Exhibit 10.3
CONFORMED COPY
DATED AS OF JUNE 25, 1999
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MONARCH RESOURCES INVESTMENTS LIMITED
as Borrower
MONARCH MINERA SURAMERICANA, C.A.
as an additional Obligor
THE VARIOUS BANKS AND FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HERETO
as Initial Lenders
STANDARD BANK LONDON LIMITED
as Collateral Agent
and
STANDARD BANK LONDON LIMITED
as Administrative Agent
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CREDIT AGREEMENT
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ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171 638 1111
Fax: 0171 972 7990
TCW/627S00004/1178124
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INDEX
1. DEFINITIONS; INTERPRETATION 1.1 Defined Terms 1.2 Use of Defined Terms 1.3 Accounting and Financial Determinations 1.4 Change in Accounting Principles 1.5 Project Determinations, etc 1.6 General Provisions as to Certificates and Opinions, etc. 1.7 Interpretation
2. COMMITMENTS AND PROCEDURES FOR MAKING LOANS; CONTINUATION PROCEDURES 2.1 Commitments; Making Loans 2.2 Continuation and Conversion Elections 2.3 Records 2.4 Funding 2.5 Obligations Several
3. PRINCIPAL PAYMENTS; INTEREST; COMMISSIONS 3.1 Principal Payments 3.1.1Scheduled Repayments 3.1.2Prepayments - Voluntary and Mandatory 3.1.3Principal Payments Generally 3.2 Interest Payments 3.2.1Rate 3.2.2Post-Maturity Rate 3.2.3Payment Dates; Calculation of Interest 3.2.4Rate Determinations 3.3 Fees 3.3.1Agents' Fees
4. PROJECT ACCOUNTS 4.1 The Account Bank; the Proceeds Account 4.2 Proceeds Account 4.3 Treatment of Proceeds of Project Insurance and Compensation 4.4 General Provisions Relating to the Proceeds Account and the Local Accounts
5. INCREASED COSTS; TAXES; MARKET DISRUPTIONS; GENERAL PAYMENT PROVISIONS 5.1 Gold or Dollars Unavailable 5.2 Increased Costs, etc. 5.3 Funding Losses 5.4 Increased Capital Costs 5.5 Illegality 5.6 Taxes
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5.7 Mitigation 5.8 Payments, Computations, etc. 5.9 Proration of Payments 5.10 Setoff 5.11 Conversion upon Acceleration, Judgment Currency, etc. 5.12 Application of Proceeds
6. CONDITIONS PRECEDENT TO MAKING LOANS 6.1 Initial Loans 6.1.1Resolutions, etc. 6.1.2Acquisition Transaction, etc. 6.1.3Subordinated Loan Agreement, etc. 6.1.4Borrower Share Charge 6.1.5MMS Pledge Agreement 6.1.6Security Agreement (U.S. Assets) 6.1.7Canadian Security Agreement 6.1.8MMS Guaranty 6.1.9Venezuelan Security Documents 6.1.10 Account Agreement 6.1.11 Intercompany Subordination Agreement 6.1.12 Miscellaneous Documents and Conditions 6.1.13 Opinions 6.1.14 Approvals, Project Documents 6.1.15 Borrowing Notice 6.1.16 Closing Fees, Expenses, etc. 6.1.17 Compliance with Warranties, No Defaults, etc.
