EXHIBIT 10.3
up to $8,000,000
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of September 7, 2001
Among
SUNSHINE ARGENTINA, INC.
as Borrower
SUNSHINE MINING AND REFINING COMPANY
SUNSHINE PRECIOUS METALS, INC.
SUNSHINE EXPLORATION, INC.
SUNSHINE ARGENTINA GOLD, INC.
SUNSHINE INTERNATIONAL EXPLORATION COMPANY
▇▇▇▇▇ RESEARCH AND DEVELOPMENT CORPORATION
SUNSHINE MANAGEMENT, INC.
MINERA SUNSHINE DE MEXICO SA de CV
SUNSHINE PERU, INC.
SUNSHINE GOLD CORP.
MINERA SUNSHINE DEL PERU SA
SUNSHINE DIAMOND MINING COMPANY
▇▇▇▇▇ PETROLEUM OF CANADA, LTD.
▇▇▇▇▇ RESOURCES, INC.
as Guarantors
HIGHWOOD PARTNERS, ▇.▇.
▇▇▇▇▇▇▇▇▇ CAPITAL MANAGEMENT LLC
as Lenders
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 7, 2001,
among SUNSHINE ARGENTINA, INC., a Delaware corporation (the "Borrower"),
SUNSHINE MINING AND REFINING COMPANY, a Delaware corporation ("Sunshine"), and
SUNSHINE PRECIOUS METALS, INC., a Delaware corporation ("Metals"), SUNSHINE
EXPLORATION, INC., a Delaware corporation, SUNSHINE ARGENTINA GOLD, INC., a
Delaware corporation, SUNSHINE INTERNATIONAL EXPLORATION COMPANY, a Delaware
corporation, ▇▇▇▇▇ RESEARCH AND DEVELOPMENT CORPORATION, an Idaho corporation,
SUNSHINE MANAGEMENT, INC., a Delaware corporation, MINERA SUNSHINE DE MEXICO SA
de CV, a Mexican corporation, SUNSHINE PERU, INC., a Delaware corporation,
SUNSHINE GOLD CORPORATION, a Delaware corporation, SUNSHINE DIAMOND MINING
COMPANY, a Delaware Corporation, MINERA SUNSHINE DEL PERU SA, a Peruvian
corporation, ▇▇▇▇▇ PETROLEUM OF CANADA, LTD., a Delaware corporation, and ▇▇▇▇▇
RESOURCES, INC., a Delaware corporation, as guarantors (together, the
"Guarantors"), HIGHWOOD PARTNERS, LP ("Highwood") and Stonehill CAPITAL
MANAGEMENT LLC ("Stonehill Capital") (collectively, the "Lenders").
PRELIMINARY STATEMENTS:
(1) On August 23, 2000 (the "Filing Date"), the Borrower and
certain of the Guarantors filed petitions under Chapter 11 of
the Bankruptcy Code (11 U.S.C.ss.ss.101 et seq.; the
"Bankruptcy Code") in the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court").
(2) On such date, the Borrower and the Guarantors entered into a
Post-Petition Credit Agreement, dated as of August 23, 2000
(the "Initial Credit Agreement") with the Lenders to provide
advances to the Borrowers and the Guarantors in an amount up
to $5,000,000 pursuant to Section 364(c)(i), (2) and (3) of
the Bankruptcy Code in order to provide working capital for
the Borrower and the Guarantors and for other general
corporate purposes.
(3) Pursuant to an Interim and Final Order entered by the
Bankruptcy Court on November 3, 2000, the Initial Credit
Agreement and the Security Agreement securing the obligations
thereunder, were approved by the Bankruptcy Court.
(4) On February 5, 2001, the Borrower, the Guarantor and the
Lenders amended and restated the terms of the Initial Credit
Agreement to extend the maturity of the advances and to
provide for continued financing to the Borrower and the
Guarantors hereof on the terms set forth therein, pursuant to
an Amended and Restated Credit Agreement (the "First Amended
Credit Agreement").
(5) The Borrower, the Guarantors and the Lenders desire to further
amend the First Amended Credit Agreement, to further increase
the amount of the potential
advances, to further extend the maturity and to provide for
such additional terms as are set forth herein.
(6) In anticipation of this Second Amended and Restated Credit
Agreement, the Lenders advanced, pursuant to demand notes (the
"Demand Notes"), the aggregate sum of $420,000 (the "Initial
Advance"), which Demand Notes were guaranteed by the
guaranties (the "Initial Guaranties").
(7) The Borrower, the Guarantors and the Lenders desire that the
Initial Advance become an Advance made pursuant to this Second
Amended and Restated Agreement and that such Advance be
guaranteed by the Guarantors pursuant to Article VII hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advances" has the meaning specified in Section 2.1.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director of officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the Voting Stock of such Person or
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"Argentine Security Documents" shall mean the mortgage and security
agreements filed pursuant to the Initial Credit Agreement and the First Amended
Credit Agreement.
"Bankruptcy Action" means, as to any Person, such Person or any of its
Subsidiaries shall generally not pay its debts as such debts become due, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against such Person or any of its subsidiaries seeking to have
such Person adjudicated bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property; or such Person or any of its
subsidiaries shall take any corporate action to authorize any of the actions set
forth above.
"Bankruptcy Code" has the meaning specified in the Preliminary
Statements.
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"Bankruptcy Court" has the meaning specified in the Preliminary
Statements.
"Base Rate" means 15% per annum.
"Benefit Plan" shall mean an employee pension benefit plan of a Loan
Party or an ERISA Affiliate, as defined in Section 3(2) of ERISA, which is
subject to Title IV of ERISA.
"Borrower's Account" means the account of the Borrower maintained by
the Borrower with Comerica Bank Texas at its office at ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇, Account No. 1880704778, Account Name, "Sunshine Argentina, Inc." or any
other account as designated in writing by the Borrower and acceptable to the
Lenders, provided that the Lenders shall have a perfected first priority
interest in such account pursuant to the Security Agreement.
"Borrower's Professionals" means all Persons retained or engaged by any
Loan Party as professional persons within the meaning of Section 327 of the
Bankruptcy Code.
"Borrowing" means a borrowing consisting of simultaneous Advances made
by the Lenders.
"Budget" means a statement, in form and substance satisfactory to the
Lenders, certified by the Borrower's Chief Financial Officer setting forth the
Borrower's and each Guarantor's projected sources and uses of cash and Cash
Equivalents on a semi-monthly basis for two months on a rolling basis with a
semi-monthly reconciliation and variance schedule delivered to the Lenders on
the third Business Day following the conclusion of the 14th day and the last day
of each month; such that each semi-monthly Budget contains all historical
reconciliation together with a two month projection. Each Budget or amendment
thereof shall be in form and substance satisfactory to the Lenders.
"Business Day" means a day of the year on which commercial banks are
not required or authorized to close in New York City.
"Capital Expenditures" means, for any period, the sum of (a) all
expenditures during such period, that would be required to be capitalized in
accordance with GAAP, for equipment, fixed assets, real property or
improvements, or for replacements or substitutions therefor or additions
thereto, that have a useful life of more than one year plus (b) the entire
principal amount of any Debt (including obligations under Capitalized Leases)
assumed or incurred in connection with any such expenditures. For purposes of
this definition, the purchase price of equipment that is purchased
simultaneously with the trade-in of existing equipment or with insurance
proceeds shall be included in Capital Expenditures only to the extent of the
gross amount of such purchase price less the credit granted by the seller of
such equipment for the equipment being traded in at such time or the amount of
such proceeds as the case may be.
"Capitalized Leases" has the meaning ascribed in the definition of
"Debt" below.
"Cash Equivalents" means any of the following, to the extent owned by
the Borrower or any Guarantor free and clear of all Liens (other than Liens
created or permitted under this Agreement and the Final Order) and having a
maturity of not greater than 90 days from the date of acquisition thereof: (a)
readily marketable direct obligations of the Government of the United
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States or any agency or instrumentality thereof or obligations unconditionally
guaranteed by the full faith and credit of the Government of the United States
with a maturity of one year or less, or (b) insured certificates of deposit of
or time deposits with any commercial bank that is a Lender or a member of the
Federal Reserve System, is organized under the laws of the United States of any
State thereof and has combined capital and surplus of at least $500,000,000.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act, as amended.
"Collateral" means all "Collateral" referred to in the Collateral
Documents and all other property that is subject to any Lien in favor of the
Lenders.
"Collateral Documents" means the Second Amended Security Agreement and
the Argentine Security Documents, the Argentine Amendment (as defined in the
First Amended Credit Agreement), the Second Argentine Amendment, the Sunshine
Mortgage and the Sunshine Mortgage Amendment (as defined in the First Amended
Credit Agreement) and the Second Sunshine Mortgage Amendment.
"Commitment" means, in the aggregate the total of the amounts set forth
under the column headed "Commitments" and "Optional Commitments" in Annex A
hereto, which shall aggregate $8,000,000, including "Optional Commitments" of
the Lenders in the amount of $1,500,000; and as to each Lender, the amount set
forth next to such Lender under the columns headed "Commitments" and "Optional
Commitments" in Annex A hereto.
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Current Assets" of any Person means all assets of such Person that
would, in accordance with GAAP, be classified as current assets of a company
conducting a business the same as or similar to that of such Person, after
deducting adequate reserves in each case in which a reserve is proper in
accordance with GAAP.
"Current Liabilities" of any Person means (a) all Debt (other than such
Debt described in clause (f) of the definition of "Debt" in this Section 1.1) of
such Person, (b) all Debt in respect of the Advances, and (c) all other items
(including taxes accrued as estimated) that in accordance with GAAP would be
classified as current liabilities of such Person other than all such Debt
incurred prior to the Filing Date.
"Debt" of any Person means, without duplication, (a) all indebtedness
of such Person for borrowed money, (b) all Obligations of such Person for the
deferred purchase price of property or services (other than (i) prepetition
trade payable and (ii) postpetition trade payables not overdue by more than 60
days incurred in the ordinary course of such Person' business, consistent with
past practice), (c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all Obligations of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all Obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all
Obligations, contingent or otherwise, of
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such Person under acceptance, letter of credit or similar facilities, (g) all
Obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any capital stock of or other ownership or profit
interest in such Person or any other Person or any warrants, rights or options
to acquire such capital stock, valued, in the case of Redeemable Preferred
Stock, at the greater of its voluntary or involuntary liquidation preference
plus accrued and unpaid dividends, (h) all Debt of others referred to in clauses
(a) through (g) above guaranteed directly or indirectly in any manner by such
Person, or in affect guaranteed directly or indirectly by such Person through an
agreement (1) to pay or purchase such Debt or to advance or supply funds for the
payment or purchase of such Debt, (2) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of such
Debt against loss, (3) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services irrespective or
whether such property is received or such services are rendered) or (4)
otherwise to assure a creditor against loss, and (h) all Debt referred to in
clauses (a) through (g) above secured by (or for which the holder of such Debt
has an existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights) owned by
such Person, even through such Person has not assumed or become liable for the
payment of such Debt.
"Default" means any Event of Default or any event that would constitute
an Event of Default but for the requirement that notice be given or time elapse
or both.
"EBITDA" means, for any period, net income (or net loss) plus the sum
of (a) interest expense net of interest income, (b) income tax expense, (c)
depreciation expense, (d) amortization expense and (e) noncash extraordinary or
unusual losses and less extraordinary or unusual gains, in each case determined
in accordance with GAAP for such period.
