lenders.
SECTION 6.11. TRADING AGREEMENT;
PURCHASE CONTRACT. Strictly perform its
obligations under, and strictly comply with the
terms of, the Purchase Contract, the Trading
Agreement and each Forward Contract and Option (as
such terms are defined in the Trading Agreement),
and ensure that the Purchase Contract and the
Trading Agreement and each Forward Contract and
Option will remain in full force and effect.
SECTION 6.12. FURTHER ASSURANCES.
Execute and deliver to the Agent all further
documents, financing statements, agreements and
instruments, and take all further action that may
be required under applicable law, or that the
Agent may reasonably request, in order to
effectuate the transactions contemplated by the
Loan Documents or, without limiting any of the
foregoing, to grant, preserve, protect and perfect
the validity and first-priority of the security
interests created or intended to be created by any
of the Security Documents.
SECTION 6.13. LICENSES. Maintain in
full force and effect all licenses and permits
that are material or necessary for the operation
of the Mines, the ownership of the assets related
thereto and the performance of its obligations
under the Purchase Contract and the Trading
Agreement and will submit a report to each Lender
annually on the status of such licenses and
permits.
SECTION 6.14. YEAR 2000 COMPLIANT. The
Borrower will ensure that the Computer Capacity is
at all times Year 2000 Compliant, except insofar
as any failure to be Year 2000 Compliant will not
result in a Material Adverse Effect and shall
notify the Agent promptly upon detecting any
failure of the Computer Capacity or any part
thereof to be Year 2000 Compliant.
SECTION 6.15. ERISA NOTICES. Borrower
shall deliver or cause to be delivered to the
Agent, at Borrower's expense, the following
information and notices as soon as reasonably
possible, and in any event:
(a) within thirty (30) Business Days after
Borrower or any ERISA Affiliate knows or has
reason to know that a Termination Event has
occurred, a written statement of the chief
financial officer of the Borrower describing
such Termination Event and the action, if
any, which Borrower or any ERISA Affiliate
has taken, is taking or proposes to take with
respect thereto, and when known, any action
taken or threatened by the IRS, DOL or PBGC
with respect thereto;
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(b) within thirty (30) Business Days after
Borrower knows or has reason to know that a
prohibited transaction (defined in Sections
406 of ERISA and Section 4975 of Code) has
occurred, a statement of the chief financial
officer of Borrower describing such
transaction and the action which Borrower or
any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto;
(c) within thirty (30) Business Days after
the filing of the same with the DOL, IRS or
PBGC, copies of each annual report (form 5500
series), including Schedule B thereto, filed
with respect to each Plan;
(d) within thirty (30) Business Days after
receipt by Borrower or any ERISA Affiliate of
each actuarial report for any Plan or
Multiemployer Plan and each annual report for
any Multiemployer Plan, copies of each such
report;
(e) within thirty (30) Business Days after
the filing of the same with the IRS, a copy
of each funding waiver request filed with
respect to any Plan and all communications
received by Borrower or any ERISA Affiliate
with respect to such request;
(f) within thirty (30) Business Days after
the occurrence any material increase in the
benefits of any existing Plan or
Multiemployer Plan or the establishment of
any new Plan or the commencement of
contributions to any Plan or Multiemployer
Plan to which Borrower or any ERISA Affiliate
to which Borrower or any ERISA Affiliate was
not previously contributing, notification of
such increase, establishment or commencement;
(g) within thirty (30) Business Days after
Borrower or any ERISA Affiliate receives
notice of the PBGC's intention to terminate a
Plan or to have a trustee appointed to
administer a Plan, copies of each such
notice;
(h) within thirty (30) Business Days after
Borrower receives notice of any unfavorable
determination letter from the IRS regarding
the qualification of a Plan under Section
401(a) of the Code, copies of each such
letter;
(i) within thirty (30) Business Days after
Borrower or any ERISA Affiliate receives
notice from a Multiemployer Plan regarding
the imposition of withdrawal liability,
copies of each such notice;
(j) within thirty (30) Business Days after
Borrower or any ERISA Affiliate fails to make
a required installment or any other required
payment under Section 412 of Code on or
before the due date for such installment or
payment, a notification of such failure; and
(k) within thirty (30) Business Days after
Borrower or any ERISA Affiliate knows or has
reason to know (i) a Multiemployer Plan has
been terminated, (ii) the administrator or
plan sponsor of a Multiemployer Plan intends
to terminate a
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Multiemployer Plan, or (iii) the PBGC has
instituted or will institute proceedings
under Section 4042 of ERISA to terminate a
Multiemployer Plan, notification of such
termination, intention to terminate or
institution of proceedings.
SECTION 6.16. ERISA COMPLIANCE.
Borrower shall cause, and shall cause each of its
ERISA Affiliates to, establish, maintain and
operate all Plans to comply in all material
respects with the provisions of ERISA, the Code,
all other applicable laws, and the regulations and
interpretations thereunder and the respective
requirements of the governing documents for such
Plans.
ARTICLE VII
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NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, until
payment and satisfaction in full of all
Obligations, whether now existing or arising
hereafter, and unless expressly waived by Majority
Lenders in writing, Borrower will not, directly or
indirectly:
SECTION 7.01. FUNDAMENTAL CHANGES.
Dissolve, liquidate, merge, consolidate or
otherwise alter or modify Borrower's corporate
name, mailing address, principal place of
business, structure, status or existence or enter
into or engage in any operation or activity
materially different from that presently conducted
by Borrower; make any substantial change in its
executive management; amend its corporate charter
or by-laws in any manner that could have a
Material Adverse Effect; or sell or otherwise
transfer all or substantially all of Borrower's
assets.
SECTION 7.02. ILLEGAL ACTIVITIES.
Engage in any conduct or activity, including,
without limitation, a pattern of racketeering
activity, that could subject any of Borrower's
assets to forfeiture or seizure.
SECTION 7.03. DIVIDENDS. Pay any
dividends, or make any distribution of cash or
property, or both, to holders of shares of its
capital stock, or directly or indirectly, redeem,
purchase or otherwise acquire for a consideration,
any shares of its capital stock, of any class.