7. REPRESENTATIONS AND WARRANTIES 7.1 Organization, Power, Authority, etc. 7.2 Due Authorization; Non-Contravention 7.3 Validity, etc. 7.4 Legal Status 7.5 Financial Statements 7.6 Absence of Default 7.7 Acquisition Agreement 7.8 Litigation, etc. 7.9 Materially Adverse Effect 7.10 Taxes and Other Payments 7.11 Mining Rights 7.12 Ownership and Use of Properties; Liens 7.13 Subsidiaries 7.14 Intellectual Property 7.15 Technology 7.16 Approvals; Project Documents 7.17 Environmental Warranties 7.18 Pari Passu
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8. COVENANTS 8.1 Informational and Financial Covenants 8.1.1Financial Information, etc. 8.1.2Defaults 8.1.3Miscellaneous Information Concerning the Project 8.1.4Books and Records; Access 8.1.5Financial Covenants of the Borrower 8.1.6Recalculation of Base Case 8.1.7Accuracy of Information 8.2 Affirmative Covenants 8.2.1Compliance with Laws, etc. 8.2.2Approvals; Operative Documents 8.2.3Maintenance of Corporate Existence 8.2.4Payment of Taxes, etc. 8.2.5Insurance 8.2.6Management and Operation 8.2.7Hedging - Metal Price 8.2.8Environmental Covenant 8.2.9Maintenance of Project Assets 8.2.10 Pari Passu 8.2.11 Collateral Agreements; After-Acquired Collateral 8.3 Negative Covenants 8.3.1Business Activities; Place of Business; Organic Documents; Fiscal Year 8.3.2Indebtedness 8.3.3Liens 8.3.4Capital Expenditures 8.3.5Investments 8.3.6Restricted Payments, etc. 8.3.7Take or Pay Contracts 8.3.8Consolidation, Merger, etc. 8.3.9Asset Dispositions, etc. 8.3.10 Transactions with Affiliates 8.3.11 Restrictive Agreements, etc. 8.3.12 Project Documents 8.3.13 Royalty Agreements
9. EVENTS OF DEFAULT 9.1 Events of Default 9.1.1Non-Payment of Obligations 9.1.2Non-Performance of Certain Covenants 9.1.3Non-Performance of Other Obligations 9.1.4Breach of Representation or Warranty 9.1.5Default on other Indebtedness 9.1.6Bankruptcy, Insolvency, etc. 9.1.7Metal Trading Agreements 9.1.8Project Documents, etc.
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9.1.9Impairment of Loan Documents 9.1.10 Abandonment, Mining Rights 9.1.11 Judgments 9.1.12 Change in Control 9.1.13 Materially Adverse Effect 9.1.14 Cease to Carry on Business 9.1.15 Political Risk Events 9.2 Action if Bankruptcy 9.3 Action if Other Event of Default
10. THE AGENTS 10.1 Actions 10.2 Funding Reliance, etc. 10.3 Exculpation 10.4 Successors 10.5 Loans by Standard Bank 10.6 Standard Bank as Administrative Agent 10.7 Credit Decisions 10.8 Copies, etc
11. MISCELLANEOUS 11.1 Waivers, Amendments, etc 11.2 Notices 11.3 Costs and Expenses 11.4 Indemnification 11.5 Survival 11.6 Severability 11.7 Headings 11.8 Counterparts; Effectiveness 11.9 Governing Law; Entire Agreement 11.10Successors and Assigns 11.11Sale and Transfer of Loans; Participations in Loans 11.11.1 Assignments 11.11.2 Participations 11.12Other Transactions 11.13Forum Selection and Consent to Jurisdiction; Waiver of Immunity 11.14Waiver of Jury Trial 11.15English Language
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SCHEDULES AND EXHIBITS
SCHEDULE I Disclosure Schedule SCHEDULE II Base Case SCHEDULE III Additional Costs Rate EXHIBIT A Borrowing Notice EXHIBIT B Continuation Notice EXHIBIT C Conversion Notice EXHIBIT D Lender Assignment Agreement EXHIBIT E Compliance Certificate EXHIBIT F- 1 Process Agent Acceptance EXHIBIT F-2 Independent Consultant's Certificate EXHIBIT G Subordinated Loan Agreement EXHIBIT H Account Agreement EXHIBIT I MMS Guaranty EXHIBIT J-1 Canadian Security Agreement EXHIBIT J-2 Security Agreement (U.S. Assets) EXHIBIT K-1 Borrower Share Charge EXHIBIT K-2 MMS Pledge Agreement EXHIBIT L-1 Assignment of Contract Rights EXHIBIT L-2 Chattel Mortgage EXHIBIT L-3 Pledge Without Conveyance EXHIBIT L-4 Real Property Mortgage EXHIBIT M-1 Intercompany Subordination Agreement EXHIBIT M-2 Nationsbank Subordination Agreement EXHIBIT N-1 Opinion of Debevoise & Plimpton, New York
counsel to the Finance Parties EXHIBIT N-2 Opinion of Torres, Plaz & Araujo, Venezuelan
counsel to the Finance Parties EXHIBIT N-3 Opinion of Neher Von Siegmund Rengifo Diquez,
Venezuelan counsel to the Obligors EXHIBIT N-4 Opinion of Conyers Dill & Pearman, Bermudan