"Environmental Action" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of non-compliance or
violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in any way to any
Environmental Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment
including, without limitation, (a) by any governmental or regulatory authority
for enforcement, cleanup, removal, response, remedial or other actions or
damages or (b) by any party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, rule, regulation, code, order, judgment, decree, or judicial or
agency interpretation, policy or guidance relating to the environment, health or
safety or the release or disposal or of contamination by Hazardous Materials
(including, without limitation, any such laws, rules or regulations in
Argentina).
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental Law.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and all references to sections thereof shall include such sections
and any predecessor and successor provisions thereto.
"ERISA Affiliate" shall mean any member of a controlled group of
entities as determined under Section 414(b),(c),(m), or (o) of the Internal
Revenue Code, of which a Loan Party is a member.
"Event of Default" has the meaning specified in Section 6.1.
"Excepted Proceeds" shall mean (i) proceeds from sales of assets at
Metals' Sunshine Mine property, including the pending sale of the refining and
related assets to Formation Capital Corporation, pending sales of various
residential properties, the office facilities, and sales of equipment and
supplies from that property; (ii) proceeds from the pending sale of Minera
Sunshine de Mexico to Toreador Resources; and (iii) in the event of a reopening
of the Sunshine Mine, proceeds from the sale of production up to the amount of
Cost of Production. For these purposes, "Cost of Production" includes all direct
mining, processing, transportation, and smelting costs, plus associates general
and administrative costs and costs incurred to reopen the facility.
"Filing Date" has the meaning specified in the Preliminary Statements.
"Final Order" means the Final Order Authorizing Secured and
Superpriority Financing pursuant to 11 ▇.▇.▇.▇▇. 364(c) and (d) entered by the
Bankruptcy Court.
"GAAP" has the meaning specified in Section 1.3.
"Grantor" has the meaning specified in the Security Agreement.
"Guaranteed Obligations" has the meaning specified in Section 7.1.
"Guarantors" has the meaning specified in the recital of parties to
this Agreement.
"Guaranty" means the guaranty of each Guarantor provided pursuant to
Article VII.
"Hazardous Materials" means petroleum or petroleum products, byproducts
or breakdown products, radioactive materials, asbestos-containing materials,
radon gas and any substances designated, classified or regulated as being
"hazardous" or "toxic", or words of similar import, under any Environmental Law.
"Indemnified Party" has the meaning specified in Section 8.4.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Inventory" has the meaning specified in the Security Agreement.
"Lender" has the meaning specified in the recital of parties to this
Agreement.
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"Lien" means any lien, security interest or other charge or encumbrance
of any kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
"Liverpool" means The Liverpool Limited Partnership.
"Loan Documents" means this Agreement, each Note, and each Collateral
Document.
"Loan Party or Loan Parties" means the Borrower and the Guarantors
individually or collectively as the case may be.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of any of the Loan Parties.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Loan Parties, other than those changes directly
and solely resulting from the commencement of the Cases, (b) the rights and
remedies of the Lenders or any Lender under any Loan Document, or (c) the
ability of any Loan Party to perform its Obligations under any Loan Document to
which it is or is to be a party.
"Maximum Lawful Rate" means the maximum rate of interest that Borrower
is allowed to contract for, charge, take, reserve, or receive under the
applicable state law or the United States of America (whichever from time to
time permits the highest rate).
"Mortgage" has the meaning specified in Section 5.1.
"Multiemployer Plan" shall mean a plan described in Section 4001(a)(3)
of ERISA which covers employees of any Loan Party or any ERISA Affiliate.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer or
other disposition of any asset or the sale or issuance of any Debt or capital
stock, any securities convertible into or exchangeable for capital stock or any
warrants, rights or options to acquire capital stock by any Person, the
aggregate amount of cash or Cash Equivalents received from time to time by or on
behalf of such Person in connection with such transaction after deducting
therefrom only (a) reasonable expenses incurred directly in connection with such
transaction, including, without limitation, reasonable and customary brokerage
commissions, underwriting fees and discounts, legal and accounting fees and
expenses, finder's fees and other similar fees and commissions, (b) the amount
of taxes payable in connection with or as a result of such transaction, (c) the
amount of any Debt secured by a Lien on such asset that, by the terms of such
transaction, is required to be repaid upon such disposition and (d) amounts
received with respect to the sublease of any asset to the extent such amounts
received are paid to the lessor of such asset, in each case to the extent, but
only to the extent, that the amounts so deducted are, at the time of receipt of
such cash, actually paid to a Person that is not an Affiliate and are properly
attributable to such transaction or to the asset that is the subject thereof.
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"Note" means (i) a promissory note of the Borrower payable to the order
of any Lender, in substantially the form of EXHIBIT C hereto, evidencing the
aggregate indebtedness of the Borrower to such Lender resulting from the
Advances made by such Lender and (ii) any promissory note issued pursuant to the
Initial Credit Agreement.
"Notice of Borrowing" has the meaning specified in Section 2.2.
"Obligation" means, with respect to any Person, any obligation of such
Person of any kind, including, without limitation, any liability of such Person
on any claim, instrument or agreement whether or not the right of any creditor
or counterparty to payment or performance in respect of such claim, instrument
or agreement is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any bankruptcy, insolvency, reorganization or other similar
proceeding. Without limiting the generality of the foregoing, the Obligations of
the Loan Parties under the Loan Documents include (a) the obligation to pay
principal, interest, charges, expenses, fees, attorneys' fees and disbursements,
indemnities and other amounts payable by any Loan Party under any Loan Document
(including, without limitation, in the case of the Guarantors, the obligations
to pay amounts pursuant to Article VII) and (b) the obligation to reimburse any
amount in respect of any of the foregoing that any Lender, in its sole
discretion, may elect to pay or advance on behalf of such Loan Party.
"Order" means the Final Order.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor agency.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens and other similar Liens arising in
the course of business securing obligations that are not overdue for a period of
more than 30 days; (b) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations; (c) existing Liens securing equipment leases and disclosed on the
schedules to the Reorganization Plan; (d) easements, rights of way, and other
encumbrances on title to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely affect the use of such
property for its present purposes; and (e) the items listed on SCHEDULE 1.1
hereto.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Pledged Debt" has the meaning specified in the Security Agreement.
"Pledged Shares" has the meaning specified in the Security Agreement.
"Prohibited Transaction " shall mean a prohibited transaction described
in Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
"Receivables" has the meaning specified in the Security Agreement.
8
"Reorganization Plan" means the Chapter 11 Plan Of Reorganization
proposed by the Debtors, Liverpool, Westgate, Stonehill Partners and Stonehill
Offshore and approved by the Bankruptcy Court.
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder for which the 30-day
notice of such event has not been waived pursuant to such regulations.
"Second Amended Security Agreement" shall have the meaning set forth in
Section 3.1.
"Second Argentine Amendments" shall have the meaning set forth in
Section 3.1.
"Second Sunshine Mortgage Amendment" shall have the meaning set forth
in Section 3.1.
"Security Agreement" shall mean the security agreement entered into
pursuant to the Initial Credit Agreement.
"Stonehill Partners" means Stonehill Institutional Partners, L.P.
"Stonehill Offshore" means Stonehill Offshore Partners Limited.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) more than 50% of (a) the issued
and outstanding capital stock having ordinary voting power to elect a majority
of the Board of Directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) the
interest in the capital or profits of such partnership or joint venture, or (c)
the beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other Subsidiaries.
Notwithstanding the foregoing, ▇▇▇▇▇▇▇ Mining Company, an Idaho corporation,
shall not be deemed a Subsidiary for purposes of the Loan Documents.
"Termination Date" means the earliest of (i) December 31, 2002 and (ii)
the date of termination of the obligation to make Advances pursuant to Section
6.1 of this Agreement.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar functions) of such Person, even though the right
so to vote has been suspended by the happening of such a contingency.
"Westgate" means ▇▇▇▇▇▇▇ International, L.P. (formerly known as
Westgate International, L.P.)
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SECTION 1.2 Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding".
SECTION 1.3 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
annual financial statements for the fiscal year ended 2000 ("GAAP").
ARTICLE II
AMOUNT AND TERMS OF CREDIT
SECTION 2.1 The Advances; Commitment. Each Lender severally and not
jointly with the other Lenders agrees, on the terms and conditions hereinafter
set forth, to make advances ("Advances") to the Borrower from time to time on
any Business Day during the period from the first date on which all conditions
set forth in Article III shall have been satisfied until the Termination Date in
an aggregate amount not to exceed at any time outstanding the amount set forth
opposite such Lender's name on Annex A hereto under the caption "Commitment";
provided, however, that the aggregate amount available to be borrowed under the
"Commitments" shall not exceed $6,500,000. Within the limits of each Lender's
Commitment in effect from time to time, and subject to the limits referred to
above, the Borrower may borrow under this Section 2.1, prepay pursuant to
Section 2.5 and reborrow under this Section 2.1. In addition, at the option of
each Lender, the Borrower may in addition borrow the amount set forth for such
Lender under "Optional Commitment," provided, however, that the aggregate amount
to be borrowed hereunder shall not exceed $8,000,000. Upon 5 days written notice
to the Borrower, a Lender may indicate that it is making all or any part of its
share of the Optional Commitment available and thereafter the amounts that may
be borrowed, prepaid and reborrowed pursuant to this Article II shall thereafter
include such amount.
SECTION 2.2 Making the Advances.
(a) Each Borrowing shall be made on notice, given not later than 11:00
A.M. (New York City time) on the second Business Day immediately preceding the
date of the proposed Borrowing, by the Borrower to the Lenders. Each such notice
of a Borrowing (a "Notice of Borrowing") shall be by telecopier and email, in
substantially the form of EXHIBIT D hereto, specifying therein the requested (i)
date of such Borrowing and (ii) aggregate amount of such Borrowing. The amount
of such Borrowing shall be at least $500,000. So long as there shall be no
Default or Event of Default and all conditions to a Borrowing shall have been
satisfied and the Borrower shall then be entitled to make Borrowings under the
Loan Documents, each Lender shall, before 3 P.M. (New York City time) on the
date of such Borrowing, make available at the such Lender's bank account, in
same day funds, such Lender's ratable portion of such Borrowing in accordance
with the respective Commitments of such Lender and the other Lenders. Upon
fulfillment of the applicable conditions set forth in Article III, the Lenders
will make such funds available to the Borrower by crediting the Borrower's
Account.
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(b) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower and Guarantors regardless of whether the Guarantors shall have received
notice thereof.
(c) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
(d) The aggregate indebtedness of the Borrower to each Lender shall be
evidenced by a Note. Notwithstanding the provisions of the Notes regarding
payment on demand, no such demand shall be made unless and until there arises an
obligation to make a payment to the Lender holding the Note, under this
Agreement.
(e) All Advances made and Notes issued under the Initial Credit
Agreement shall be hereafter governed by the terms of this Agreement.
SECTION 2.3 Repayment. On the Termination Date, the Borrower shall
repay to the Lenders the outstanding principal amount of the Advances, together
with all accrued interest (and all other amounts due hereunder or under the Loan
Documents). Upon any of the Obligations of the Borrower or the Guarantors
hereunder or under the other Loan Documents becoming due and payable (by
acceleration or otherwise), the Lenders shall be entitled to immediate payment
of such Obligations.