SECTION 7.04. LIENS. Create, incur,
assume or suffer to exist any mortgage, pledge,
lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, now
or hereafter owned, other than:
(i) liens securing the payment of taxes,
either not yet due or the validity of which
is being contested in good faith by
appropriate proceedings, and as to which it
shall have set aside on its books adequate
reserves;
(ii) deposits under worker's compensation,
unemployment insurance and social security
laws, or to secure the performance of bids,
tenders, contracts (other than for the
repayment of borrowed money) or leases, or to
secure statutory
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obligations or surety or appeal bonds or
reclamation bonds, or to secure indemnity,
performance or other similar bonds in the
ordinary course of business;
(iii) liens imposed by law, such as
carriers', warehousemen's or mechanics'
liens, incurred by it in good faith in the
ordinary course of business, and liens
arising out of a judgment or award against it
with respect to which it shall currently be
prosecuting an appeal, a stay of execution
pending such appeal having been secured;
(iv) liens in favor of the Agent or any
Lender;
(v) liens in favor of other entities
providing financing to Borrower related to
mining properties and not to exceed One
Million Dollars ($1,000,000) in the aggregate
at any time; and
(vi) royalties, net profit interests,
Purchase Money Liens and Permitted Liens.
SECTION 7.05. DISPOSITION OF ASSETS.
Sell, lease, transfer or otherwise dispose of its
properties, equipment, assets, rights, licenses
and franchises, including but not limited to water
rights and timber rights to any Person, except
sales of Gold inventory to Gerald in the ordinary
course of its business pursuant to the Purchase
Contract and sales or dispositions of other
properties, assets, rights, licenses and
franchises with a market value of less than
$100,000 in the aggregate during any 12 month
period, or turn over the management of, or enter a
management contract with respect to, such
properties, assets, rights, licenses and
franchises at the Mines.
SECTION 7.06. SALE AND LEASEBACKS.
Enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell
or transfer any property, real, personal or mixed,
used or useful in its business, whether now owned
or hereafter acquired, and thereafter rent or
lease such property.
SECTION 7.07. INVESTMENTS. Purchase,
invest in or otherwise acquire or hold securities,
including, without limitation, capital stock and
evidences of indebtedness of, or make loans or
advances to, or, enter into any arrangement for
the purpose of providing funds or credit to, any
other Person, except:
(a) advances to officers, directors or
employees for business expenses or for
personal needs not to exceed One Hundred
Thousand Dollars ($100,000) in the case of
any one (1) officer, director or employee and
not to exceed Three Hundred Fifty Thousand
Dollars ($350,000) in the aggregate to all
such officers, directors and employees
outstanding at one time;
(b) investments in short-term obligations of
the United States; and
(c) investments existing as of the date of
this Agreement and previously disclosed in
writing to Agent.
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ARTICLE VIII
------------
DEFAULTS/RIGHTS AND REMEDIES OF AGENT UPON DEFAULT
- -------------------------------------------------
SECTION 8.01. EVENTS OF DEFAULT. Each of
the following events or circumstances shall
constitute an "Event of Default":
(a) failure of Borrower to pay (i) any
installment of principal of, or interest on,
the Notes, (ii) reasonable Expenses or (iii)
any other Obligations, when the same shall
become due and payable, whether at the due
date thereof or by acceleration or otherwise;
(b) failure of Borrower to perform, comply
with or observe any term, covenant or
agreement applicable to Borrower (other than
as set forth in other paragraphs of this
Section 8.01) contained in Articles II, VI or
VII hereof, Section 10.03 hereof or in the
Notes, which failure continues for a period
of ten (10) Business Days following its
occurrence, (or at the expiration of the
grace period set forth therein, if shorter);
(c) Failure of Borrower to comply with or
observe any term, covenant or agreement under
Article V hereof;
(d) failure of Borrower to perform, comply
with or observe any other term, covenant or
agreement applicable to Borrower pursuant to
this Agreement other than as set forth in
Article V or as set forth in other paragraphs
of this Section 8.01, and such default shall
continue unremedied for a period of ten (10)
Business Days after the delivery of express
written notice thereof by Agent to Borrower;
(e) any representation or warranty made by
or on behalf of Borrower pursuant to this
Agreement, any other Loan Document or any
other agreement, document, instrument or
certificate executed by Borrower in favor of
the Agent shall be untrue or misleading in
any material adverse respect as of the date
such representation or warranty was made or
is deemed to have been made;
(f) the occurrence of a default or event of
default with respect to any Indebtedness
(other than to Agent or any Lender), if the
effect of such default is to accelerate the
maturity of such Indebtedness or to permit
the holder thereof to cause such Indebtedness
to become due prior to the stated maturity
thereof, or if any Indebtedness of Borrower
(other than to Agent or any Lender) is not
paid, when due and payable, whether at the
due date thereof or by acceleration or
otherwise;
(g) the occurrence of any "Event of Default"
as defined in any Security Document;
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(h) Borrower shall (i) discontinue or
abandon operation of its business, (ii) apply
for or consent to or suffer the appointment
of a receiver, trustee, custodian or
liquidator of it or any of its property,
(iii) admit in writing its inability to pay
its debts as they mature, (iv) make a general
assignment for the benefit of creditors, (v)
file, or have filed against it, a petition
for relief under Title 11 of the United
States Code, (vi) file, or have filed against
it, a petition in bankruptcy, or a petition
or an answer seeking reorganization or an
arrangement with creditors or to take
advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution
or liquidation law or statute, or an answer
admitting the material allegations of a
petition filed against it in any proceeding
under any such law, or if corporate or action
shall be taken for the purpose of effecting
any of the foregoing, (vii) become insolvent,
(viii) fail to generally pay its debts as
they mature or (ix) have liabilities which
exceed the fair value of its assets;
(i) for any reason, except for Agent's or
any Lender's errors, omissions, misconduct
(willful or otherwise) or gross negligence
(no obligation on the part of Lenders or
Agent shall be created, implied or inferred
by or in this subsection), any Security
Document at any time shall not be in full
force and effect in all material respects or
shall not be enforceable in all material
respects in accordance with its terms, or any
Lien granted pursuant thereto shall fail to
be perfected within ten (10) days subsequent
to the execution and delivery of this
Agreement as a first priority lien;
(j) Borrower suffers or sustains a Material
Adverse Change or the prospect of repayment
of the Obligations owing to the Agent or any
Lender, in the reasonable judgment of the
Agent, is materially impaired;
(k) any change of fifty percent (50%) or
more in the share ownership of Borrower;
(l) the occurrence of any "event of default"
or other default under, or material breach
of, the Purchase Contract, the Trading
Agreement, any Option or Forward Contract (as
terms are defined in the Trading Agreement)
by any party thereto; or, for any reason, the
Trading Agreement shall not be in full force
and effect or shall not be enforceable
against the Borrower in accordance with its
terms, or any Person other than the Agent or
any Lender shall contest the validity or
enforceability of, or the Borrower shall seek
to disaffirm, terminate or otherwise limit
its obligations under, the Trading Agreement
or Purchase Contract;
(m) for any reason, except for Agent's or any
Lender's errors, omissions, misconduct
(willful or otherwise) or gross negligence
(no obligation on the part of Lenders or
Agent shall be created, implied or inferred
by or in this subsection), any Security
Document at any time shall not be in full
force and effect in all material respects or
shall not be enforceable in all material
respects in accordance with its terms, or any
Lien granted pursuant thereto shall fail to
be perfected, or any Person
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(other than the Agent or any Lender) shall
contest the validity, enforceability or
perfection of any Lien granted pursuant
thereto, or any party thereto (other than the
Agent or any Lender) shall seek to disaffirm,
terminate, limit or reduce its obligations
under any Security Document;
(n) any judgment or court order for the
payment of money in excess of an aggregate of
$200,000 and which has a Material Adverse
Effect shall be rendered against the Borrower
or any of its property, and either the same
shall remain undischarged for a period of
thirty (30) consecutive days or execution
shall have issued in respect thereof;
(o) the occurrence of any "event of default"
under, or the termination, expiration or
cancellation of any lease, royalty agreement
or other instrument necessary for the
operation of the Olinghouse Mine or the
Griffon Mine;
(p) (i) Borrower or any ERISA Affiliate shall
engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (ii)
any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or
not waived, shall exist with respect to any
Plan, (iii) a Termination Event shall occur
or (iv) any other event or condition shall
occur or exist with respect to a Plan or a
Multiemployer Plan; and in each case in
clauses (i) through (iv) above, such event or
condition, together with all other such
events or conditions, if any, could subject
Borrower to any tax, penalty or other
liabilities in the aggregate material in
relation to the business, operations,
property or financial or other condition of
Borrower and any of the foregoing are not
corrected or cured within 30 days after
notice to Borrower; or
(q) the occurrence of any material Event of
Default under any other loan agreements in
connection with indebtedness owed to lenders
other than Lenders.