counsel EXHIBIT N-5 Opinion of Nathaniel K. Adams, corporate
counsel to Hecla Mining EXHIBIT N-6 Opinion of Fasken Martineau, Canadian counsel
to the Finance Parties
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THIS CREDIT AGREEMENT is dated as of June 25, 1999 (this "AGREEMENT") AMONG:-
(1) MONARCH RESOURCES INVESTMENTS LIMITED, a company organized
and existing under the laws of Bermuda ("MRIL" or the
"BORROWER");
(2) MONARCH MINERA SURAMERICANA, C.A., a company organized under
the laws of Venezuela ("MMS"), as an additional Obligor;
(3) THE PARTIES LISTED ON THE SIGNATURE PAGES HERETO, as the
initial lenders (collectively, the "INITIAL LENDERS");
(4) STANDARD BANK LONDON LIMITED, a bank organized under the
laws of England ("STANDARD BANK"), in its capacity as the
collateral agent (in such capacity, the "COLLATERAL AGENT");
and
(5) STANDARD BANK LONDON LIMITED, in its capacity as the
administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT").
WITNESSETH:
WHEREAS, Hecla Mining Company, a Delaware corporation ("HECLA MINING") is active in exploration and development of precious metals and has entered into the Purchase Agreement, dated of May 17, 1999 (the "ACQUISITION AGREEMENT"), pursuant to which Hecla Mining intends to purchase from Monarch Resources Limited, a corporation organized under the laws of Bermuda ("MRL" or the "VENDOR"), all of the issued and outstanding share capital of the Borrower;
WHEREAS, MRIL owns all of the issued and outstanding share capital of MMS and also of Monarch Resources de Mexico, S.A. de C.V., a company organized under the laws of Mexico ("MONARCH MEXICO");
WHEREAS, MMS owns the La Camorra underground gold mine in Venezuela (the "PROJECT") and the Project is already engaging in the commercial production and sale of Gold;
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WHEREAS, immediately following completion of the Acquisition Transaction, MMS intends to initiate certain capital improvements and installations and to fund certain working capital requirements at the Project;
WHEREAS, the Borrower has requested that the Lenders make loans available to the Borrower for the purposes of reimbursing moneys spent by Hecla Mining in the Acquisition Transaction and also for remitting funds to MMS to fund the improvements and working capital requirements at the Project described in the previous recital and the Lenders are willing to make such loans available to the Borrower, on the terms and subject to the conditions of this Agreement and the other Loan Documents;
WHEREAS, in order to finance its obligations under the Acquisition Agreement, Hecla Mining has requested that Standard Bank make additional funds available to it and Standard Bank is willing to make such loans available to Hecla Mining on the terms and subject to the conditions of the Subordinated Loan Agreement and the other Loan Documents;
WHEREAS, as security for the Borrower's obligations under this Agreement and for Hecla Mining's obligations under the Subordinated Loan Agreement: (a) Hecla Mining is willing to grant a security interest over the MRIL Shares and (b) the Borrower is willing to grant a security interest over the MMS Shares;
WHEREAS, as security for the Borrower's obligations under this Agreement and for Hecla Mining's obligations under the Subordinated Loan Agreement, MMS is willing: (a) to guarantee such obligations in favor of the Lenders and (b) grant security interests over those of its assets constituting the Project as more particularly set forth in the Loan Agreements to which it is a party.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy whereof is hereby acknowledged by each party hereto, the parties hereto hereby agree as follows:
1. DEFINITIONS; INTERPRETATION
1.1 DEFINED TERMS
The following terms, when used in this Agreement, including
its preamble and recitals, shall have the following
meanings:
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"ACCOUNT AGREEMENT" means that certain Account Agreement,
executed or to be executed by the Collateral Agent, the
Account Bank and the Borrower substantially in the form of
EXHIBIT H attached hereto.