SECTION 2.4 Termination of the Commitments. On the Termination Date the
Commitments of the Lenders shall be terminated in whole.
SECTION 2.5 Prepayments.
(a) Optional. The Borrower may, upon written notice to the Lenders on
or prior to the day of any proposed prepayment stating the proposed date and
aggregate principal amount of any proposed prepayment, prepay the Obligations,
provided that the minimum amount of such prepayment shall be $100,000 and if
such notice is given the Borrower shall prepay on the proposed repayment date
such proposed prepayment amount, together with accrued interest to the date of
such prepayment on the principal amount prepaid.
(b) Mandatory. (i) The Borrower shall, on the date of receipt of Net
Cash Proceeds from (X) the sale, lease, transfer or other disposition of any
assets of the Borrower, any Guarantor, or any Affiliate of Borrower or
Guarantor, (Y) the incurrence or issuance by the Borrower, any Guarantor, or any
Affiliate of Borrower or Guarantor of any Debt, (Z) the sale or issuance by the
Borrower, any Guarantor, or any Affiliate of Borrower or Guarantor of any
capital stock or any warrants, rights or options to acquire capital stock, or
any other securities, or (AA) the receipt by the Borrower, any Guarantor or any
Affiliate of any Borrower or Guarantor, of any judgment, award or settlement,
prepay an aggregate principal amount of the Advances equal to the lesser of (a)
the amount of outstanding Advances and (b) the amount of such Net Cash Proceeds
and the commitments of the Lenders shall be accordingly reduced; provided
however, that the receipt of any Net Cash Proceeds which are Excepted Proceeds
shall not reduce the commitments of the Lenders.
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(ii) Metals hereby covenants that in the event that it shall
have aggregate balances in its bank accounts which exceed the amount provided
for disbursements in the Budget by more than $100,000, then such excess amount
shall be immediately applied to the prepayment of the outstanding Advances.
(c) Application of Prepayments. Any payments or prepayments by the
Borrower or any Guarantor of outstanding Advances shall be applied in the
following order: first, to the payment of any fees, costs, expenses, or charges
of the Lenders arising under the Loan Documents, including, but not limited to,
those set forth in Section 8.4 of this Agreement; second, to the payment of
interest accrued on the outstanding Advances; and third, to the payment of the
principal amount of the outstanding Advances.
SECTION 2.6 Interest.
(a) Ordinary Interest. The Borrower shall pay interest on the unpaid
principal amount of each Advance owing to each Lender from the date of such
Advance until such principal amount shall be paid in full, at the Base Rate per
annum, payable in arrears monthly through the last day of each month (or if
later, the day immediately preceding the day such interest is paid) on the first
Business Day of the next succeeding month and on the Termination Date.
(b) Default Interest. Upon the occurrence and during the continuance of
an Event of Default, the Borrower shall pay interest on the unpaid principal
amount of each Advance owing to each Lender and on the unpaid amount of all
interest, fees and other amounts payable hereunder that is not paid when due,
payable in arrears on the dates referred to in clause (a) above and on demand,
at a rate per annum equal to 10% per annum above the rate required to be paid on
Advances pursuant to clause (a) above.
SECTION 2.7 Commitment Premium. In consideration of the execution of
this Agreement, the Borrower shall pay to the Lenders an aggregate premium
payment of $325,000 (of which $21,000 has been paid) (the "Commitment Premium"),
to be allocated pro rata among the Lenders. In addition, at the time of any
Optional Commitment becoming available to the Borrower, the Borrower shall pay
to the Lender making such commitment available, an additional premium of 5% of
the Optional Commitment amount.
SECTION 2.8 Payments and Computations.
(a) The Borrower shall make each payment hereunder and under the Notes
not later than 3 P.M. (New York City time) on the day when due, in U.S. dollars,
to the Lenders at the accounts set forth below:
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If to Highwood:
Chase Manhattan Bank
ABA# ▇▇▇▇▇▇▇▇▇
Acct: Highwood Partners LP
Acct#: 114023743
If to Stonehill Capital:
Citibank ABA# 021-000089
Acct: ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Acct#: ▇▇▇-▇▇-▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
FFC: Account Name: Stonehill Capital Management LLC
(b) All computations of interest, fees, and charges shall be made by
the Lenders on the basis of a year of 360 days, in each case for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest, fees, or charges are payable. Each
determination by the Lenders of an interest rate, fee, or charge hereunder shall
be conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest or fee, as the case may
be.
SECTION 2.9 Sharing of Payments, Etc. If (x) any Lender shall obtain at
any time any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise) (a) on account of Obligations due and
payable to such Lender hereunder and under the Notes at such time in excess of
its ratable share (according to the proportion of (i) the amount of such
Obligations due and payable to such Lender at such time to (ii) the aggregate
amount of the Obligations due and payable to all Lenders hereunder and under the
Notes at such time) of payments on account of the Obligations due and payable to
all Lenders hereunder and under the Notes at such time or (b) on account of
Obligations owing (but not due and payable) to such Lender hereunder and under
the Notes at such time in excess of its ratable share (according to the
proportion of (i) the amount of such Obligations owing to such Lender at such
time to (ii) the aggregate amount of the Obligations owing (but not due and
payable) to all Lenders hereunder and under the Notes at such time) of payments
on account of the Obligations owing (but not due and payable) to all Lenders
hereunder and under the Notes at such time obtained by all Lenders at such time,
then (y) such Lender shall forthwith purchase from the other Lenders such
participations in the Obligations due and payable to them as shall be necessary
to cause such purchasing Lender to share the excess payment ratably with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each other
Lender shall be rescinded and such other Lender shall repay to the purchasing
Lender the purchase price to the extent of such other Lender's ratable share
(according to the proportion of (w) the purchase price paid to such Lender to
(z) the
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aggregate purchase price paid to all Lenders) of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (A) the amount of such other Lender's required repayment to (B) the total
amount so recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect to the total amount so
recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.9 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.
SECTION 2.10 Use of Proceeds. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) solely (a)
to provide funds necessary to conduct the business of the Borrower, the
Guarantors, and their Subsidiaries in the ordinary course, in accordance with
the Budget, and as permitted hereunder, (b) to pay any fees and disbursements
paid to the Lenders and their professionals and agents in accordance with this
Agreement, and the Budget and (c) as otherwise contemplated or permitted by the
Budget.
SECTION 2.11 Taxes.
(a) Any and all payments by the Borrower or any Guarantor hereunder or
under the Loan Documents shall be made free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto ("Taxes"). If the
Borrower or any Guarantor shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to the Lenders, (i) the sum payable
shall be increased by the amount necessary so that after making all required
deductions such Lender (as the case may be) shall receive an amount equal to the
sum it would have received had no such deduction been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall notify the applicable
Lenders of the making of any such deductions and (iv) the Borrower shall pay the
full amount deducted to the relevant taxing authority or other governmental
authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or the
Loan Documents ("Other Taxes").
(c) The Borrower will indemnify each Lender for the full amount of
Taxes and Other Taxes paid by such Lender, as the case may be, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted by the relevant taxing authority or other governmental
authority. Such indemnification shall be made within 30 days after the date any
Lender, as the case may be, makes written demand therefor. If a Lender shall
become aware that it is entitled to receive a refund in respect of Taxes or
Other Taxes as to which it has been indemnified by the Borrower pursuant to this
Section 2.11, it shall promptly notify the Borrower of the availability of such
refund and shall, within 30 days after receipt of a request by the Borrower,
apply for such refund at the Borrower's expense. If any Lender receives a refund
in respect of any Taxes or Other Taxes as to which it has been indemnified by
the Borrower pursuant to this Section 2.11, it shall promptly notify the
Borrower of such refund and shall, within 30 days after receipt of a
14
request by the Borrower (or promptly upon receipt, if the Borrower has requested
application for such refund pursuant hereto), repay such refund to the Borrower
(to the extent of amount that have been paid by the Borrower under this Section
2.11 with respect to such refund plus interest that is received by the Lender as
part of the refund), net of all out-of-pocket expenses of such Lender and
without additional interest thereof; provided that the Borrower, upon the
request of such Lender, agrees to return such refund (plus penalties, interest
or other charges) to such Lender in the event such Lender is required to repay
such refund. Nothing contained in this subsection (c) shall require any Lender
to make available any of its tax returns (or any other information relating to
its taxes that it deems to be confidential).
SECTION 2.12 Participations. In consideration of the increase in the
"Commitments", the extension of the Termination Date, and the forbearance of
certain affiliates of the Lenders from exercising their rights and remedies
pursuant to certain agreements, including, without limitation, the right to
acquire the capital stock of the Borrower and the right to certain compensatory
payments, the Borrower and the Guarantors hereby grant to the Lenders, pro rata,
the following contractual participations:
in the first $10,000,000, in the aggregate, received from any
of the proceeds received from the sources referenced in Section 2.5(b) which
remain after the pre-payment required pursuant to such section or from any other
sources; provided that such participations shall not include any income from the
ordinary course sale of mining concentrates or any Excepted Proceeds.
The foregoing interests is limited to receipt of proceeds and
shall not be construed to give the Lenders any right to participate in the
management or direction of the affairs of the Borrower, Grantor or any affiliate
thereof.
The foregoing participation rights shall survive any
termination of this Agreement, unless the obligations hereunder shall be
refinanced pursuant to Section 2.14 below.
15
SECTION 2.13 Demand Notes and Initial Guaranties. Upon the execution
and delivery of this Agreement, the borrowings evidenced in the Demand Notes
shall become part of the Advances hereunder and the Initial Guaranties shall be
superseded by the Guaranties set forth in Article VII below.
SECTION 2.14 Refinancing. Until the 90th day from the date hereof, the
Borrower, may, in the event that it determines that the financing provided
hereunder be obtained on more favorable terms pursuant to an arrangement with
another party, elect to refinance the amounts outstanding hereunder pursuant to
such arrangement. In such event, it shall pay or prepay such amounts in full
with the proceeds thereof, the parties shall execute written terminations of
this Agreement and the Loan Documents, and no prepayment penalty or premium
shall be due.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.1 Delivery of Documents. (a) Concurrently with the
execution and delivery of this Agreement, the Borrower and the Guarantors are
delivering the following to the Lenders:
(i) executed Notes, one issued to each Lender, reflecting the
aggregate of Commitment and Optional Commitment of such Lender.
(ii) A second amended and restated security agreement
substantially in the form of Exhibit 3.1(ii) (as amended from time to time in
accordance with its terms, the "Second Amended Security Agreement"), duly
executed by the Borrower and each Guarantor, together with
(A) evidence of the insurance required by the terms
of the Second Amended Security Agreement, and
(B) evidence that all action that the Lenders may
deem necessary or desirable in order to perfect and to protect the Liens created
by the Second Amended Security Agreement has been taken, including, without
limitation, the execution and filing of UCC-1 financing statements or amendments
thereto in the requisite jurisdictions.
(iii) the additional amendments to the Argentine Security
Documents (the "Second Argentine Amendments"), duly executed by the Borrower,
together with evidence that all action that Lenders may deem necessary or
desirable in order to perfect and protect the Liens created by the Argentine
Security Documents has been taken, including, without limitation, evidence that
the mortgage on the Borrower's silver mine, known as the "Pirquitas Mine" has
been duly registered.