THEN, upon the occurrence of any such Event of
Default which has not been cured by Borrower or
waived in writing by Agent, the Agent may, with
the prior written consent of the Majority Lenders,
by notice to Borrower, declare all Notes to be
immediately due and payable. Upon such
declaration, the Notes shall become immediately
due and payable, both as to principal and
interest, without presentment, demand, protest or
notice of any kind, all of which are hereby
expressly waived, anything contained herein or in
the Notes or other evidence of such Obligations to
the contrary notwithstanding (except with respect
to any Event of Default set forth in Section
8.01(g), in which case all Notes shall
automatically become immediately due and payable
without the necessity of any notice or other
demand) and any obligation of Lenders to make the
Loans or any Advances thereunder to Borrower shall
immediately terminate. Agent may enforce payment
of the same and exercise any or all of the rights,
powers and remedies possessed by Agent, whether
under this Agreement, the Security Documents or
under any agreement securing the Obligations of
Borrower hereunder, or afforded by applicable law.
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The remedies provided for herein are
cumulative and are not exclusive of any other
remedies provided by law. Borrower agrees to pay
Agent's and Lenders' attorneys' reasonable fees
and legal expenses incurred in enforcing Agent's
and Lenders' rights, powers and remedies under
this Agreement, the Notes, the Security Documents
and any other agreement securing the Obligations.
ARTICLE IX
----------
THE AGENT
---------
SECTION 9.01. AUTHORIZATION AND ACTION.
Each Lender hereby appoints and authorizes the
Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably
incidental thereto. As to any matters not
expressly provided for by any Loan Documents
(including, without limitation, enforcement or
collection thereof), the Agent shall not be
required to exercise any discretion or take any
action, but shall be required to act or to refrain
from acting (and shall be fully protected in so
acting or refraining from acting) upon the
instructions of the Lenders; provided, however,
that the Agent shall not be required to take any
action which exposes the Agent to personal
liability or which is contrary to this Agreement
or applicable law. The Agent agrees to deliver
promptly to each Lender notice of each notice
given to it by the Borrower pursuant to the terms
of this Agreement.
SECTION 9.02. AGENT'S RELIANCE, ETC.
Neither the Agent nor any of its directors,
officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or
them under or in connection with any Loan
Document, except for its or their own gross
negligence or willful misconduct. Without
limitation of the generality of the foregoing, the
Agent: (i) may consult with legal counsel
(including counsel for the Borrower), independent
public accountants and other experts selected by
it and shall not be liable for any action taken or
omitted to be taken in good faith by it in
accordance with the advice of such counsel,
accountants or experts; (ii) makes no warranty or
representation to any Lender and shall not be
responsible to any Lender for any statements,
warranties or representations made in or in
connection with any Loan Document; (iii) shall not
have any duty to ascertain or to inquire as to the
performance or observance of any of the terms,
covenants or conditions of any Loan Documents on
the part of the Borrower to be performed or
observed, or to inspect any property (including
the books and records) of the Borrower; (iv) shall
not be responsible to any Lender for the due
execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan
Document or any other instrument or document
furnished pursuant hereto; and (v) shall incur no
liability under or in respect of any Loan Document
by acting upon any notice, consent, certificate or
other instrument or writing (which may be by
telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or
parties.
SECTION 9.03. STANDARD AS LENDER. With
respect to its Term Loan Commitment and the Term
Note issued to it, and its Revolving Loan
Commitment and the Revolving Note issued to it,
Standard shall have the same rights and powers
under this Agreement as any other Lender and may
exercise the same as though it were not the Agent,
and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include Standard in
its individual capacity.
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SECTION 9.04. LENDER CREDIT DECISION. Each
Lender acknowledges that it has, independently and
without reliance upon the Agent or any other
Lender and based on the financial information
delivered to it in connection herewith and such
other documents and information as it has deemed
appropriate, made its own credit analysis and
decision to enter into this Agreement. Each
Lender also acknowledges that it will,
independently and without reliance upon the Agent
or any other Lender and based on such documents
and information as it shall deem appropriate at
the time, continue to make its own credit
decisions in taking or not taking action under
this Agreement.
SECTION 9.05. INDEMNIFICATION. The Lenders
agree to indemnify the Agent (to the extent not
reimbursed by the Borrower), ratably according to
the respective principal amounts of the Notes then
held by each of them, from and against any and all
liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by,
or asserted against the Agent in any way relating
to or arising out of this Agreement or any action
taken or omitted by the Agent under this
Agreement, provided that no Lender shall be liable
for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful
misconduct. Without limitation of the foregoing,
each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any
out-of-pocket Expenses (including counsel fees)
incurred by the Agent in connection with the
preparation, execution, delivery, administration,
modification, amendment or enforcement (whether
through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement
to the extent that the Agent is entitled to
reimbursement for such Expenses but is not
reimbursed for such Expenses by the Borrower.