"ACCOUNT BANK" means The Chase Manhattan Bank or, subject
to this Agreement and the Account Agreement, such other
bank located in New York with which the Proceeds Account
shall be maintained.
"ACQUISITION AGREEMENT" is defined in the FIRST RECITAL.
"ACQUISITION EFFECTIVE DATE" means such date as of which
the Acquisition Transaction shall have been completed in
accordance with its terms.
"ACQUISITION TRANSACTION" means the purchase by Hecla
Mining of the share capital of MRIL, MMS and Monarch
Mexico, as contemplated by the Acquisition Agreement.
"ADDITIONAL COSTS RATE" means for any Interest Period, the
applicable rate determined by Administrative Agent and the
relevant Lenders in accordance with SCHEDULE III.
"ADMINISTRATIVE AGENT" is defined in the PREAMBLE.
"AFFILIATE" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or
under common control with such Person (excluding any
trustee under, or any committee with responsibility for
administering, any compensation, welfare or similar plan).
A Person shall be deemed to be "controlled by" any other
Person if such other Person possesses, directly or
indirectly, power:
(a) to vote twenty percent (20%) or more of the securities
(on a fully diluted basis) having ordinary voting power
for the election of directors or managing general
partners of such Person; or
(b) to direct or cause the direction of the management and
policies of such Person, whether by contract or
otherwise.
"AGENTS" means, collectively, the Administrative Agent and
the Collateral Agent.
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"AGGREGATE COMMITMENT AMOUNT" means U.S.$11,000,000, as may
be reduced pursuant to SECTION 2.1(d).
"AGGREGATE DISCOUNTED PROJECTED CASHFLOW" means for any
Forecast Period, the aggregate of Projected Available
Cashflow for each Measurement Period comprising such
Forecast Period, discounted back to the relevant
Calculation Date at the Discount Rate.
"AGREEMENT" is defined in the PREAMBLE.
"APPLICABLE LAW" means, with respect to any Person or
matter, any supranational, national, provincial, federal,
state, regional or local statute, law, rule, treaty,
convention, regulation, order, decree or other requirement
relating to such Person or matter and, where applicable,
any interpretation thereof by any Governmental Agency
having jurisdiction with respect thereto or charged with
the administration or interpretation thereof (in each case,
whether or not having the force of law, but if not having
the force of law, such statute, law, etc. being of the type
with which such Person would comply in the ordinary course
of business).
"APPLICABLE MARGIN" means two and one-half percent. (2.50%)
PER ANNUM.
"APPROVAL" means each and every approval, authorization,
license, permit, consent, filing and registration by or
with any Governmental Agency or other Person necessary for
the execution, delivery or performance of this Agreement or
any other Operative Document (including any such approval
relating to, or necessary for, the production and export of
Project Output and the consent of any lessor or owner of
any property or assets forming part of the Project) or for
the validity or enforceability hereof or thereof, whether
or not referred to in ITEM 1 ("APPROVALS") of the
Disclosure Schedule.
"APPROVED CREDIT QUALITY" means at least A-1 (or any
successor rating) by Standard & Poor's Rating Group, a
division of McGraw Hill, Inc. and/or P-1 (or any successor
rating) by Moody's Investors Services, Inc.