(iv) the additional amendment to the Mortgage on the Sunshine
Mine, in the Form of Exhibit 3.1(iv) hereto (the "Second Sunshine Mortgage
Amendment") has been duly filed and registered in Idaho.
16
(v) A copy of a certificate of the Secretary of State of the
state of incorporation of the Borrower and Sunshine, dated reasonably near the
date of the initial Borrowing, certifying that (A) attached thereto are true and
correct copies of the certificate of incorporation of such party and each
amendment thereto on file in his office, (B) such amendments are the only
amendments to such certificates of incorporation on file in his office, (C) such
party has paid all franchise taxes to the date of such certificate, and (D) such
party is duly incorporated and in good standing under the laws of the state of
its incorporation.
(vi) Certified copies of the resolution of the Board of
Directors of each of the Borrower and each Guarantor approving this Agreement,
the Notes, and each other Loan Document to which it is or is to be a party and
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement, the Notes, and each other
Loan Document.
(vii) A certificate of each of the Borrower and each
Guarantor, signed on behalf of such party by such party's chief executive and
chief financial officers, dated the date of the initial Borrowing, certifying
that (A) the bylaws of such party delivered to the Lenders are in effect on the
date of the initial Borrowing, (B) the due incorporation and good standing of
such party as a corporation organized under the laws of the state of its
incorporation, respectively, and the absence of any proceeding for the
dissolution or liquidation of such party, (C) the truth of the representations
and warranties contained in the Loan Documents as though made on and as of the
date of the initial Borrowing, and (D) the absence of any event occurring and
continuing, or resulting from the initial Borrowing, that constitutes a Default
under the Loan Documents.
(viii) A certificate of the Secretary or an Assistant
Secretary of the Borrower and each Guarantor certifying the names and true
signatures of the officers of the Borrower and each Guarantor authorized to sign
this Agreement, the Notes, each other Loan Document to which they are or are to
be parties and the other documents to be delivered hereunder and thereunder.
(ix) The current Budget in form and substance acceptable to
the Lenders.
(x) The legal opinion of independent U.S. counsel to the
Borrower and Guarantors, dated the date hereof, in form and substance, and
issued by counsel, satisfactory to the Lenders.
(xi) The legal opinion of independent Argentine counsel to the
Borrower, dated the date hereof, in form and substance, and issued by counsel,
satisfactory to the Lenders.
(xii) For the Borrower and each Guarantor, the unaudited
balance sheet, income statement and cash flow statement for six months ended
June 30, 2001.
(b) In the event that the Lenders to waive condition 3.1(a)(iii) and
3.1(a)(xi), the Borrower and the Guarantors hereby covenant to supply such
documents as soon as practicable upon request of the Lenders.
SECTION 3.2 Conditions Precedent to Each Borrowing. The obligation of
each Lender to make an Advance on the occasion of each Borrowing (including the
initial Borrowing
17
other than (a) below) shall be subject to the further conditions precedent that
on the date of such Borrowing:
(a) The Lenders shall have received a certificate duly executed by the
Chief Executive Officer, Chief Financial Officer, or Treasurer of the Borrower,
setting forth the amount of the Borrowing and certifying that such Borrowing is
consistent with and permitted by the Budget.
(b) the following statements shall be true (and each of the giving of
the applicable Notice of Borrowing and the acceptance by the Borrower of the
proceeds of such Borrowing shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing such statements are true):
(i) the representations and warranties contained in each Loan
Document are true and correct on and as of the date of such Borrowing, before
and after giving effect to such Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date, other than any such
representations or warranties that, by their terms, refer to a date other than
the date of such Borrowing (and in such cases the representations and warranties
shall be true and correct as of such date); and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or from the application of the proceeds therefrom, that
constitutes a Default or an Event of Default.
(c) The Lenders shall have received the timely delivery of the most
recent Budget (including weekly reconciliations) to be delivered hereunder in
form and substance satisfactory to the Lenders.
(d) There shall have occurred no Material Adverse Change, with respect
to any Loan Party, since June 30, 2001, except for the Loan Parties having
continued to operate at a loss consistent with operational losses experienced by
the Loan Parties prior to June 30, 2001, and all information provided by the
Borrower and the Guarantors to the Lenders prior to the date of such Borrowing
shall be true and correct in all material respects.
(e) There shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that (i) could reasonably be expected to have a
Material Adverse Effect, or (ii) purports to materially adversely affect the
legality, validity or enforceability of this Agreement, the Notes, the other
Loan Documents, or the transactions contemplated hereby and thereby.
(f) The Lenders shall have determined that the Borrowing is consistent
with and permitted by the Budget.
(g) the Lenders shall have received such other approvals, opinions or
documents (including updated legal opinions) which any Lender may reasonably
request.
SECTION 3.3 Payment on First Advance. Upon the funding of the First
Advance under this Agreement, the Borrower shall concurrently pay all accrued
interest due and owing to
18
the Lenders, and such payment shall be effected by means of an offset of such
amount against such first Advance. Upon such payment, the Lenders agree that any
default occasioned by the prior failure to pay such interest shall be waived.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of the Borrower and the
Guarantors. The Borrower, and each Guarantor (as to such Guarantor), represents
and warrants as follows, it being understood by the Borrower and each Guarantor
that the Lenders are relying on such representations and warranties in making
the Advances to the Borrower:
(a) Each (i) is a corporation duly organized, validly existing and in
good standing under the laws of Delaware, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which it owns or
leases property or in which the conduct of its business requires it to so
qualify or be licensed except where failure to be so qualified would not have a
Material Adverse Effect, and (iii) has all requisite corporate power and
authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
(b) Set forth on SCHEDULE 4.1(B) hereto is a complete and accurate list
of all Subsidiaries of each Loan Party, showing as of the date hereof (as to
each such Subsidiary) the jurisdiction of its incorporation, the number of
shares of each class of stock authorized, and the number of shares outstanding,
on the date hereof, and the percentage of the outstanding shares of each such
class owned (directly or indirectly) by such Loan Party on the date hereof and
the number of shares of each of the Subsidiaries covered by all outstanding
options, warrants, rights of conversion or purchase and similar rights at the
date hereof. All of the outstanding capital stock of all of such Subsidiaries
has been validly issued, is fully paid and non-assessable and is owned by such
party or one or more of its Subsidiaries free and clear of all Liens, except
those created by this Agreement and the Loan Documents. Each such Subsidiary (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) is duly qualified and in
good standing as a foreign corporation in each other jurisdiction in which it
owns or leases property or in which the conduct of its business requires it to
so qualify or be licensed except where the failure to be so qualified would not
have a Material Adverse Effect, and (iii) has all requisite corporate power and
authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
(c) The execution, delivery and performance by each Loan Party of this
Agreement, the Notes and each other Loan Document to which it is or is to be a
party, and the other transactions contemplated hereby, are within such Loan
Party's corporate powers, have been duly authorized by all necessary corporate
action, and do not (i) contravene such Loan Party's certificate of incorporation
charter or by-laws, (ii) violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award, (iii) conflict with or
result in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument entered
into after the Filing Date binding on or affecting any Loan
19
Party, any of is Subsidiaries or any of their properties, or (iv) except for the
Liens created by the Collateral Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of any Loan
Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in
violation of any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument, the
violation or breach of which could reasonably be expected to have a Material
Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other third
party is required for (i) the due execution, delivery, recordation, filing or
performance by any Loan Party of this Agreement, the Notes, or any other Loan
Document to which it is or is to be a party, or the other transactions
contemplated hereby and thereby, (ii) the grant by any Loan Party of the Liens
granted by it pursuant to the Collateral Documents, (iii) the perfection or
maintenance of the Liens created by the Collateral Documents (including the
perfected first priority nature thereof), or (iv) the exercise by the Lenders of
their rights under the Loan Documents or the remedies in respect of the
Collateral pursuant to the Collateral Documents and the other Loan Documents,
all applicable waiting periods shall have expired without any action being taken
by any competent authority restraining, preventing, or imposing material adverse
conditions upon this Agreement and the transactions contemplated hereby and by
the other Loan Documents; and no law or regulation shall be applicable that
restrains, prevents or imposes materially adverse conditions upon this Agreement
and the transactions contemplated hereby and by the other Loan Documents.
(e) This Agreement has been, and each of the Notes and each other Loan
Document when delivered hereunder will have been, duly executed and delivered by
each Loan Party which is a party thereto. This Agreement is, and each of the
Notes and each other Loan Document when delivered hereunder will be, the legal,
valid and binding obligation of each Loan Party which is a party thereto,
enforceable against such Loan Party in accordance with its terms. The pledge of
the Collateral pursuant to the Collateral Documents create a valid and perfected
first priority security interest in and Lien on the Collateral, securing the
payment of the Obligations of the Loan Parties hereunder and under the other
Loan Documents, and all actions necessary to perfect and to protect such
security interests have been duly taken.
(f) No information, exhibit or report (whether in writing) furnished by
any Loan Party to the Lenders or any Lender in connection with the negotiation
of the Loan Documents or pursuant to the terms of the Loan Documents contain any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements made therein not misleading.
(g) Other than as set forth in SCHEDULE 4.1(G), there is no action,
suit, investigation, litigation or proceeding affecting any Loan Party or any of
its Subsidiaries, pending or, to the best of the Loan Parties' knowledge,
threatened before any court, governmental agency or arbitrator that (i) could
reasonably be expected to have a Material Adverse Effect or (ii) purports to
affect the legality, validity or enforceability of this Agreement, any Note, or
any other Loan Document or the consummation of the transactions contemplated
hereby and thereby.
20
(h) There are no Liens (including liens or retained security title of
conditional vendors) of any nature whatsoever on any properties of the Borrower
or its Subsidiaries other than Permitted Liens. The Liens granted by the
Borrower and the Guarantors to the Lender pursuant to the Collateral Documents
are duly perfected, valid and subsisting Liens on the Collateral. The Borrower
is not a party to any contract, agreement, lease or instrument the performance
of which, either unconditionally or upon the happening of an event, will result
in or require the creation of a Lien on the property or assets of the Borrower,
other than Permitted Liens, or otherwise result in a violation of any Loan
Document.
(i) Except as set forth on SCHEDULE 4.1(I) and except as set forth in
the Company's Report on Form 10-Q for the period ended June 30, 2001, no Benefit
Plan is or has been in violation in any material respect of any of the
provisions of ERISA or any of the qualification requirements of Section 401(a)
of the Internal Revenue Code within the immediately preceding five year period,
no non-exempt Prohibited Transaction or Reportable Event has occurred with
respect to any Benefit Plan, no Benefit Plan has been the subject of a waiver of
the minimum funding standard under Section 412 of the Internal Revenue Code, no
Benefit Plan has experienced an accumulated funding deficiency under Section 412
of the Internal Revenue Code, no Lien has been imposed upon any Loan Party or
any ERISA Affiliate of such Loan Party under Section 412(n) of the Internal
Revenue Code, no Benefit Plan has been amended in such a way that the security
requirements of Section 401(a)(29) of the Internal Revenue Code apply, no notice
of intent to terminate a Benefit Plan has been distributed to affected parties
or filed with the PBGC under Section 4041 of ERISA, no Benefit Plan has been
terminated under Section 4041(e) of ERISA, the PBGC has not instituted
proceedings to terminate, or appoint a trustee to administer, a Benefit Plan,
and no event has occurred or condition exists which might reasonably constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan and no Loan Party nor any ERISA
Affiliate of any Loan Party would be liable for any amount in the aggregate
pursuant to Sections 4062, 4063 and 4064 of ERISA, if all Benefit Plans
terminated as of the most recent valuation dates of such Benefit Plans, which
would reasonably result in a Material Adverse Effect; no Loan Party nor any
ERISA Affiliate of a Loan Party maintains any employee welfare benefit plan, as
defined in Section 3(1) of ERISA, which provides any benefits to an employee or
the employee's dependents with respect to claims incurred after the employee
separates from service other than as required by applicable law; no Loan Party
nor any ERISA Affiliate of a Loan Party has incurred or expects to incur any
withdrawal liability to any Multiemployer Plan; and none of the above-described
events shall occur which is reasonably likely to result in a Material Adverse
Effect.