SECTION 9.06. SUCCESSOR AGENT. The Agent
may resign at any time by giving written notice
thereof to the Lenders and the Borrower, with any
such resignation to become effective only upon the
appointment of a successor Agent pursuant to this
Section 9.06. Upon any such resignation, the
Majority Lenders shall have the right to appoint a
successor Agent, which shall be a Lender or
another commercial bank or trust company
reasonably acceptable to the Borrower organized or
licensed under the laws of the United States, or
of any State thereof. If no successor Agent shall
have been so appointed by the Majority Lenders, or
no such successor Agent shall have accepted such
appointment, within thirty (30) days after the
retiring Agent's giving of notice of resignation,
then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be
Lender or shall be another commercial bank or
trust company organized or licensed under the laws
of the United States or of any State thereof
reasonably acceptable to the Borrower. In
addition to the foregoing right of the Agent to
resign, the Majority Lenders may remove the Agent
at any time, with or without cause, concurrently
with the appointment by the Majority Lenders of a
successor Agent. Upon the written acceptance of
any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights,
powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged
from its duties and obligations under this
Agreement. After any retiring Agent's resignation
or removal hereunder as Agent, the provisions of
this Article IX
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shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent
under this Agreement.
SECTION 9.07. CONSENTS AND APPROVALS.
(a) Each Lender authorizes and directs Agent
to enter into the Loan Documents other than this
Agreement for the benefit of Lenders. Each Lender
agrees that any action taken by Agent at the
direction or with the consent of Majority Lenders,
in accordance with the provisions of this
Agreement or any Loan Document, and the exercise
by Agent at the direction or with the consent of
Majority Lenders of the powers set forth herein or
therein, together with such other powers as are
reasonably incidental thereto, shall be authorized
and binding upon all Lenders, except for actions
specifically requiring the approval of all
Lenders. Agent agrees not to amend this Agreement
or any Loan Document without the prior written
consent of all Lenders. All communications from
Agent to Lenders requesting Lenders'
determination, consent, approval or disapproval
(i) shall be given in the form of a written notice
to each Lender, (ii) shall be accompanied by a
description of the matter or thing as to which
such determination, approval, consent or
disapproval is requested, or shall advise each
Lender where such matter or thing may be
inspected, or shall otherwise describe the matter
or issue to be resolved, and (iii) shall include,
if reasonably requested by a Lender and to the
extent not previously provided to such Lender, any
written materials provided to Agent by Borrower in
respect of the matter or issue to be resolved.
Each Lender shall reply promptly, but in any event
(x) within fifteen (15) Business Days for those
matters requiring the consent by all Lenders, and
(y) except as provided in clause (x), within ten
(10) Business Days for those matters requiring the
consent by Majority Lenders in each instance,
after receipt of the request therefor by Agent (in
either event, the "Lender Reply Period"). Unless
a Lender shall give written notice to Agent that
it objects to the recommendation or determination
of Agent (together with a written explanation of
the reasons behind such objection) within the
Lender Reply Period, such Lender shall be deemed
to have approved of or consented to such
recommendation or determination. With respect to
decisions requiring the approval of Majority
Lenders or all Lenders, Agent shall submit its
recommendation or determination for approval of or
consent to such recommendation or determination to
all Lenders and upon receiving the required
approval or consent shall follow the course of
action or determination recommended to Lenders by
Agent or such other course of action recommended
by Majority Lenders and each non-responding Lender
shall be deemed to have concurred with such
recommended course of action.
(b) Agent is hereby authorized on behalf of
all Lenders, without the necessity of any notice
to or further consent from any Lender, from time
to time prior to an Event of Default, to take any
action with respect to any Collateral or Loan
Document which may be necessary to perfect and
maintain perfected Agent's liens (for the benefit
of Lenders) upon the Collateral granted pursuant
to the Loan Documents.
(c) Lenders hereby irrevocably authorize
Agent, at its option and in its discretion, to
release any lien granted to or held by Agent upon
any Collateral (i) upon termination of the
Revolving Loan Commitments and Term Loan
Commitments and repayment and satisfaction of all
Loans, and all other Obligations and the
termination of this Agreement or (ii) if approved,
authorized or ratified in writing by Agent at the
direction of all Lenders.
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(d) Except as provided in this Agreement,
Agent shall have no obligation whatsoever to any
Lender or to any other Person to assure that the
Collateral exists or is owned by any Borrower or
is cared for, protected or insured or has been
encumbered or that the liens granted to Agent
herein or in any of the other Loan Documents or
pursuant hereto or thereto have been properly or
sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any
particular priority.
(e) In the event that all or any portion of
the Collateral is acquired by Agent as the result
of a foreclosure or the acceptance of a deed or
assignment in lieu of foreclosure, or is retained
in satisfaction of all or any part of any
Borrower's obligations, title to any such
Collateral or any portion thereof shall be held in
the name of Agent or a nominee or subsidiary of
Agent, as agent, for the ratable benefit of Agent
and Lenders.
ARTICLE X
---------
MISCELLANEOUS
-------------
SECTION 10.01. AMENDMENT OF PURCHASE
CONTRACT AND TRADING AGREEMENT. Gerald shall
provide written notice to CAI and Standard of any
amendments or modifications to the Purchase
Contract or Trading Agreement within two (2)
Business Days of the date of such amendment or
modification; provided, however, that Gerald will
seek the prior written consent of Agent and the
remaining Lenders for any amendments or
modifications to the Purchase Contract or the
Trading Agreement which, when determined
reasonably, would negatively impact the rights of
Lenders as assignees of the proceeds to be paid
pursuant to the terms of the Purchase Contract and
the Trading Agreement.
SECTION 10.02. SURVIVAL. This Agreement and
the other Loan Documents and all covenants,
agreements, representations and warranties herein
and in the certificates delivered pursuant hereto,
shall survive the making by the Lenders of the
Loans and the execution and delivery to Lenders of
the Notes and shall continue in full force and
effect so long as the Notes and any other
indebtedness of Borrower to the Lenders is
outstanding and unpaid.
