AMENDMENT NO. 1 TO THE
CREDIT AGREEMENT
Dated as of June 30, 1997
AMENDMENT NO. 1 TO THE CREDIT AGREEMENT among Pegasus Gold,
Inc., a company organized under the laws of British Columbia, Canada
("PGI"), Pegasus Gold Corporation, a Nevada corporation ("PGC"), and
Pegasus Gold Australia Pty Ltd, an Australia corporation ("PGA", and
together with PGI and PGC, the "BORROWERS"), the banks, financial
institutions and other institutional lenders parties to the Credit
Agreement referred to below (collectively, the "LENDERS"), the co-agents
referred to therein and Citibank, N.A., as administrative agent in the
United States and as a collateral agent (the "US ADMINISTRATIVE AGENT")
for the Lenders, Citibank Canada, as administrative agent in Canada and
as a collateral agent (the "CANADIAN ADMINISTRATIVE AGENT") for the
Lenders, and Citibank Limited, as administrative agent in Australia and
as a collateral agent (the "AUSTRALIAN ADMINISTRATIVE AGENT", and
together with the US Administrative Agent and the Canadian
Administrative Agent, the "ADMINISTRATIVE AGENTS") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrowers, the Lenders and the Administrative Agents
have entered into a Multicurrency Reducing Revolving Credit Agreement
dated as of April 17, 1996 (the "CREDIT AGREEMENT"). Capitalized terms
not otherwise defined in this Amendment have the same meanings as
specified in the Credit Agreement.
(2) In accordance with Section 8.01 of the Credit Agreement,
the Borrowers and the Required Lenders have agreed to amend the Credit
Agreement as hereinafter set forth.
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit
Agreement is, effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 3, hereby
amended as follows:
(a) The definition of "EBITDA" in Section 1.01 is amended
in full to read as follows:
"EBITDA" means, with respect to any Person for any period, net
income (or net loss) of such Person for such period PLUS (a) to the
extent deducted in computing such net income (or net loss), the sum
of (i) interest expense, (ii) income tax expense, (iii) depreciation
expense, (iv) amortization expense, (v) non-cash charges related to
asset write downs, revaluations and other similar reductions in the
carrying value of property, plant and equipment and Investments and
(vi) any non-recurring expense paid for by PGI or its Subsidiaries
solely with PGI's common stock, PLUS (b) any refund or release to any
Borrower or Guarantor of contributions described in clause (c)(i)
below, and MINUS (c)(i) contributions made by any Borrower or
Guarantor in connection with Liens permitted pursuant to Section
5.02(a)(viii) or (ix) and (ii) to the extent included in computing
such net income (or net loss), non-recurring gains since January 1,
1997, in each case (other than with respect to clauses (b) and (c)(i)
above) determined in accordance with GAAP for such period.
(b) Section 2.09(c)(ii) is hereby amended by deleting clause (A)
therefrom and replacing it with the following:
(A) except with respect to any Existing Letter of Credit, an issuance
fee, payable in the currency in which the applicable Letter of Credit
is denominated, for each Letter of Credit issued by such Issuing Bank
on or after April 17, 1996, in an amount equal to 0.125% of the
Available Amount of such Letter of Credit calculated and payable (i)
on the date of issuance of such Letter of Credit and (ii) if such
Letter of Credit shall be extended one or more times and remain
outstanding for a period in excess of one (1) year, on each annual
anniversary of the issuance date of any such Letter of Credit,
PROVIDED that such Letter of Credit is outstanding on such anniversary
date (and, with respect to any increase in such Available Amount at
any time, 0.125% of such increase payable on the date of such
increase) and
(c) Section 5.01(j) is hereby amended by adding thereto, immediately
following the word "Affiliates" appearing in the fourth line of such
Section, the words "which are not Loan Parties".
(d) Section 5.01(l) is amended (i) by inserting the words "not
subject to any contingency that may preclude any Borrower from making
delivery or receiving payment thereunder" immediately after the phrase
"Gold Price Hedge Agreement" and (ii) by inserting the words "in cash"
immediately after the phrase "weighted average realized price of gold".