(j) The aggregate liability (including, without limitation, the cost of
insurance premiums) based on actuarial calculation with respect to retiree
benefits (as defined in Section 1114 of the Bankruptcy Code) for which the Loan
Parties and their Subsidiaries are liable for on the Company's balance sheet for
June 30, 2001, does not exceed $4,500,000.
(k) The operations and properties of each Loan Party and each of its
Subsidiaries comply in all material respects with all Environmental Laws, all
necessary Environmental Permits have been obtained and are in effect for the
operations and properties of each Loan Party and its Subsidiaries, each Loan
Party and its Subsidiaries are in compliance in all material respects with all
such Environmental Permits, and no circumstances exist that could (i) form the
21
basis of an Environmental Action against any Loan Party or any of its
Subsidiaries or any of their properties that could reasonably be expected to
have a Material Adverse Effect or (ii) cause any such property to be subject to
any restrictions on ownership, occupancy, use or transferability under any
Environmental Law that could reasonably be expected to have a Material Adverse
Effect.
(l) Except as described in SCHEDULE 4.1(G) or as could not reasonably
be expected to have a Material Adverse Effect, none of the properties currently
owned or operated by any Loan Party or any of its Subsidiaries is listed or, to
the best of its knowledge, proposed for listing on the National Priorities List
under CERCLA or on the Comprehensive Environmental Response, Compensation and
Liability Information System maintained by the Environmental Protection Agency
or any analogous state list; no underground storage tanks, as such term is
defined in 42 ▇.▇.▇.▇▇. 6991, are located on any property currently owned or
operated by any Loan Party or any of its Subsidiaries.
(m) Except as could not reasonably be expected to have a Material
Adverse Effect, neither any Loan Party nor any of its Subsidiaries to its
knowledge since January 1, 2000, has transported or arranged for the
transportation of any Hazardous Materials to any location that is listed or
proposed for listing on the National Priorities List under CERCLA or on the
Comprehensive Environmental Response, Compensation and Liability Information
System maintained by the Environmental Protection Agency or any analogous state
list. All Hazardous Materials generated, used, treated, handled, stored at, or
transported to or from, any property currently owned or operated by any Loan
Party or any of its Subsidiaries have been disposed of or otherwise handled in a
manner not reasonably expected to give rise to a Material Adverse Effect.
(n) (i) Except set forth in SCHEDULE 4.1(N), each Loan Party and each
of its Subsidiaries has filed, has caused to be filed or has been included in
all tax returns (Federal, state, local and foreign) required to be filed and
which were correct and complete in all respects and has paid all Taxes and Other
Taxes, together with applicable interest and penalties, other than Taxes and
Other Taxes being contested in good faith and by appropriate proceedings with
respect to which adequate reserves in accordance with GAAP have been set aside
and except to the extent prohibited by the Bankruptcy Code in connection with
the Cases.
(ii) Each Loan Party and each Subsidiary thereof has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(o) Except as set forth in SCHEDULE 4.1(N), no Loan Party nor any
Subsidiary thereof owes any taxing authority any Taxes which are due and which
have not been paid.
(p) Except pursuant to this Agreement and as set forth in Schedule
4.1(p) hereto, Sunshine has no indebtedness in excess of $25,000 other than (1)
secured debt associated with equipment financing of which less than $100,000 is
owed, (2) recurring trade debt which generally is current and no one liability
exceeds $70,000, (3) a liability of $175,000 related to the financing of the
insurance policies listed on Schedule 1.1, (4) the funding obligations referred
to in Section 4.1(j) above; and (5) indebtedness paid in accordance with the
Budget.
22
(q) Except pursuant to this Agreement and as set forth in Schedule
4.1(q) hereto, Metals has no indebtedness in excess of $25,000 other than (1)
indebtedness paid in accordance with the Budget; (2) the funding obligation,
referred to in Section 4.1(j) above; (3) recurring trade debt which generally is
current and no one liability exceeds $70,000.
(r) Except pursuant to this Agreement and as set forth in Schedule
4.1(r) hereto, the Borrower has no indebtedness in excess of $25,000 other than
(1) recurring trade debt which generally is current and no one liability exceeds
$70,000; (2) indebtedness paid in accordance with the Budget; and (3) the
funding obligations referred to in Section 4.1(j).
(s) Set forth on SCHEDULE 4.1(S) hereto is a complete and accurate list
of all real property owned or leased by each Loan Party and its Subsidiaries,
showing as of the date hereof the street address, county or other relevant
jurisdiction, state, and record owner. With respect to each property owned, such
Loan Party has good and marketable title to the property free and clear of all
equities, encumbrances or claims of adverse ownership except for paramount title
of the United States of America with respect to those unpatented mining claims
included in the property in Idaho, and except for Permitted Liens or those
easements and encumbrances listed on SCHEDULE 4.1(S). The easements and
encumbrances listed on SCHEDULE 4.1(S) to which the property is subject, do not
materially effect such Loan Party's use and enjoyment of the property of the
operations conducted thereon. All of the unpatented mining claims included in
the Idaho property have been filed with the Bureau of Land Management pursuant
to Section 314 of the Federal Land Policy and Management Act of 1976 and the
United States has no claim that any unpatented mining claim has been abandoned.
(t) The Borrower is the sole record and beneficial owner of the silver
mine in Argentina known as the "Pirquitas Mine" (as defined in the Argentina
Security Documents) and all real property and personal property relating to the
mining operations thereon, and all rights and permits necessary and/or desirable
to develop and operate the Pirquitas Mine.
(u) Each Loan Party has delivered to the Lenders copies of its
financial statements for the fiscal year ended December 31, 2000. Such financial
statements have been prepared in accordance with GAAP during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of each Loan
Party and its subsidiaries as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(v) Since June 30, 2001, except for the Loan Parties having continued
to operate at a loss consistent with operational losses experienced by the Loan
Parties prior to June 30, 2001, no Material Adverse Effect has occurred or
exists, and no event or circumstance has occurred that with notice or the
passage of time or both is reasonably likely to result in a Material Adverse
Effect with respect to any Loan Party or its subsidiaries.
(w) No Loan Party has liabilities or obligations not disclosed in the
financial statements referred to in paragraph (u) above, other than those
liabilities incurred in the ordinary course of the Company's or its
subsidiaries' respective businesses since December 31, 2000,
23
which liabilities, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Loan Party or its direct or indirect
subsidiaries.
(x) To the best knowledge of each Loan Party, no material event or
circumstance has occurred or exists with respect to such Loan Party or its
direct or indirect subsidiaries or their respective businesses, properties,
prospects, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by Sunshine but which
has not been so publicly announced or disclosed.
(y) No Loan Party is party to any employment agreement which is in
effect.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.1 Affirmative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower and each
Guarantor (as to such Guarantor) will, unless the Lenders shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable U.S.,
state, local or foreign laws, rules, regulations and orders, except where the
failure to comply could not reasonably be expected to have a Material Adverse
Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent and
to the extent permitted or required under the Bankruptcy Code, (i) all Taxes and
Other Taxes, assessments and governmental charges or levies imposed upon it or
upon its property after the Filing Date and (ii) all lawful claims arising after
the Filing Date that, if unpaid, might by law become a Lien upon its property
senior to the Liens in favor of the Lenders; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to pay or discharge any
such Tax, Other Tax, assessment, charge or claim that is being contested in good
faith and by proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to its
property and becomes enforceable against its other creditors.
(c) Compliance with Environmental Laws. Comply, and cause each of its
Subsidiaries and all lessees occupying its properties to comply, in all material
respects, with all Environmental Laws and Environmental Permits applicable to
its operations and properties; obtain and renew all Environmental Permits
necessary for its operations and properties.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which the Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Other than as provided by
the Reorganization Plan, preserve and maintain, and cause each of its
Subsidiaries to preserve and maintain, its corporate existence, rights (charter
and statutory) and franchises; provided,
24
however, that neither the Borrower nor any of its Subsidiaries shall be required
to preserve any right or franchise if the Board of Directors of the Borrower or
such Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Borrower or such Subsidiary, as
the case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lenders.
(f) Visitation Rights. At any reasonable time and from time to time
upon reasonable notice, permit the Lenders, or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and books
of account of, and visit the properties of, the Borrower and any of its
Subsidiaries including, without limitation, the Pirquitas Mine in Argentina and
the Sunshine Mine in Idaho, and to discuss the affairs, finances and accounts of
the Borrower and any of its Subsidiaries with any of their officers or directors
and with their independent certified public accountants.
(g) Keeping of Books. Keep, and cause each of its Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Borrower
and each such Subsidiary in accordance with generally accepted accounting
principles in effect from time to time.
(h) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties that
are used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
(i) Financing Statements, Etc. Promptly furnish to the Lenders (i)
acknowledgment copies or stamped receipt copies of proper financing statements,
duly filed under the Uniform Commercial Code of all jurisdiction that the
Lenders may deem necessary or desirable in order to perfect and protect the
Liens created by the Security Agreement, covering the Collateral described in
the Security Agreement, (ii) completed requests for information listing of such
financing statements and all other effective financing statements filed in the
jurisdictions referred to herein that name the Borrower or any Guarantor as
debtor, together with copies of such other financing statements, and (iii)
evidence of the completion of all other recordings and filings of or with
respect to the Security Agreement that the Lenders may deem necessary or
desirable in order to perfect and protect the Liens created thereby.
(j) Mortgages, Etc. Promptly furnish to the Lenders amended deeds of
trust, trust deeds and mortgages in form and substance reasonably satisfactory
to the Lenders and covering the properties identified in SCHEDULE 5.1(J) hereto
(as amended from time to time in accordance with their terms, the "Mortgages"),
duly executed by the Borrower, together with evidence that all action that the
Lenders may deem necessary or desirable in order to create valid first and
subsisting Liens on the property described in the Mortgages has been taken.
(k) [INTENTIONALLY OMITTED].
(l) Borrower's Account. The Loan Parties shall direct all of their
receivables to be paid to the accounts referred to in the Security Agreement.
(m) Further Assurances, Etc. From time to time, at the expense of the
Borrower, promptly furnish such information respecting the business, condition
(financial or otherwise),
25
operations, performance, properties or prospects of any Loan Party or any of its
Subsidiaries as any Lender may from time to time reasonably request and promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Lenders may reasonable
request.
(n) Budget. The Loan Parties shall comply with the Budget.