SECTION 10.03. INDEMNIFICATION. Borrower
shall and hereby agrees to indemnify, defend and
hold harmless Agent and Lenders and their
respective directors, officers, agents, employees
and counsel from and against any and all losses,
claims, damages, liabilities, deficiencies,
judgments or expenses incurred by any of them
(except to the extent that it is finally
judicially determined to have resulted from their
own gross negligence or willful misconduct)
arising out of or by reason of any litigation,
investigations, claims or proceedings which arise
out of or are in any way related to (i) this
Agreement or the transactions contemplated hereby,
(ii) any actual or proposed use by Borrower of the
proceeds of the Loans, (iii) any breach by
Borrower of any of the provisions of this
Agreement or (iv) Agent and Lenders entering into
this Agreement, the other Loan Documents or any
other agreements and documents relating hereto,
including, without limitation, amounts paid in
settlement, court costs and fees and disbursements
of counsel incurred in connection with any such
litigation, investigation, claim or proceeding or
any advice rendered in connection with any of the
foregoing. If and to the extent that any
Obligations are
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unenforceable for any reason,Borrower hereby
agrees to make the maximum contribution to the
payment and satisfaction of such Obligations which
is permissible under applicable law. Borrower's
obligations set forth in this Section 10.03 shall
survive any termination of this Agreement and the
other Loan Documents and the payment in full of
the Obligations, and are in addition to, and not
in substitution of, any other of its obligations
set forth in this Agreement or otherwise. In
addition, Borrower shall, upon demand, pay to
Agent all costs and expenses (including the
reasonable fees and disbursements of counsel) paid
or incurred by Agent or Lenders in (i) enforcing
or defending its rights under or in respect of
this Agreement, the other Loan Documents or any
other document or instrument now or hereafter
executed and delivered in connection herewith,
(ii) collecting the Loans, (iii) foreclosing or
otherwise collecting upon the Collateral or any
part thereof and (iv) obtaining any legal,
accounting or other advice in connection with any
of the foregoing.
SECTION 10.04. NONLIABILITY OF AGENT AND
LENDERS. THE RELATIONSHIP BETWEEN BORROWER AND
AGENT AND LENDERS SHALL BE SOLELY THAT OF BORROWER
AND LENDER. AGENT AND LENDERS SHALL NOT HAVE ANY
FIDUCIARY RESPONSIBILITIES TO BORROWER. BORROWER
(i) AGREES THAT AGENT AND LENDERS SHALL NOT HAVE
ANY LIABILITY TO BORROWER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED
BY BORROWER IN CONNECTION WITH, ARISING OUT OF, OR
IN ANY WAY RELATED TO, THE TRANSACTIONS
CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY
OTHER AGREEMENT ENTERED INTO IN CONNECTION
HEREWITH OR ANY ACT, OMISSION OR EVENT OCCURRING
IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED
BY A JUDGMENT OF A COURT THAT IS BINDING ON THE
AGENT AND LENDERS (WHICH JUDGMENT SHALL BE FINAL
AND NOT SUBJECT TO REVIEW ON APPEAL), THAT SUCH
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE
PART OF THE AGENT AND THE LENDERS, CONSTITUTING
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AND (ii)
WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY
CLAIM AGAINST AGENT OR LENDERS (WHETHER SOUNDING
IN TORT, CONTRACT OR OTHERWISE), EXCEPT A CLAIM
BASED UPON GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
WHETHER OR NOT SUCH DAMAGES ARE RELATED TO A CLAIM
THAT IS SUBJECT TO THE WAIVER EFFECTED ABOVE AND
WHETHER OR NOT SUCH WAIVER IS EFFECTIVE, THE AGENT
AND THE LENDERS SHALL NOT HAVE ANY LIABILITY WITH
RESPECT TO, AND BORROWER HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY CLAIM FOR, ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES SUFFERED BY BORROWER IN CONNECTION WITH,
ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS CONTEMPLATED OR THE RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR ANY OTHER AGREEMENT ENTERED INTO IN
CONNECTION HEREWITH OR THEREWITH OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION HEREWITH
OR THEREWITH, UNLESS IT IS DETERMINED BY A
JUDGMENT OF A COURT THAT IS BINDING ON AGENT AND
THE LENDERS (WHICH JUDGMENT SHALL BE FINAL AND NOT
SUBJECT TO REVIEW ON APPEAL), THAT SUCH DAMAGES
WERE THE RESULT OF ACTS OR
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OMISSIONS ON THE PART OF AGENT OR THE LENDERS
CONSTITUTING WILLFUL MISCONDUCT.
Section 10.05. GOVERNING LAW; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL; WAIVER OF
DAMAGES. (a) THIS AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(b) THE BORROWER HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, NEW
YORK. BORROWER WAIVES IN ALL DISPUTES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF SUCH
COURT CONSIDERING THE DISPUTE INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(c) EACH PARTY HERETO HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO ANY RELATIONSHIP ESTABLISHED
IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY
DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
(d) BORROWER HEREBY IRREVOCABLY DESIGNATES
KUMMER, KAEMPFER, BONNER & RENSHAW, 3800 HOWARD
HUGHES PARKWAY, 7TH FLOOR, LAS VEGAS, NEVADA 89109
FAX NO. (701) 796-7181 ATTENTION: MICHAEL J.
BONNER, ESQ. AS THE DESIGNEE, APPOINTEE AND AGENT
OF BORROWER TO RECEIVE, FOR AND ON BEHALF OF
BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE
JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT. BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO BORROWER AT ITS ADDRESS SPECIFIED IN
THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE
THREE (3) BUSINESS DAYS AFTER SUCH MAILING.
(e) NOTHING HEREIN SHALL AFFECT THE RIGHT OF
AGENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER
JURISDICTION.
(f) BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF AGENT AND LENDERS IN
CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING
TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF AGENT AND LENDERS, OR TO
ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY
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OR PERMANENT INJUNCTION THIS AGREEMENT OR ANY
OTHER AGREEMENT OR DOCUMENT BETWEEN BORROWER AND
AGENT AND LENDERS.
SECTION 10.06. AMENDMENTS, ETC. No amendment
or waiver of any provision of this Agreement, any
Note or any Security Document, 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 Majority Lenders, and
then such waiver or consent shall be effective
only in the specific instance and for the specific
purpose for which given; provided, however, that
no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of
the following: (a) waive, modify or eliminate any
of the conditions specified in Article V, (b)
increase the Commitment of any Lender hereunder or
increase the Commitments of the Lenders that may
be maintained hereunder or subject the Lenders to
any additional obligations, (c) reduce the
principal of, or interest on, the Notes, or any
fees or other amounts payable hereunder, (d)
postpone any date fixed for any payment of
principal of, or interest on, the Notes or any
fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or
the number of Lenders which shall be required for
the Lenders or any of them to take any action
hereunder, (f) amend this Agreement, any Note or
any Security Document in a manner intended to
prefer one or more Lenders over any other Lenders,
(g) amend this Section 10.06, or (h) release all
or substantially all of the Collateral otherwise
than in accordance with the provisions for such
release contained in the Security Documents, or
change any provision of any Security Document
providing for the release of all or substantially
all of the Collateral; and provided, further, that
no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the
Lenders required above to take such action, affect
the rights or duties of the Agent under this
Agreement or any Note.