(e) Section 5.02(a) is hereby amended by (i) deleting the word "and"
appearing at the end of Section 5.02(a)(vi), (ii) deleting the period
appearing at the end
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of Section 5.02(a)(vii) and replacing it with a semicolon, and (iii) adding
thereto the following Sections 5.02(a)(viii) and (ix) to read as follows:
(viii) Liens arising under a Trust Agreement, dated as of
October 22, 1996, between PGC, as Grantor, and the Board of Investment
of the State of Montana, as Trustee, and furnished solely for purposes
of compliance with the financial assurances requirements set forth in
Paragraph 44 of the Consent Decree entered September 27, 1996, in the
consolidation of UNITED STATES OF AMERICA, ET AL., V. PEGASUS GOLD
CORPORATION, ET AL., Civil Action No. 95-95-BLG-JDS, and GROS VENTRE
TRIBE, ET AL., V. PEGASUS GOLD INC., ET AL., Civil Action No.
95-96-BLG-JDS, in the United States District Court for the District of
Montana, Billings Division (hereinafter referred to as the "ZORTMAN
CONSENT DECREE"); PROVIDED, HOWEVER, that the aggregate fair market
value of all property subject to such Liens shall not at any time
exceed US$15,000,000 and no such Lien shall extend to cover any
Collateral; and
(ix) Liens securing the obligations of any Borrower or
any Restricted Subsidiary to reimburse the issuer of any surety or
bond required to be furnished under Paragraph 44 of the Zortman
Consent Decree; PROVIDED, HOWEVER, that the aggregate fair market
value of all property subject to such Liens shall not at any time
exceed US$10,000,000 and no such Lien shall extend to cover any
Collateral.
(f) Section 5.03 is amended by inserting at the end thereof a new
Section 5.03(l), to read as follows:
(l) MONTHLY FINANCIALS. As soon as available and in any event
within 30 days after the end of each month from July, 1997 through and
including December, 1997, (i) Consolidated and consolidating balance
sheets of PGI and its Subsidiaries as of the end of such month and
Consolidated and consolidating statements of income and a Consolidated
statement of cash flows of PGI and its Subsidiaries for the period
commencing at the end of the previous Fiscal Year and ending with the
end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the previous
Fiscal Year and (ii) a schedule in form satisfactory to the US
Administrative Agent setting forth the position of the Loan Parties
under all Hedge Agreements, all in reasonable detail and duly certified
by the chief financial officer of PGI.
(g) Section 5.03 is amended by inserting at the end thereof a
new Section 5.03(m), to read as follows:
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(m) MOUNT XXXX REPORT. As soon as available and in any event
within 30 days after the end of each month from July, 1997 through and
including December, 1997, a report on the Mount Xxxx development, in
form and covering subject matter satisfactory to the US Administrative
Agent.
(h) Section 5.03 is amended by inserting at the end thereof a new
Section 5.03(n), to read as follows:
(n) MOUNT XXXX ENGINEERING REPORT. No later than December 15,
1997, an engineering report, from an independent engineering firm
selected by PGI and subject to the approval of the Required Lenders
(such approval not to be unreasonably withheld), in form and covering
subject matter satisfactory to the US Administrative Agent and
prepared on a basis consistent with the feasibility study and
engineering review regarding the Phase II Development provided to the
US Administrative Agent prior to the closing of the Credit Agreement.
(i) Section 5.03 is amended by inserting at the end thereof a
new Section 5.03(o), to read as follows:
(o) OFFICER'S CERTIFICATE. No later than January 30, 1998 and
no earlier than January 2, 1998, (i) a certificate from the chief
financial officer of PGI confirming that, as of December 31, 1997,
subject where applicable to year-end audit adjustments, no Default
has occurred and is continuing or, if a Default has occurred and is
continuing, a statement as to the nature thereof and the action that
the Borrowers have taken and propose to take with respect thereto and
(ii) a schedule setting forth the computations used by such officer
in determining compliance as of December 31, 1997 with the covenants
contained in Sections 5.04(a) through (e); PROVIDED, HOWEVER, that if
such certificate fails to be delivered on January 30, 1998 and any
Administrative Agent shall have notified any Borrower of such failure,
such certificate shall be delivered within three days of such notice.