SECTION 5.2 Negative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower and each
Guarantor (as to such Guarantor) will not, without the written consent of the
Lenders:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any
of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or
with respect to any of its properties of any character (including, without
limitation, accounts) whether now owned or hereafter acquired, or assign, or
permit any of its Subsidiaries to assign, any accounts or other right to receive
income, excluding, however, from the operation of the foregoing restrictions the
following:
(i) Liens created by the Loan Documents; and
(ii) Permitted Liens.
(b) Debt. Other than Debt permitted by Sections 4.1(p), 4.1(q) and
4.1(r), create, incur, assume or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist, any Debt other than in
the case of the Borrower, the Guarantors and their Subsidiaries, Debt under the
Loan Documents and Debt, the payment of which is made in compliance with the
Budget.
(c) Lease Obligations. Other than leases existing on the date hereof
described on SCHEDULE 5.2(C), create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
obligations as lessee for the rental or hire of real or personal property of any
kind under leases or agreements to lease, other than leases incurred in
compliance with the Budget.
(d) Mergers, Etc. Merge into or consolidate with any Person or permit
any Person to merge into it, or permit any of its Subsidiaries to do so.
(e) Affiliated Transactions. Engage in any transactions with Affiliates
not set forth in the Budget and approved by the Lenders.
(f) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose
of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise
dispose of, any Collateral or any substantial part of its assets other than
Collateral or grant any option or other right to purchase, lease or otherwise
acquire any Collateral, except (i) sales in the ordinary course of its business,
consistent with the past practice, (ii) the sale of the capital stock of Minera
Sunshine de Mexico SA de CV; and (iii) the sale of the assets of the Sunshine
Mine in Kellogg, Idaho.
26
(g) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
retire, defease or otherwise acquire for value any of its capital stock or any
warrants, rights or options to acquire such capital stock, now or hereafter
outstanding, return any capital to its stockholders as such, make any
distribution of assets, capital stock, warrants, rights, options, obligations or
securities to its stockholders as such or issue or sell any capital stock or any
warrants, rights or options to acquire such capital stock, or permit any of its
Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value
any capital stock of the Borrower or any warrants, rights or options to acquire
such capital stock or to issue or sell any capital stock or any warrants, rights
or options to acquire such capital stock.
(h) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(i) Charter Amendments. Amend, or permit any of its Subsidiaries to
amend, its certificate of incorporation or bylaws except pursuant to the
Reorganization Plan.
(j) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or reporting
practices, except as required by generally accepted accounting principles.
(k) Prepayments, Etc. of Debt. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner, or make
any payment in violation of any subordination terms of, any Debt, other than the
prepayment of the Advances in accordance with the terms of this Agreement.
(l) Negative Pledge. Enter into or suffer to exist, or permit any of
its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or
conditioning the creation or assumption of any Lien upon any of its property or
assets other than in favor of the Lenders.
(m) [INTENTIONALLY OMITTED].
(n) [INTENTIONALLY OMITTED].
(o) Investments in Other Persons. Except as set forth on SCHEDULE
5.2(O) or pursuant to the Reorganization Plan, make or permit any of its
Subsidiaries to make, any investment in any Person other than (i) loans and
advances by one Loan Party or its Affiliate to another Loan Party or its
Affiliate in accordance with the Budget and (ii) investments in Cash Equivalents
in accordance with this Agreement and the Budget.
(p) Employment Agreements. Enter into any, or suffer to exist, any
employment agreement.
(q) Issuance of Securities. Issue or permit any of its Subsidiaries to
issue, any securities.
SECTION 5.3 Reporting Requirements. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower and each
Guarantor
27
(as to such Guarantor) will, unless the Lenders otherwise consent in writing,
furnish to the Lenders:
(a) Default Notice. As soon as possible and in any event within two
Business Days after the occurrence of each Default, Event of Default, breach or
nonperformance of any Loan Document or a development which could be reasonably
expected to have a Material Adverse Effect, a statement of the Chief Financial
Officer of the Borrower setting forth details of such event and the action that
the Borrower has taken and proposes to take with respect thereto.
(b) Budget. As soon as available and in any event on the third business
day following the conclusion of the 14th and the last day of each month, a
semi-monthly revised Budget showing sources and uses for the next two months and
historical reconciliation for all weeks from the date of the initial Borrowing.
(c) Monthly Financials. As soon as available and in any event within 12
Business Days after the end of each month, a Consolidated and consolidating (by
operating business) balance sheet of the Borrower, the Guarantors and their
Subsidiaries as of the end of such month and Consolidated and consolidating (by
operating business) statements of income and consolidated cash flows of the
Borrower, the Guarantors and their Subsidiaries for the period commencing at the
end of the previous month and ending with the end of such month, setting forth
in each case a reconciliation all in reasonable detail and duly certified by the
Chief Financial Officer or other financial officer of the Borrower.
(d) Financial Statements, Reports, etc. The Borrower and the Guarantors
shall deliver to each of the Lenders:
(i) Within 90 days after the end of each fiscal year, the
Borrower's consolidated and consolidating balance sheet and related statement of
income and cash flows, showing the financial condition of the Borrower and the
Guarantors on a consolidated and consolidating basis as of the close of such
fiscal year and the results of their respective operations during such year, the
consolidated statement of the Borrower to be audited for the Borrower and its
consolidated Subsidiaries by independent public accountants of recognized
national standing acceptable to the Lenders and accompanied by an opinion of
Sunshine's outside auditors (which shall not be qualified in any material
respect other than with respect to the Cases), and the consolidating statement
to be subject to the auditing procedures applied to such audit of the
consolidated statement, and to be certified by the Chief Financial Officer of
the Borrower to the effect that such consolidated financial statements fairly
present the financial condition and results of operations of the Borrower and
the Guarantors on a consolidated basis in accordance with GAAP consistently
applied;
(ii) within 45 days after the end of each of the first three
fiscal quarters and within 90 days after the end of the fourth fiscal quarter of
each fiscal year, the Borrower's consolidated and consolidating balance sheets
and related statements of income and cash flows, showing the financial condition
of the Borrower and the Guarantors on a consolidated and consolidating basis as
of the close of such fiscal quarter and the results of their operations during
such fiscal quarter and the then elapsed portion of the fiscal year, each
certified by the Chief Financial Officer of the Borrower as fairly presenting
the financial condition and results of
28
operations of the Borrower and the Guarantors on a consolidated and
consolidating basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments;
(iii) concurrently with any delivery of financial statements
under paragraphs (c) and/or (d) (i) or (ii) above, (i) a certificate of the
Chief Financial Officer, certifying such financial statements and certifying
that no Event of Default or event which upon notice or lapse of time or both
would constitute an Event of Default has occurred, or, if such an Event of
Default or event has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto and (ii) a
certificate (which certificate may be limited to accounting matters and disclaim
responsibility for legal interpretations) of Sunshine's outside auditors
accompanying the audited consolidated financial statements delivered under
(d)(i) above certifying that, in the course of the audit of the business of the
Borrower and its consolidated Subsidiaries, such accountants have obtained no
knowledge that an Event of Default has occurred and is continuing, or if, in the
opinion of such accountants, an Event of Default has occurred and is continuing,
specifying the nature thereof and all relevant facts with respect thereto;
(iv) concurrently with any delivery of the Budgets under
paragraphs (b) above, a certificate of the Chief Financial Officer, certifying
such Budget and certifying that no Event of Default or event which upon notice
or lapse of time or both would constitute an Event of Default has occurred, or,
if such Event of Default or event has occurred, specifying the nature and extent
thereof and any corrective actions taken or proposed to be taken with respect
thereto; and
(v) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Guarantor, or compliance with the terms of any material loan or
financing agreements as any Lender may reasonably request.
(e) Litigation. Promptly after knowledge of the commencement thereof,
notice of all actions, suits, investigations, litigation and proceedings before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any Loan Party or any of its
Subsidiaries.
(f) Securities Reports. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports that any Loan
Party or any of its Subsidiaries sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements, that any
Loan Party or any of its Subsidiaries files with the Securities and Exchange
Commission or any governmental authority that may be substituted therefor, or
with any national securities exchange.
(g) Creditor Reports. Promptly after the furnishing thereof, copies of
any statement or report furnished to any other holder of the securities of any
Loan Party or any of its Subsidiaries pursuant to the terms of any indenture,
loan or credit or similar agreement and not otherwise required to be furnished
to the Lenders under this Agreement.
(h) Environmental Conditions. Promptly after the occurrence thereof,
notice of any condition or occurrence on any property of any Loan Party or any
of its Subsidiaries that results
29
in a material noncompliance by any Loan Party or any of its Subsidiaries with
any Environmental Law or Environmental Permit or could (i) form the basis of an
Environmental Action against any Loan Party or any of its Subsidiaries or such
property that could reasonably be expected to have a Material Adverse Effect or
(ii) cause any such property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law that could
reasonably be expected to have Material Adverse Effect.
(i) [INTENTIONALLY OMITTED].
(j) Other Information. Such other information respecting the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any Loan Party or any of its Subsidiaries as any Lender may from
time to time reasonably request.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1 Events of Default. If any of the following events ("Events
of Default") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of, or interest
on, any Advance when the same becomes due and payable (other than accrued
interest due and owing to the Lenders on the date hereof pursuant to First
Amended Credit Agreement) or (ii) any Loan Party shall fail to make any other
payment under any Loan Document within two Business Days after notice that the
same has become due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to have
been incorrect in when made; or
(c) the Borrower shall (i) fail to observe any covenant or term
contained in Section 5.2 of this Agreement or (ii) shall fail to observe any
other term, covenant or agreement contained in this Agreement if such failure
(in the case of clause (ii))shall remain unremedied for five (5) Business Days
after written notice from the Lenders to the Borrowers; or
(d) the Borrower or any Guarantor shall fail to perform or observe any
term, covenant or agreement contained in any other Loan Document on its part to
be performed or observed if such failure shall remain unremedied for 5 days
after written notice thereof shall have been given to the Borrower by any
Lender; or
(e) a judgment is entered against the Borrower or any Guarantor or any
subsidiary thereof for an amount in excess of $50,000;
(f) any default under or acceleration prior to maturity of any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness for money in excess of
$50,000 borrowed by the Borrower or any Guarantor or any subsidiary thereof or
for money in excess of $50,000 borrowed the repayment of which is
30
guaranteed by the Company or any Guarantor or any subsidiary thereof, whether
such indebtedness or guarantee exists or shall be created hereafter.