SECTION 10.07. WAIVER. Any amendment or
waiver effected in accordance with this Article IX
shall be binding upon the Agent and Lenders and
the Borrower; and the Agent's failure to insist
upon the strict performance of any term, condition
or other provision of this Agreement, the Notes,
or any of the Loan Documents, or to exercise any
right or remedy hereunder or thereunder, shall not
constitute a waiver by the Agent of any such term,
condition or other provision or Default or Event
of Default in connection therewith, nor shall a
single or partial exercise of any such right or
remedy preclude any other or future exercise, or
the exercise of any other right or remedy; and any
waiver of any such term, condition or other
provision or of any such Default or Event of
Default shall not affect or alter this Agreement,
the Notes or any of the Loan Documents, and each
and every term, condition and other provision of
this Agreement, the Notes and the Loan Documents
shall, in such event, continue in full force and
effect and shall be operative with respect to any
other then existing or subsequent Default or Event
of Default in connection therewith. An Event of
Default hereunder and under the Notes or under any
of the Loan Documents shall be deemed to be
continuing unless and until waived in writing by
the Agent, as provided in Section 10.12 hereof.
Neither any failure nor any delay on the part of
the Agent in exercising any right, power or
privilege hereunder, or under the Notes, or any
Security Document shall operate as a waiver
thereof, nor shall a single or partial exercise
thereof preclude any other or future exercise, or
the exercise of any other right, power or
privilege.
SECTION 10.08. NOTICES. All notices and
correspondence hereunder shall be in writing and
sent by certified or registered mail, return
receipt requested, or by overnight delivery
service,
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with all charges prepaid, to the applicable party
at the addresses set forth below, or by facsimile
transmission (including, without limitation,
computer generated facsimile), promptly confirmed
in writing sent by first class mail, to the FAX
numbers and addresses set forth below.
If to Agent or Standard:
Standard Chartered Bank
7 World Trade Center
New York, New York USA 10048-2627
Attention: George J. Schnepf
Fax No.: (212) 667-0780
With a copy to:
Connell & Wiener, LLP
545 Fifth Avenue
New York, New York 10017
Attention: William F. Connell, Esq.
FAX No.: (212) 687-6999
If to CAI:
Credit Agricole Indosuez
520 Madison Avenue - 8th Floor
New York, New York 10022
Attention: Christine Reynolds
FAX No. (212) 418-2288
With a copy to:
Moon and Ikeda
555 Madison Avenue - 25th Floor
New York, New York 10022
Attention: Alexander Moon, Esq.
FAX No. (212) 758-9828
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If to Gerald:
Gerald Metals, Inc.
High Ridge Park
P.O. Box 10134
Stamford, Connecticut 06904
Attention: Mr. Mark Edelstein
FAX No.: (203) 609-8532
cc: Treasurer
With a copy to:
Edwards & Angell
750 Main Street, 14th Floor
Hartford, Connecticut 06103
Attention: Justin M. Sullivan, Esq.
FAX No.: (860) 541-7723
If to Borrower:
Alta Gold Co.
601 Whitney Ranch Drive
Suite 10
Henderson, Nevada 89014
Attention: President
FAX No.: (702) 433-1547
With a copy to:
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Parkway
7th Floor
Las Vegas, Nevada 89109
Attention: Michael J. Bonner, Esq.
FAX No.: (702) 796-7181
or, as to each party, at such other address as
shall be designated by such party in a written
notice to the other party complying as to delivery
with the terms of this Section. All notices,
documents, statements and requests sent by the
Borrower to the Agent shall also be sent
concurrently by the Borrower to each Lender.
Notices and correspondence shall be deemed given
upon the earliest to occur of (i) actual receipt,
(ii) if sent by certified or registered mail,
three (3) Business Days after being postmarked,
(iii) if sent by overnight delivery service, when
received at the above stated addresses or when
delivery is refused or (iv) if sent by facsimile
transmission, when receipt of such transmission is
acknowledged.
SECTION 10.09. ASSIGNMENTS AND
PARTICIPATIONS.
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(a) ASSIGNMENTS. No assignments or
participation's of any Lender's rights or
obligations under this Agreement shall be made
except in accordance with this Section 10.09. Each
Lender may assign to one or more Eligible
Assignees who, so long as no Default or Event of
Default exists and is continuing, is approved by
Borrower (which approval shall not be unreasonably
withheld, conditioned or delayed) all or a portion
of its rights and obligations under this Agreement
(including all of its rights and obligations with
respect to the Loans) in accordance with the
provisions of this Section 10.09.
(b) LIMITATIONS ON ASSIGNMENTS. Each assignment
shall be subject to the following conditions: (i)
each assignment shall be of a constant, and not a
varying, ratable percentage of all of the
assigning Lender's right and obligations under
this Agreement with regard to either or both of
its Term Loan Commitment or Revolving Loan
Commitment and, in the case of a partial
assignment, shall be in a minimum principal amount
of $1,000,000, (ii) each such assignment shall be
to an Eligible Assignee who, so long as no Default
or Event of Default exists and is continuing, is
approved by Borrower (which approval shall not be
unreasonably withheld, conditioned or delayed),
and (iii) the parties to each such assignment
shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as
defined below), an Assignment and Acceptance in
the form of Exhibit L attached hereto and made a
part hereof. Upon such execution, delivery,
acceptance and recording in the Register, from and
after the effective date specified in each
Assignment and Acceptance and agreed to by the
Agent, (A) the assignee thereunder shall, in
addition to any rights and obligations hereunder
held by it immediately prior to such effective
date, if any, have the right to and obligations
hereunder that have been assigned to it pursuant
to such Assignment and Acceptance and shall, to
the fullest extent permitted by law, have the same
rights and benefits hereunder as if it were an
original Lender hereunder, (B) the assigning
Lender shall, to the extent that rights and
obligations hereunder have been assigned by it and
assumed by the Eligible Assignee pursuant to such
Assignment and Acceptance, relinquish its rights
and be released from its obligations under this
Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion
of such assigning Lender's rights and obligations
under this Agreement, the assigning Lender shall
cease to be a party hereto) and (C) Borrower shall
execute and deliver to the assignee thereunder a
Note evidencing its obligations to such assignee
with respect to the Loans and, if applicable, a
new Note to the Assignor evidencing its remaining
obligations to the Assignor. Notwithstanding the
foregoing, the Agent hereunder shall be required
to maintain a minimum Revolving Loan Commitment,
Loans or a combination thereof of at least
$1,000,000.