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"APPROVED SUBORDINATED INDEBTEDNESS" means any intercompany
Indebtedness advanced by (a) any Subordinated Creditor for
the benefit of the Borrower or MMS and subject to the terms
and conditions of the Intercompany Subordination Agreement
or (b) any other Affiliate of Hecla Mining for the benefit
of the Borrower or MMS and subject to subordination and
other terms and conditions the same in all material
respects as those contained in the Intercompany
Subordination Agreement.
"ASSIGNEE LENDER" is defined in SECTION 11.11.1.
"ASSIGNMENT OF CONTRACT RIGHTS" means any Assignment
executed in Spanish between MMS, the Initial Lenders and
the Collateral Agent relating to MMS' rights under any
designated Project Document, the English translation of
which shall be substantially in the form of EXHIBIT L-1
hereto.
"ASSIGNOR LENDER" is defined in SECTION 11.11.1.
"AUTHORIZED REPRESENTATIVE" means, relative to any Obligor
or Subordinated Creditor, those of its officers whose
signatures and incumbency shall have been certified
pursuant to SECTION 6.1.1.
"AVAILABLE COMMITMENT AMOUNT" means, at any time prior to
the Commitment Termination Date, the excess of the
Commitment Amount (for all Lenders) at such time minus the
Principal Amount of the Loans outstanding at such time.
"AVAILABLE FREE CASHFLOW" means, for any relevant period,
the amount equal to the following:
(a) the actual revenues (expressed in Dollars) realized by
MMS in respect of the Project during such period,
MINUS;
(b) all Operating Expenditures paid by MMS in respect of
the Project during such period, MINUS;
(c) all Taxes paid by MMS in respect of the Project during
such period, MINUS;
(d) all royalty and similar fees paid by MMS in respect of
the Project during such period, MINUS;
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(e) all direct corporate costs as identified in the Base
Case, MINUS;
(f) all Capital Expenditures paid by MMS in respect of the
Project during such period, PLUS;
(g) working capital recovery as identified in the Base
Case, MINUS;
(h) amounts paid by the Borrower in respect of principal,
interest or otherwise in respect of the Obligations
during such period.
For the purposes of the foregoing:
(i) ITEM (a) shall be adjusted for any hedging profits or
losses on settlement of each Metal Trading Agreement
then in effect during such period;
(ii) any Obligations paid in Gold shall be valued at the
Current Dollar Equivalent at the time of payment; and
(iii) in computing any portion of a relevant period
where there are insufficiently accurate data to measure
any amounts actually paid by the Borrower and/or MMS,
any means of extrapolation and/or estimation reasonably
acceptable to the Administrative Agent may be used.
"BASE CASE" means the financial model prepared by the
Borrower (approved in writing by the Administrative Agent),
containing INTER ALIA operational, economic, technical and
risk management data concerning the Project and relating to
the Facility together with calculations of: (a) the Loan
Life Cover Ratio, the Project Life Cover Ratio, the Debt
Service Cover Flow Ratio, the Reserve Debt Cover Ratio and
the Reserve Tail Cover Ratio as subject to agreed standard
assumptions and sensitivity analyses, (b) Aggregate
Discounted Projected Cashflow and Projected Available
Cashflow until the Maturity Date or, as the case may be,
the Project End Date and (c) the scheduled payment
obligations with respect to the Facility, as such model is
modified and updated pursuant to SECTION 8.1.6. A print-
out of the initial Base Case is attached as SCHEDULE II.
"BOLIVAR" means lawful money of Venezuela.
"BORROWER" is defined in the PREAMBLE.
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"BORROWER SHARE CHARGE" means the Agreement executed by
Hecla Mining and the Collateral Agent, substantially in the
form of EXHIBIT K-1 hereto.
"BORROWING DATE" means either Business Day on which Loans
are made pursuant to SECTION 2.1.
"BORROWING NOTICE" means a loan request and certificate
duly executed by an Authorized Representative of the
Borrower, substantially in the form of EXHIBIT A hereto.