(g) The Borrower or any Guarantor admits in writing that it is unable
to pay its debts as they become due;
(h) The Borrower or any Guarantor makes a general assignment for the
benefit of any creditors;
(i) a trustee, liquidator or receiver shall be appointed for the
Borrower or any Guarantor or for a substantial part of the Borrower or
Guarantor's property or business without its consent and shall not be discharged
within forty-five (45) days after such appointment; or
(j) any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Borrower or
any Guarantor and shall not be dismissed within forty-five (45) days thereafter;
or
(k) bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings, or relief under any bankruptcy law or any law for the
relief of debt shall be instituted by or against the Borrower or any Guarantor
and, if instituted against the Borrower or any Guarantor shall not be dismissed
within forty-five (45) days after such institution, or the Borrower or any
Guarantor shall by any action or answer approve of, consent to, or acquiesce in
any such proceedings or admit to any material allegations of, or default in
answering a petition filed in any such proceeding; or
(l) any Loan Document after delivery thereof shall for any reason
(other than pursuant to the terms thereof) cease to create a valid and perfected
first priority Lien on the Collateral purported to be covered thereby (subject
only to Permitted Liens); or
(m) the Borrower or the Guarantors shall fail to perform or observe any
covenant or agreement in the agreements or documents attached as Exhibits to the
Reorganization Plan (the "Restructuring Agreements") and such failure continues
for a period of five (5) business days after notice of such failure by the
Lenders; or
(n) there shall occur in the reasonable judgment of the Lenders any
Material Adverse Change after the date hereof, except for the Loan Parties
having continued to operate at a loss consistent with operational losses
experienced by the Loan Parties prior to the date hereof; or
(o) an Environmental Action shall be commenced involving potential
liability or obligations of any Loan Party or any of its Subsidiaries in excess
of $50,000.
then, and in any such event, the Lenders (i) shall or may, by notice to the
Borrower, declare the obligation of each Lender to make Advances to be
terminated, whereupon the same shall forthwith terminate, and (ii) shall or may
(A) by notice to the Borrower, declare the Notes, all interest thereon and all
other amounts payable under this Agreement and the other Loan Documents to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest
31
or further notice of any kind, all of which are hereby expressly waived by the
Borrower and each Guarantor, and (B) exercise any and all rights and remedies
under this Agreement and the other Loan Documents available to the Lenders, and
all other rights and remedies provided under the Uniform Commercial Code of the
applicable jurisdiction and other applicable laws, which rights and remedies
shall be cumulative.
ARTICLE VII
GUARANTY
SECTION 7.1 Guaranty. In consideration of and in order to induce the
Lenders to make the Advances, which actions are reasonably expected to benefit,
directly or indirectly, each Guarantor hereby unconditionally and irrevocably,
jointly and severally, guarantees the punctual payment and performance when due,
whether at stated maturity, by acceleration or otherwise, of all Obligations of
the Borrower now or hereafter existing, whether matured or unmatured, contingent
or liquidated, under this Agreement, the Notes, and each other Loan Document
(including, without limitation, payments in respect of the Advances) whether for
principal, interest, fees, expenses, reimbursement, indemnification or otherwise
(such Obligations being the "Guaranteed Obligations"), and agrees to pay any and
all reasonable costs and expenses (including reasonable counsel fees and
expenses) incurred by the Lenders in connection with enforcing any right under
this Article VII. This guaranty is a guaranty of payment and not of
collectibility, and if any part of the Guaranteed Obligations shall not have
been paid when due and payable, each Guarantor, jointly and severally, agrees
that it will, promptly upon receipt of notice from the Lenders, pay or cause to
be paid to the Lenders such amount thereof as is then due and payable and
unpaid. For purposes hereof, the Guaranteed Obligations shall be due and payable
when and as the same shall be so due and payable under the terms of the Loan
Documents notwithstanding the fact that the collection or enforcement thereof
may be stayed or enjoined under the Bankruptcy Code or other applicable law.
SECTION 7.2 Waivers and Consents. (a) Except for such notices as are
otherwise expressly provided for under this Agreement, each Guarantor consents
to all of the terms and provisions of this Agreement, and waives:
(i) (A) presentment, demand for payment and protest of
non-payment of any of the Guaranteed Obligations, (B) notice of acceptance of
this Guaranty and of presentment, demand, and intent to accelerate and protest,
(C) notice of the existence, creation or incurrence of new or additional
Guaranteed Obligations, (D) notice that any or all Guaranteed Obligations are
due and payable, (E) notice of any and all proceedings to collect the Guaranteed
Obligations from the Borrower or any other Person, and (F) notice of the
exchange, sale or surrender of any security or collateral for the payment of
Guaranteed Obligations;
(ii) (A) demand for performance or observance of any provision
of, or for any enforcement of any provision of, or for any pursuit or exhaustion
of rights or remedies against the Borrower or any other guarantor of the
Guaranteed Obligations or any other Person under this Agreement, any other Loan
Document, or for enforcement of any security for the Guaranteed Obligations, and
any requirements of diligence or promptness on the part of the Lenders in
connection therewith and (B) any and all other demands and notices of every kind
and
32
description to which such Guarantor might be entitled or which may be required
to be given by any statute or rule of law;
(iii) (A) any defense arising by reasons of any claim or
defense based upon an election of remedies by the Lenders that, in any manner,
impairs, affects, reduces, releases, destroys and/or extinguishes its
subrogation rights, rights to proceed against the Borrower, against any other
guarantor of the Guaranteed Obligations or against any other Person or security
and (B) any requirement that the Lenders protect, secure, perfect or insure any
security interest, lien or property subject thereto;
(iv) (A) the revocation or repudiation of any of this
Agreement or any other Loan Document by the Borrower, any other guarantor of the
Guaranteed Obligations or any other Person, (B) the failure of the Lenders to
file or enforce a claim against the estate (either in administration, bankruptcy
or any other proceeding) of the Borrower, any other guarantor of the Guaranteed
Obligations or any other Person, (C) the lack of validity or enforceability in
whole or in part of this Agreement or any other Loan Document or any other
instrument, document or agreement referred to therein or herein;
(v) any taking, application, modification or release of any
Collateral or guaranties for any Guaranteed Obligation, or any failure to
perfect any security interest in, or the taking of or failure to take any other
action with respect to, any Collateral securing payment of the Guaranteed
Obligations; and
(vi) any other circumstances of any kind that might otherwise
constitute a defense (other than the defense of payment) that it may now or
hereafter have with respect to, or a discharge of, this Guaranty.
(b) No delay or omission on the part of the Lenders in exercising any
right or remedy under this Guaranty, this Agreement, or any other Loan Document,
or against any security for the Guaranteed Obligations, shall operate as a
waiver or relinquishment of such right or remedy, and no such waiver whatsoever
shall be valid unless in writing and signed by a duly authorized officer of each
of the Lenders or by its counsel, and then only to the extent therein set forth.
(c) Each Guarantor hereby waives (i) any right to enforce any remedy
which now has or may hereafter have against the Borrower, any other guarantor of
the Guaranteed Obligations or any other Person and (ii) any benefit of, and any
right to participate in, any security or Collateral given to the Lenders to
secure payment of Guaranteed Obligations. Each Guarantor further agrees that any
and all of its claims against the Borrower, any Guarantor, any other guarantor
of the Guaranteed Obligations or any other Person, or against any of their
respective properties, whether arising by reason of any payment by such
Guarantor hereof, or otherwise, shall be subordinate and subject in right or
payment to the prior payment in full of all Guaranteed Obligations.
(d) Each Guarantor hereby grants to the Lenders full power in its sole
discretion, without notice to such Guarantor, such notice being hereby expressly
waived, and without in any way affecting the liability of such Guarantor under
this Guaranty:
33
(i) to waive compliance with, and to consent to any amendment
or change of, any terms of this Agreement or any other Loan Document, or
guaranty of the Guaranteed Obligations, each as amended from time to time;
(ii) to grant any extensions or renewals of the Guaranteed
Obligations, and any other indulgence with respect thereto, and to effect any
release, compromise or settlement with respect thereto; and
(iii) to take security in any form for the Guaranteed
Obligations or any other guaranty thereof, and to consent to the addition to or
the substitution, exchange, release or other disposition of, and to deal in any
other manner with, all or part of any property which may from time to time
secure the Guaranteed Obligations or any other guaranty thereof, whether or not
the property, if any, received upon the exercise of such power shall be of a
character or value the same as or different from the character or value of any
property disposed of.
(e) Each Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty.
(f) EACH GUARANTOR ACKNOWLEDGES THAT THE LENDERS MAY, WITHOUT NOTICE TO
OR DEMAND UPON SUCH GUARANTOR AND WITHOUT AFFECTING THE LIABILITY OF SUCH
GUARANTOR UNDER THIS GUARANTY, FORECLOSE UNDER ANY REAL PROPERTY CONSTITUTING
COLLATERAL BY NONJUDICIAL SALE, AND EACH GUARANTOR HEREBY WAIVES ANY DEFENSE TO
THE RECOVERY BY THE LENDERS AGAINST SUCH GUARANTOR OF ANY DEFICIENCY AFTER SUCH
NONJUDICIAL SALE AND ANY DEFENSE OR BENEFITS THAT MAY BE AFFORDED BY ANY STATUTE
OR LAW IN ANY JURISDICTION HAVING SIMILAR EFFECT.
(g) Each Guarantor hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to any of the Loan Documents, the
transactions contemplated thereby or the actions of the Lenders or any Lender in
the negotiation, administration, performance or enforcement thereof.
(h) Each Guarantor hereby irrevocably waives any claim or other rights
that it may now or hereafter acquire against the Borrower or any other Guarantor
that arise from the existence, payment, performance or enforcement of such
Guarantor's Obligations under this Guaranty or any other Loan Document,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of any Lender against the Borrower or any other Guarantor or any
Collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Borrower or any other Guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right. Each Guarantor
further agrees that any and all of its claims against the Borrower, any other
guarantor of the Guaranteed Obligations or any other Person, or against any of
their respective properties, whether arising by reason of any payment by such
Guarantor to the Lenders pursuant to the provisions hereof, or
34
otherwise, shall be subordinate and subject in right or payment to the prior
payment in full of all Guaranteed Obligations. If any amount shall be paid to
any Guarantor in violation of the first sentence of this Section 7.2 at any time
prior to the later of the payment in full of the Guaranteed Obligations and all
other amounts payable under this Guaranty and the Termination Date, such amount
shall be held in trust for the benefit of the Lenders and shall forthwith be
paid to the Lenders to be credited and applied to the Guaranteed Obligations and
all other amounts payable under the Guaranty, whether matured or unmatured, in
accordance with the terms of the Loan Documents, or to be held as Collateral for
any Guaranteed Obligations or other amounts payable under this Guaranty
thereafter arising.
SECTION 7.3 Information Pertaining to Borrower. This Guaranty is given
at the Borrower's request. Each Guarantor has established adequate means of
obtaining from the Borrower on a continuing basis financial and other
information pertaining to the Borrower's business; and such Guarantor is now and
will be completely familiar with the business, operations and condition of the
Borrower and its assets. Each Guarantor hereby waives and relinquishes any duty
on the part of the Lenders to disclose to such Guarantor any matter, fact or
thing relating to the business, operations or condition of the Borrower or its
assets now known or hereafter known by the Lenders during the life of this
Guaranty. With respect to any Guaranteed Obligations of the Borrower to the
Lenders, no Lender need inquire into the powers of the Borrower or the Persons
acting or purporting to act on its behalf, and any Guaranteed Obligations made
or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
SECTION 7.4 Continuing Guaranty. The Guaranty provided pursuant to this
Article VII shall create a continuing guaranty and shall (i) remain in full
force and effect until the later of the payment in full of the Guaranteed
Obligations and all other amounts payable hereunder and the Termination Date,
(ii) be binding on each Guarantor, and its successors and assigns, and (iii)
inure, together with the rights and remedies of the Lenders hereunder, to the
benefit of and be enforceable by the Lenders, and their respective successors,
transferees and assigns.