(c) THE REGISTER. The Agent shall maintain at its
address referred to in Section 10.08 a copy of
each Assignment and Acceptance delivered to and
accepted by it and a register (the "REGISTER") for
the recordation of the names and addresses of the
Lenders, the Revolving Loan Commitments and Term
Loan Commitments of, and the principal amount of
the Loans under such Commitments owing to, each
Lender from time to time and whether such Lender
is an original Lender or the assignee of another
Lender pursuant to an Assignment and Acceptance.
The entries in the Register shall
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be conclusive and binding for all purposes, absent
manifest error, and each Borrower, the Agent and
the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for
all purposes of this Agreement. The Register shall
be available for inspection by Borrower or any
Lender at any reasonable time and from time to
time upon reasonable prior notice.
(d) FEE. Upon its receipt of an Assignment and
Acceptance executed by the assigning Lender and an
Eligible Assignee and a processing and recordation
fee of $2,500 (payable by the assigning Lender or
the assignee, as shall be agreed between them),
the Agent shall, if such Assignment and Acceptance
has been completed and is in compliance with this
Agreement and in substantially the form of Exhibit
L hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt
notice thereof to the Borrower and the other
Lenders.
(e) PARTICIPATIONS. Each Lender may sell
participations to one or more other financial
institutions in or to all or a portion of its
rights and obligations under and in respect of any
and all facilities under this Agreement
(including, without limitation, all or a portion
of any or all of its Revolving Loan Commitment
hereunder and the Loans owing to it); provided,
however, that (i) such Lender's obligations under
this Agreement (including, without limitation, its
Revolving Loan Commitment and Term Loan Commitment
hereunder) shall remain unchanged, (ii) such
Lender shall remain solely responsible to the
other parties hereto for the performance of such
obligations, and (iii) each of Borrower, the Agent
and the other Lenders shall continue to deal
solely and directly with such Lender in connection
with such Lender's rights and obligations under
this Agreement and (iv) such participant's rights
to agree or to restrict such Lender's ability to
agree to the modification, waiver or release of
any of the terms of the Loan Documents, to consent
to any action or failure to act by any party to
any of the Loan Documents or to exercise or
refrain from exercising any powers or rights which
any Lender may have under or in respect of the
Loan Documents, shall be limited to the right to
consent to (A) increase in the Revolving Loan
Commitment or Term Loan Commitment of the Lender
from whom such participant purchased a
participation, (B) reduction of the principal of,
or rate or amount of interest on the Loans subject
to such participation (other than by the payment
or prepayment thereof), and (C) postponement of
the Revolving Credit Termination Date or Term Loan
Maturity Date. Gerald agrees that it shall not
sell participations in the Trading Agreement,
other than to the other Lenders, without the prior
written consent of the other Lenders, which
consent shall not be unreasonably withheld.
(f) INFORMATION REGARDING THE BORROWER. Any
Lender may, in connection with any assignment or
participation pursuant to this Section 10.09,
disclose to the assignee or participant or
proposed assignee or participant, any information
relating to Borrower furnished to such Lender by
the Agent or by or on behalf of Borrower; provided
that, prior to any such disclosure, such assignee
or participant, or proposed assignee or
-50-
participant, shall agree to preserve the
confidentiality of any confidential information
described therein.
(g) PAYMENT TO PARTICIPANTS. Anything in this
Agreement to the contrary notwithstanding, in the
case of any participation, all amounts payable by
Borrower under the Loan Documents shall be
calculated and made in the manner and to the
parties required hereby as if no such
participation had been sold.
(h) LENDERS' CREATION OF SECURITY INTERESTS.
Notwithstanding any other provision set forth in
this Agreement, any Lender may at any time create
a security interest in all or any portion of its
rights under this Agreement (including, without
limitation, Obligations owing to it and any Note
held by it) in favor of any Federal Reserve bank
in accordance with Regulation A of the Federal
Reserve Board.
(i) FOREIGN BANKS. Any assignee or participant
that is not created or organized under the laws of
the United States or a political subdivision
thereof shall deliver to the Borrower a true and
accurate certificate executed by a duly authorized
officer to the effect that such party is subject
to tax review and eligible to receive payments
hereunder and under any Note without deduction or
withholding of United States federal income tax
(i) under the provisions of an applicable tax
treaty concluded by the United States (in which
case the certificate shall be accompanied by two
duly completed copies of IRS Form 1001 (or any
successor or substitute form or forms)) or (ii)
under Sections 1442(c)(1) and 1442 (a) of the
Internal Revenue Code (in which case the
certificate shall be accompanied by two duly
completed copies of IRS Form 4224 (or any
successor or substitute form or forms).
(j) BORROWER'S RIGHTS AND OBLIGATIONS UNAFFECTED.
Notwithstanding anything to the contrary contained
herein, no assignment or participation by any
Lender shall result in any material change in any
of the Loan Documents, any additional or increased
cost or obligation to Borrower or reduce the
rights or benefits of the Borrower hereunder
without the prior written consent of the Borrower.
Notwithstanding anything to the contrary contained
herein, Borrower shall not be responsible for any
Expenses in connection with the assignment or
participation of any Lender's interest under the
Loans.
SECTION 10.10. SETOFF AND RATABLE SHARING OF
PAYMENTS.
(a) Borrower hereby grants to each Lender, a
lien, security interest and right of set-off as
security for all liabilities and obligations to
such Lender, whether now existing or hereafter
arising, upon and against all deposits, credits,
collateral and property, now or hereafter in the
possession, custody, safekeeping or control of
such Lender, or in transit to such Lender. If any
payment is not made when due under any of the Loan
Documents, after giving regard to any applicable
grace periods, if any, or if any Event of Default
or other event which would entitle Lenders to
accelerate the Loans occurs, any such deposits,
balances or other sums credited by or due from
such Lender to Borrower, whether or not such
obligations may be unmatured, may to the fullest
extent not prohibited by applicable law at any
time or from time to time, without
-51-
regard to the existence, sufficiency or adequacy
of any other collateral, and without notice or
compliance with any other condition precedent now
or hereafter imposed by statute, rule of law or
otherwise, all of which are hereby waived, be set
off, appropriated and applied by such Lender
against any or all of Borrower's obligations owed
to such Lender irrespective of whether demand
shall have been made, in such manner as such
Lender in its sole and absolute discretion may
determine subject to the terms of this Agreement.