(j) Section 5.04(b) is amended by deleting the periods September
30, 1997 to December 30, 1997 and December 31, 1997 to March 30, 1998,
and the ratios set opposite such periods, and substituting therefor the
periods and ratios set forth below:
Period Ratios
------ ------
September 30, 1997 to December 30, 1997 6.00 to 1.0
December 31, 1997 5.75 to 1.0
January 1, 1998 to March 30, 1998 5.50 to 1.0
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(k) Section 5.04(c) is amended by deleting the periods
September 30, 1997 to December 30, 1997 and December 31, 1997 to March 30,
1998, and the ratios set opposite such periods, and substituting therefor
the ratios set forth below:
Period Ratios
------ ------
September 30, 1997 to December 30, 1997 2.40 to 1.0
December 31, 1997 2.70 to 1.0
January 1, 1998 to March 30, 1998 3.00 to 1.0
(l) Section 6.01(c) is amended by inserting immediately after
the reference "5.04" therein the phrase "or 5.03(o) (but only if the
three day grace period provided for in the proviso of such Section
5.03(o) shall have expired without delivery of the certificate referred
to therein)".
SECTION 2. ADDITIONAL FEE. If the Borrowers fail to comply
with the covenants set forth in either Section 5.04(b) or 5.04(c) (in
each case such compliance to be determined without giving effect to
Sections 1(j) and 1(k) of this Amendment) with respect to the dates of
September 30, 1997 and December 31, 1997 then, within three Business
Days after the delivery of (i) with respect to any failure to comply
with the covenants applicable as of September 30, 1997, the related
quarterly financial statements delivered in accordance with Section
5.03(b) of the Credit Agreement or (ii) with respect to any failure to
comply with the covenants applicable as of December 31, 1997, the chief
financial officer's certificate delivered in accordance with Section
5.03(o) of the Credit Agreement, as amended hereby, and, in either case,
no later than three Business Days after any such financial statements
are or such certificate is required to be delivered pursuant to such
Section 5.03(b) or such Section 5.03(o), as applicable:
(a) the US Borrower shall pay or cause to be paid to the US
Administrative Agent, for the account of each US Lender,
(b) the Canadian Borrower shall pay or cause to be paid to the
Canadian Administrative Agent, for the account of each Canadian Lender
and
(c) the Australian Borrower shall pay or cause to be paid to
(i) the Australian Administrative Agent, for the account of each
Australian Lender and (ii) each Risk Participant (in consideration of
such Risk Participant's Obligation to purchase such Risk Participant's
Adjusted Pro Rata Share of Australian Borrower Advances)
a fee equal to 0.25% per annum of each such Lender's Revolving Credit
Commitment (as designated pursuant to Section 2.01(e) of the Credit
Agreement) for the fiscal quarter ended on September 30, 1997 or
December 31, 1997, as applicable; PROVIDED, HOWEVER, that if during the
calendar quarter ended September 30, 1997 or December 31, 1997, as
applicable, any
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Borrower is required to pay default rate interest in accordance with
Section 2.08(c) of the Credit Agreement, the fee payable on such date in
accordance with this Section shall be reduced PRO RATA, based on the
number of days occuring in such calendar quarter on which such default
rate shall be payable; PROVIDED FURTHER that if year-end audit
adjustments show that the Borrowers were not in compliance with the
covenants referred to above in this Section 2, the Borrowers shall
immediately notify the US Administrative Agent of such non-compliance
and the Borrowers shall pay the fees provided for in this Section 2
within three Business Days of when such notice was or should have been
sent.