"BUSINESS DAY" means:
(a) any day which is not Saturday, Sunday, a legal holiday
or any other day on which banks are closed in London,
England, Hamilton, Bermuda, or New York, New York or,
to the extent involving MMS (but not any provision
relating to the payment or making of the Loans)
Caracas, Venezuela;
(b) relative to the making, continuing converting or the
calculation of the LIBO Rate, any day on which dealings
in Dollars are carried on in the London interbank
market; and/or
(c) relative to the making, continuing, conversion or
repaying of any Gold Loans, or any related
determination, any day on which dealings in Gold are
carried on between members of the LBMA in London.
"CALCULATION DATE" means each June 30 and December 31, and,
without duplication, the initial Borrowing Date.
"CANADIAN SECURITY AGREEMENT" means that certain Security
Agreement executed by Hecla Mining and the Collateral
Agent, substantially in the form of EXHIBIT J-1 hereto.
"CAPITAL CONTRIBUTION" means a cash contribution made
(directly or indirectly) by one Person to the ordinary
share capital or equity of another Person.
"CAPITAL EXPENDITURES" means, for any period and with
respect to any Person, the sum of:
(a) the aggregate amount of all expenditures of such Person
for fixed or capital assets (including expenditure
incurred in connection with deferred development costs)
made during such period which, in accordance with GAAP,
would be classified as capital expenditures; and
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(b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period.
"CAPITALIZED LEASE LIABILITIES" means all monetary
obligations of any Person under any leasing or similar
arrangement which, in accordance with GAAP, would be
classified as capitalized leases, and, for the purposes of
this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with
GAAP, and the stated maturity thereof shall be the date of
the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any security, maturing not more than one year after the
purchase thereof, issued by the United States Treasury
that is maintained in book-entry form on the records of
a Federal Reserve Bank in the United States;
(b) commercial paper, maturing not more than nine months
from the date of issue, which (i) has a rating of at
least Approved Credit Quality and (ii) is issued or
guaranteed by a company (other than any Obligor or
Affiliate thereof) or a bank or commercial financial
institution; or
(c) any negotiable certificate of deposit or banker's
acceptance denominated in Dollars, maturing not more
than one year after the purchase thereof, or any money
market funds in any case issued (or, in the case of a
banker's acceptance, accepted) by a commercial banking
institution organized under the laws of an OECD member
country that has a combined capital and surplus and
undivided profits of not less than U.S.$1,000,000,000
(or the equivalent thereof in any other currency).
"CHANGE IN CONTROL" means:
(a) the failure of Hecla Mining to own (and to have sole power
to vote and dispose of), directly or indirectly and free and
clear of all Liens (other than any Lien pursuant to any
Collateral Agreement), 100% of the issued and outstanding share
capital (however designated) of the Borrower;
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(b) the failure of the Borrower to own (and to have sole power
to vote and dispose of), directly or indirectly and free and
clear of all Liens (other than the Liens pursuant to any relevant
Collateral Agreement), 100% of the issued and outstanding share
capital (however designated) of MMS.
Notwithstanding the foregoing, no Change in Control shall
occur under this Agreement, if Hecla Mining wishes to
reorganize its ownership interest in the Borrower and/or
MMS as long as the Administrative Agreement shall have
granted its consent to or such reorganization and the
structure of and the benefits conferred by the Liens
pursuant to the Collateral Agreement in effect before such
reorganization shall be maintained.
"CHATTEL MORTGAGE" means the Chattel Mortgage executed in
Spanish between MMS, the Initial Lenders and the Collateral
Agent, the English translation of which shall be
substantially in the form of EXHIBIT L-2 hereto.
"COLLATERAL AGENT" is defined in the PREAMBLE.
"COLLATERAL AGREEMENTS" means, collectively, the Pledge
Agreements and the Security Agreements.
"COLLECTED LENDERS" means, collectively, the Lenders and
the Subordinated Lenders.
"COMMITMENT" means each Lender's obligation to make,
maintain, continue and convert its Loans in an amount equal
to its Commitment Amount in each case pursuant to the terms
and subject to the conditions of this Agreement.
"COMMITMENT