On the same day of making any such set off,
appropriation or application, Lender agrees to
notify Borrower, Agent and the remaining Lenders
thereof, provided the failure to give such notice
shall not affect the validity of such set off or
appropriation or application. ANY AND ALL RIGHTS
TO REQUIRE LENDERS OR AGENT TO EXERCISE THEIR
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE LOAN, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.
(b) The Lenders agree among themselves that
(i) with respect to all amounts received by them
which are applicable to the payment of the
Obligations (excluding the payment of Commitment
Fees under this Agreement) equitable adjustment
will be made so that, in effect, all such amounts
will be shared among them ratably in accordance
with their Percentages, whether received by
voluntary payment, by the exercise of the right of
setoff or banker's lien, by counterclaim or
crossaction or by the enforcement of any or all of
the Obligations (excluding the payment of
Commitment Fees under this Agreement), (ii) if any
of them shall by voluntary payment or by the
exercise of any right of counterclaim, setoff,
banker's lien or otherwise, receive payment of a
proportion of the aggregate amount of the
Obligations held by it, which is greater than the
amount which such Lender is entitled to receive
hereunder, the Lender receiving such excess
payment shall purchase, without recourse or
warranty, an undivided interest and participation
(which it shall be deemed to have done
simultaneously upon the receipt of such payment)
in such Obligations owed to the others that all
such recoveries with respect to such Obligations
shall be applied ratably in accordance with their
Percentages; provided, however, that if all or
part of such excess payment received by the
purchasing party is thereafter recovered from it,
those purchases shall be rescinded and the
purchase prices paid for such participations shall
be returned to such party to the extent necessary
to adjust for such recovery, but without interest
except to the extent the purchasing party is
required to pay interest in connection with such
recovery. Borrower agrees that, except as
otherwise expressly provided herein, any Lender so
purchasing a participation from another Lender
pursuant to this Section 10.10 may, to the fullest
extent permitted by law, exercise all its rights
of payment (including the right of setoff) with
respect to such participation as fully as if such
Lender were the direct creditor of Borrower in the
amount of such participation.
SECTION 10.11. LIMITATIONS ON
INDEMNIFICATION. To the extent, if at all, that
New Mexico Statute Section 56-7-1 (1978) is
applicable, no agreement to indemnify in this
Agreement shall extend to liability, claims,
damages, losses or expenses, including attorney
fees, for bodily injury to persons or damage to
property caused by, or resulting from, in whole or
in part, the negligent act or omission of the
indemnitee, or any legal entity for whose
negligent acts or omissions or any of them may be
liable, arising out of (a) the preparation or
approval of maps, drawings, opinions, reports,
surveys, change orders, designs or specifications
by the indemnitee, or the
-52-
agents or employees of the indemnitee, or (b) the
giving of or the failure to give directions or
instructions by the indemnitee, or the agents or
employees of the indemnitee, where such giving or
failure to give directions or instructions is the
primary cause of bodily injury to persons or
damage to property. to the extent, if at all,
that New Mexico Statute Section 56-7-2 (1978) is
applicable, no agreement, covenant or promise
contained in, collateral to or affecting this
Agreement purports to indemnify the indemnitee
against loss or liability for damages for (a)
death or bodily injury to persons, (b) injury to
property, (c) any other loss, damage or expense
arising under either clause (a) or clause (b) or
this sentence, or both, or (d) any combination of
the foregoing, arising from the sole or concurrent
negligence of the indemnitee, or the agents or
employees of the indemnitee, or any independent
contractor who is directly responsible to the
indemnitee, or from nay accident which occurs in
operations carried on at the direction or under
the supervision of the indemnitee, or an employee
or representative of the indemnitee, or in
accordance with methods and means specified by the
indemnitee, or employees or representatives or the
indemnitee.
SECTION 10.12. SUCCESSORS AND ASSIGNS. This
Agreement shall be binding upon and inure to the
benefit of Borrower, Agent and Lenders and their
respective successors and assigns and all
subsequent holders of the Notes or any portion
thereof, except that Borrower shall not have the
right to assign this Agreement or any interest
herein without the prior written consent of Agent.
SECTION 10.13. SEVERABILITY. In case any
provision in or obligation under this Agreement or
the Notes or the other Loan Documents shall be
invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and
enforceability of the remaining provisions or
obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 10.14. SECTION HEADINGS. The
Article and Section headings in this Agreement are
inserted for convenience of reference only and
shall not in any way affect the meaning or
construction of any provision of this Agreement.
SECTION 10.15. ENTIRE AGREEMENT. This
Agreement (including the Schedule and Exhibits
hereto) and the other Loan Documents represent the
entire agreement of the Borrower, the Agent and
the Lenders with respect to the subject matter
hereof and there are no promises, undertakings,
representations or warranties by the Agent or any
Lender relative to the subject matter hereof not
expressly set forth herein or in the other Loan
Documents.
SECTION 10.16. COUNTERPARTS. This Agreement
may be executed in any number of counterparts and
by the different parties hereto in separate
counterparts, each of which when so executed and
delivered shall be an original, but all of which
shall together constitute one and the same
instrument.
SECTION 10.17. SURVIVAL OF DEEDS OF TRUST.
The representations, warranties, covenants,
agreements and indemnification of Borrower, as
well as all other provisions, contained in
paragraphs 8, 9, 10, 11 and 12 of the Deeds of
Trust are hereby fully incorporated herein by
reference, as if fully set forth herein, and the
parties hereby agree that all such provisions
shall
-53-
survive any release, satisfaction, termination or
other extinguishment of the Deeds of Trust, or the
first priority lien established thereby.
IN WITNESS WHEREOF, Lenders, Agent and
Borrower have caused this Agreement to be duly
executed by their duly authorized officers, all as
of the day and year first above written.
AGENT:
STANDARD CHARTERED BANK, as Agent
By
Title
By
Title
BORROWER:
ALTA GOLD CO.
By Robert N. Pratt
Title President and Chief Executive Officer
By John A. Bielun
Title Senior Vice President and Chief Financial
Officer
-54-
LENDER:
TERM LOAN COMMITMENT: STANDARD CHARTERED BANK
- --------------------
$6,000,000.00 By
Title
REVOLVING LOAN COMMITMENT:
- -------------------------
$2,000,000.00
By
Title
-55-
LENDER:
TERM LOAN COMMITMENT: CREDIT AGRICOLE INDOSUEZ
- --------------------
$3,000,000.00
By
Title
REVOLVING LOAN COMMITMENT:
$4,000,000.00
By
Title
-56-
Lender:
TERM LOAN COMMITMENT: GERALD METALS, INC.
- --------------------
$2,000,000.00
By
Title
REVOLVING LOAN COMMITMENT:
- -------------------------
- -0-
By
Title
(Exhibits not included).
-57-
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