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall
become effective as of the date first above written when, and only when,
on or before August 15, 1997 the Borrowers shall have paid to the US
Administrative Agent for the account of the Lenders (other than the
Non-Pro Rata Lender) a fee equal to 0.05% of the aggregate amount of the
Revolving Credit Commitments, and the US Administrative Agent shall have
received counterparts of this Amendment executed by the Borrowers and
the Required Lenders or, as to any of the Lenders, advice satisfactory
to the US Administrative Agent that such Lender has executed this
Amendment, and the consent attached hereto executed by each Guarantor
and each Pledgor.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS.
Each Borrower represents and warrants as follows:
(a) Each Loan Party is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, continuance or amalgamation.
(b) The execution, delivery and performance by each Borrower
of this Amendment and the Credit Agreement, as amended hereby, are
within such Borrower's corporate powers, have been duly authorized by
all necessary corporate action, and do not (i) contravene such
Borrower's charter or bylaws or other constituent documents, (ii)
violate any foreign or domestic law (including, without limitation, the
Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970), rule,
regulation (including, without limitation, Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System), order, writ,
judgment, injunction, decree, determination or award applicable to any
Borrower, (iii) result in the breach of any material provision of, or
constitute a default under, any material contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument binding on
or affecting any Borrower or any of their properties or (iv) except for
the Liens created under the Loan 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. No Loan Party 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 would reasonably be
expected to have a Material
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Adverse Effect. No Borrower is entering into this Amendment in the
capacity of a trustee of any trust or settlement. Each Loan Party
benefits by executing the Loan Documents to which it is a party and the
interest, fees and other amounts payable hereunder are fair and
reasonable. Each Loan Party incorporated in Australia has complied with
Section 289 of the Australian Corporations Law since the later of the
date of its incorporation and January 1, 1993.
(c) No consent of any other Person and no authorization or
approval or other action by, and no notice to or filing with, any
foreign or domestic governmental authority or regulatory body or any
other third party is required for the due execution, delivery or
performance by any Borrower of this Amendment or the Credit Agreement,
as amended hereby.
(d) This Amendment has been duly executed and delivered by
each Borrower. This Amendment and the Credit Agreement, as amended
hereby, are the legal, valid and binding obligation of each Borrower,
enforceable against such Borrower in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles.
(e) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party, including any Environmental Action,
pending or, to the best knowledge of any Borrower, threatened before any
court, governmental agency or arbitrator that (i) would reasonably be
expected to have a Material Adverse Effect, or (ii) purports to affect
the legality, validity or enforceability of this Amendment or the Credit
Agreement, as amended hereby.
SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS . (a) On
and after the effectiveness of this Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof" or words of
like import referring to the Credit Agreement, and each reference in the
Notes and each of the other Loan Documents to "the Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement, shall mean and be a reference to the Credit Agreement, as
amended by this Amendment.
(b) The Credit Agreement, as specifically amended by this
Amendment, the Notes and each of the other Loan Documents are and shall
continue to be in full force and effect and are hereby in all respects
ratified and confirmed. Without limiting the generality of the
foregoing, the Collateral Documents and all of the Collateral described
therein do and shall continue to secure the payment of all Obligations
of the Loan Parties under the Loan Documents, in each case as amended by
this Amendment.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any
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Lender or any Administrative Agent under the Credit Agreement, nor
constitute a waiver of any provision of the Credit Agreement.
SECTION 6. COSTS, EXPENSES AND TAXES. The Borrowers agree to
pay on demand all costs and expenses of the Administrative Agents in
connection with the preparation, execution, delivery and administration,
modification and amendment of this Amendment and the other instruments
and documents to be delivered hereunder (including, without limitation,
the reasonable fees and expenses of counsel for the Administrative
Agents) in accordance with the terms of Section 8.04 of the Credit
Agreement. In addition, the Borrowers shall pay any and all stamp and
other taxes payable or determined to be payable in connection with the
execution and delivery of this Amendment and the other instruments and
documents to be delivered hereunder, and agrees to save the
Administrative Agents and each Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment 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 but
one and the same agreement. Delivery of an executed counterpart of a
signature page to this Amendment by telecopier shall be effective as
delivery of a manually executed counterpart of this Amendment.
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SECTION 8. GOVERNING LAW. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