SECTION 7.5 Guaranty Absolute. Each Guarantor agrees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Lenders with respect thereto. The Obligations of each Guarantor under this
Agreement are independent of the Guaranteed Obligations, and a separate action
or actions may be brought and prosecuted against any Guarantor to enforce this
Article VII, irrespective of whether any action is brought against the Borrower
or any other Guarantor or whether the Borrower or any other Guarantor is joined
in any such action or actions. Upon the Guaranteed Obligations becoming due and
payable (by acceleration or otherwise), the Lenders shall be entitled to
immediate payment of such Guaranteed Obligations by the Guarantors upon written
demand by the Lenders, without further application to or order of the Bankruptcy
Court. The liability of each Guarantor under this Article VII, and the rights of
the Lenders hereunder, shall be absolute and unconditional, irrespective of: (i)
any lack of validity or enforceability of any Loan Document or any other
agreement or instrument relating thereto; (ii) any change in the time, manner or
place of payment of, or in any other term of, all or any of the Guaranteed
Obligations or any other amendment or waiver or any consent to any departure
from any Loan Document, including, without limitation, any increase in the
Guaranteed Obligations resulting
35
from the extension of additional credit to the Borrower or any of its
Subsidiaries or otherwise; (iii) any taking, exchange, release or non-perfection
of any Collateral, or any taking, release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Guaranteed Obligations;
(iv) any manner of application of Collateral, or proceeds thereof, to all or any
of the Guaranteed Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Guaranteed Obligations or any other assets of
the Borrower or any of its Subsidiaries; (v) any change, restructuring or
termination of the corporate structure or existence of the Borrower, the
Guarantors, or any of their Subsidiaries; or (vi) any other circumstances that
might otherwise constitute a defense available to, or a discharge or, the
Borrower, any Guarantor or a third-party guarantor or grantor of a Lien. The
Guaranty provided hereunder shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of the Guaranteed Obligations or any
other payment provided for hereunder is rescinded or must otherwise be returned
by the Lenders or any Lender upon the insolvency, bankruptcy or reorganization
of any Guarantor or otherwise.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc. No amendment or waiver of any provision of
this Agreement, the Notes, or any other Loan Document, nor consent to any
departure by the Borrower or any other Loan Party therefrom, shall be effective
unless the same shall be in writing and signed by each of the Lenders, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 8.2 Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telegraphic, telecopy, telex or
cable communication) and mailed, telecopied, telexed, cabled or delivered, if to
the Borrower or any Guarantor or Grantor, at the Borrower's address
c/o Evans, ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
attn: ▇▇▇▇ ▇▇▇▇▇;
with a copy to:
Prager, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ PLLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to Highwood at
36
c/▇ ▇▇▇▇▇▇▇ Management Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇
with copies to
Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇, Esq.;
37
if to Stonehill Capital at
Stonehill Capital Management LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
facsimile (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇
with copies to
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
facsimile (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
or, as to each party, at such other address as shall be designated by such party
in a written notice to all other parties that specifically references this
Agreement; this provision thereof, and states clearly that it is a change of
notice address. All such notices and communications shall, when mailed,
telegraphed, telecopied, telexed or cabled, be effective when deposited in the
mails, transmitted by telecopier, confirmed by telex answerback or delivered to
the cable company, respectively, except that notices and communications to the
Lenders shall not be effective until actually received by the Lenders.
SECTION 8.3 No Waiver; Remedies. No failure on the part of any Lender
to exercise, and no delay in exercising, any right hereunder or under any Note
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 8.4 Costs and Expenses. (a) The Borrower agrees to pay on
demand (i) all reasonable costs and expenses of the Lenders in connection with
the preparation, execution, delivery, administration, modification, and
amendment of the Loan Documents (including, without limitation, (A) all
reasonable due diligence, transportation, computer, duplication, appraisal,
audit, insurance, consultant, search, filing and recording fees and expenses and
(B) the reasonable fees and expenses of counsel for the Lenders with respect
thereto, with respect to advising the Lenders as to its rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with any Loan
Party or with other creditors of any Loan Party or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto), (ii) all
reasonable costs and expenses of the Lenders (including fees and expenses of
counsel) incurred in connection with the Cases, and (iii) all reasonable costs
and expenses of the Lenders and the Lenders in connection with the enforcement
of the Loan Documents, whether in
38
any action, suit or litigation, any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally or otherwise (including,
without limitation, the reasonable fees and expenses of counsel for each Lender
with respect thereto). In addition, each Guarantor and Borrower will upon demand
pay to the Lenders the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, that
the Lenders may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Lenders pursuant to Article
VIII or (iv) the failure by such Guarantor or Borrower to perform or observe any
of the provisions of Article VIII.
(b) The Borrower and each Guarantor, jointly and severally, agrees to
indemnify and hold harmless each Lender and each of its Affiliates and their
respective officers, directors, employees, attorneys, agents and advisors (each,
and "Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) this Agreement, the Notes or any other Loan Document, (ii)
the transactions contemplated hereby and thereby, or (iii) the actual or alleged
presence of Hazardous Materials on any property of any Loan Party or any of its
Subsidiaries or any Environmental Action relating in any way to any Loan Party
or any of its Subsidiaries, in each case whether such investigation, litigation
or proceeding is brought by any Loan Party, its directors, shareholders or
creditors or an Indemnified Party or any Indemnified Party is otherwise a party
thereto and whether or not the transactions contemplated hereby are consummated,
except to the extent such claim, damage, loss, liability or expense is found in
a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
The Borrower also agrees not to assert any claim against the Lenders, any of
their Affiliates, or any of their respective directors, partners, officers,
employees, attorneys and agents, on any theory of liability, for special,
indirect, consequential or punitive damages arising out of or otherwise relating
to any of the transactions contemplated herein or in any other Loan Document or
the actual or proposed use of the proceeds of the Advances.
(c) Each Guarantor and the Borrower, jointly and severally, agrees to
indemnify the Lenders from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement or any Collateral
Document, except claims, losses or liabilities resulting from the Lender's gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction.
SECTION 8.5 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, each Lender, and each of its Affiliates, is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law to set off and otherwise apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender or such Affiliate to or for the
credit or the account of the Borrower or any the Loan Party against any and all
of the Obligations of the Borrower or such other Loan Party now or hereafter
existing under this Agreement and the Note
39
or Notes held by such Lender, irrespective of whether such Lender shall have
made any demand under this Agreement or such Note or Notes and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
or such other Loan Party after any such set-off and application; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender and its Affiliates under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender and its Affiliates may
have.
SECTION 8.6 Binding Effect. The representations and warranties in
Section 4.1 of this Agreement shall become binding on the Borrower when the
parties shall have executed this Agreement; the entirety of this Agreement shall
become effective when it shall have been executed by the Borrower and the
Lenders and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Lenders and their respective successors and assigns, except that
neither the Borrower nor any Guarantor any shall have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Lenders.
SECTION 8.7 GOVERNING LAW.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) THE NOTES AND THE ARGENTINE SECURITY DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, OF THE REPUBLIC OF ARGENTINA.
(c) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE ARGENTINE
SECURITY DOCUMENTS OR THE NOTES MAY BE BROUGHT IN ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ OF ARGENTINA AND BY EXECUTION AND DELIVERY OF THE NOTES
AND/OR THE ARGENTINE SECURITY DOCUMENTS, AS APPLICABLE, THE BORROWER AND EACH OF
THE GUARANTORS IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS.
(d) THE BORROWER AND THE GUARANTORS HEREBY IRREVOCABLY WAIVE ANY
OBJECTION THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THE
ARGENTINE SECURITY DOCUMENTS OR THE NOTES BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (C) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(e) THE BORROWER AND EACH OF THE GUARANTORS AGREES TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT
OF OR IN CONNECTION WITH THE NOTES OR THE ARGENTINE SECURITY DOCUMENTS (THE
"PROCEEDINGS"), AS PROVIDED IN (C)
40
ABOVE (WHETHER FOR AN INJUNCTION, SPECIFIC PERFORMANCE, DAMAGES OR OTHERWISE),
NO IMMUNITY (TO THE EXTENT THAT IT MAY AT ANY TIME EXIST) FROM THOSE
PROCEEDINGS, FROM ATTACHMENT (WHETHER IN AID OF EXECUTION, BEFORE JUDGMENT OR
OTHERWISE), OR FROM JUDGMENT SHALL BE CLAIMED BY IT OR ON ITS BEHALF OR WITH
RESPECT TO ITS ASSETS. THE BORROWER AND EACH OF THE GUARANTORS AGREES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, THAT IT IS AND ITS ASSETS ARE, AND SHALL BE,
SUBJECT TO SUCH PROCEEDINGS, ATTACHMENT OR EXECUTION IN RESPECT OF ITS
OBLIGATIONS UNDER THE ARGENTINE SECURITY DOCUMENTS OR THE NOTES TO WHICH IT IS A
PARTY.
SECTION 8.8 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 8.9 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, EACH GUARANTOR,
AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES
OR THE ACTIONS OF THE LENDERS OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THE LOAN DOCUMENTS.
SECTION 8.10 Amendment. This Agreement constitutes an amendment of the
First Amended Credit Agreement and does not constitute a novation.
SECTION 8.11 Limitation on Interest.Regardless of any provision
contained in the Note or any of the other Loan Documents, Lender shall not ever
be entitled to receive, collect, or apply, as interest on the Note, any amount
in excess of the Maximum Lawful Rate, and in the event Lender ever receives,
collects or applies as interest any such excess, such amount which would be
deemed excessive interest shall be deemed a partial pre-payment of principal and
treated hereunder as such; and if the Note is paid in full, any remaining excess
shall promptly be paid to the Borrower. In determining whether or not the
interest paid or payable under any specific contingency exceeds the Maximum
Lawful Rate, the Borrower and the Lender shall, to the extent permitted under
applicable law, (a) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (b) exclude voluntary pre-payments and the
effects thereof, and (c) amortize, prorate, allocate and spread, in equal parts,
the total amount of the interest throughout the entire contemplated term of the
Note, so that the interest rate is the Maximum Lawful Rate throughout the entire
term of the Note; provided, however, that if the unpaid principal balance
thereof is paid and performed in full prior to the end of the full contemplated
term thereof, and if the interest received for the actual period of existence
thereof exceeds the Maximum Lawful Rate, the Lender shall refund to the Borrower
the entire amount of such excess and, in such event, the Lender shall not be
subject to any penalties provided by any
41
laws for contracting for, charging, taking, reserving or receiving interest in
excess of the Maximum Lawful Rate.
SECTION 8.12 Domicile of Lenders.
Lenders hereby represent that they are domiciled in the State of New
York.
42
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SUNSHINE ARGENTINA, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: Chairman
GUARANTORS
SUNSHINE MINING AND REFINING COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: Chairman
SUNSHINE PRECIOUS METALS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: Chairman
SUNSHINE EXPLORATION, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: Chairman
SUNSHINE ARGENTINA GOLD, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Title: Chairman
43
SUNSHINE INTERNATIONAL EXPLORATION
COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
▇▇▇▇▇ RESEARCH AND DEVELOPMENT
CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
SUNSHINE MANAGEMENT, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
MINERA SUNSHINE DE MEXICO SA de CV
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
SUNSHINE PERU, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
44
SUNSHINE GOLD CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
SUNSHINE DIAMOND MINING COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
MINERA SUNSHINE DEL PERU SA
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
▇▇▇▇▇ PETROLEUM OF CANADA, LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
▇▇▇▇▇ RESOURCES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
45
LENDERS
HIGHWOOD PARTNERS, LP
By: Highwood Associates, Inc.
General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
STONEHILL CAPITAL MANAGEMENT LLC
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
46