Exhibit 10-5
XXXXXXX ASSOCIATES, L.P.
000 Xxxxx Xxxxxx - 00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
May 5, 1999
Golden Star Resources Ltd.
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxx
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Credit Facility Letter
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Dear Sirs:
You have advised that you intend to acquire (the "Acquisition") together with
Anvil Mining NL ("Anvil") of Australia a 90% interest in Bogoso Gold Mine Ltd.,
a Ghanaian company ("BGL"), which operates the Bogoso gold mine in Ghana, in a
transaction pursuant to which you would acquire for a total consideration of
approximately US$12 million and certain other conditional payments (i) 90% of
the capital stock of BGL, with the State of Ghana retaining a 10% interest, and
(ii) 100% of the approximately US$34 million in debt owed by BGL to a consortium
of banks represented by the International Finance Corporation ("IFC").
We understand it is currently your intention to raise the funds required to
effect the Acquisition and to pay the costs and expenses related thereto through
(i) the issuance and sale to the public and/or private investors of your common
shares or special warrants and/or (ii) borrowings under newly arranged senior
credit facilities.
In connection with the foregoing, we are pleased to advise you that subject to
the approval by the Government of Ghana of the Acquisition, the closing of the
Acquisition and the completion of all loan documentation with respect to the
credit facility contemplated hereby in form and substance reasonably
satisfactory to us, we hereby grant you the option to have us (directly or
through one or more of our designees) establish on the closing date a credit
facility (the "Credit Facility") in a principal amount not to exceed US$12
million having the terms set forth in Exhibit A attached hereto. You hereby
agree that the Credit Facility shall be used solely to complete the Acquisition.
You have advised us that our commitment hereunder (the "Commitment") is a
condition precedent to the signing of a definitive purchase agreement in
connection with the Acquisition (the "Acquisition Agreement"). You have also
advised us that , subject to the other provisions of this letter, a copy of this
letter (the "Credit Facility Letter") will be provided to IFC as representative
of the consortium of banks involved in the Acquisition and that IFC and the
banks will rely on the Credit Facility Letter as comfort that there will be
funds available to close the Acquisition if the approval of the Government of
Ghana of the Acquisition is obtained.
You hereby agree to compensate us for the Commitment in accordance with the
provisions of that certain Premium Letter Agreement, dated as of the date
hereof, between us, a copy of which is attached as Exhibit B hereto.
In connection with the services and transactions contemplated hereby, you agree
that we will be permitted access, or use of, any information concerning the
Acquisition and BGL which may come into your possession. We hereby acknowledge
that you are bound by the terms of a confidentiality agreement with respect to
such information (a copy of which has been delivered to us) and agree to abide
by such terms. We will treat any and all confidential information relating to
the Acquisition and BGL transmitted to us with the same degree of care you are
held to under the confidentiality agreement mentioned above, provided that we
shall not be bound by any confidentiality, noncompetition or noncircumvention
covenant following either the termination of our obligation to establish the
Credit Facility or the closing of the Acquisition (with Anvil Mining's
participation).
The Commitment may not be assigned by you and nothing in this Credit Facility
Letter, express or implied, shall give any person other than you any benefit or
any legal or equitable right, remedy or claim under this Credit Facility Letter.
We hereby acknowledge that you make no representation or warranty as to the
accuracy or completeness of any information or materials provided to us in
connection with our evaluation of the credit risk associated with the matters
contemplated hereby.
This Credit Facility Letter (including the exhibits hereto) sets forth the
entire agreement of the parties as to the scope of the Credit Facility Letter
and our respective obligations hereunder. The Commitment will expire upon the
earliest of (i) the closing of the Acquisition without the use of the Credit
Facility, (ii) the termination of the Acquisition Agreement, (iii) the failure
of any party to the Acquisition Agreement to sign and deliver it on or prior to
June 1, 1999, or (iv) on the 130th day after execution of the Acquisition
Agreement.
This Credit Facility Letter shall be governed by, and construed in accordance
with, the laws of the State of New York as applied to agreements made and
performed within such state without giving effect to principles of conflict of
laws thereof. Any action arising hereunder or under the Premium Letter may be
brought in the Federal and State courts located in New York County, New York,
and each party hereby consents to the non-exclusive jurisdiction and venue of
such courts and to service of process by certified mail, return receipt
requested (which shall constitute "personal service").
Please indicate your acceptance of our Commitment and your agreement to the
matters contained in this Credit Facility Letter (including the exhibits
thereto) by executing a copy of this letter and returning it to us prior to 5:00
PM, Eastern daylight time, on May 5, 1999.
XXXXXXX ASSOCIATES, L.P.
By: /s/ Xxxx Xxxxxx
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General Partner
ACCEPTED AND AGREED TO:
GOLDEN STAR RESOURCES LTD.
By: /s/ Xxxxx X. Xxxxx
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CEO and President
EXHIBIT A
May 5, 1999
Standby Credit Facility for the Purchase of Bogoso Gold Limited by
Golden Star Resources Ltd.
Borrower A special purpose subsidiary of Golden Star
Resources Ltd., a Canadian corporation (the
"Borrower"). Golden Star Resources will provide
a corporate guarantee for any borrowing under
the Credit Facility and the Credit Facility
loan will have full recourse back to Golden
Star Resources.
Xxxxxx Xxxxxxx Associates, L.P., Westgate
International, L.P. and/or related parties
(collectively the "Lender")
Facility Lender agrees to provide a U.S. dollar standby
credit facility (the "Credit Facility") to the
Borrower for the purchase of certain debt and
shares of BGL, a Ghanaian company which owns
and operates the Bogoso gold mine in Ghana (the
"Acquisition")
Acquisition The Acquisition of BGL shall be effected
through the purchase of at least 90% of the
common shares and 100% of the IFC and DEG debt
of BGL. Upon closing of the Credit Facility,
Golden Star shall directly or indirectly own a
majority of the outstanding equity of BGL. The
final contract for the Acquisition will include
a provision whereby operating profit after
April 1 will be for the account of Golden Star.
Facility Limit US$12 million. Only one drawdown will be
permitted.
Conditions Precedent to The Borrower shall have the right to draw down
Drawdown all or any portion of the facility upon the
closing of the Acquisition, but not earlier
than May 21, subject to the following: Material
Adverse Change clause and Force Majeure clause
consistent with proposed purchase agreement
between Golden Star and the bank syndicate
group. Xxxxxxxx must deliver favorable legal
opinions of U.S., Canadian, Ghanaian (and other
jurisdiction, if needed) counsel as to
customary matters including with respect to
validity of first priority liens, regulatory
approvals, Regulation U compliance, usury
issues and currency controls. All applicable
governmental and regulatory approvals must be
obtained prior to each of warrant issuance and
funding. Anvil Mining's written consent to all
aspects of the Credit Facility must be
obtained.
Estimated Closing Date of the July 31, 1999
Acquisition
Security First ranking charge over the assets of BGL
(including, without limitation, the mine lease
and accounts receivable) and pledge of the
common stock and debt of BGL held directly or
indirectly by Golden Star and Anvil Mining.
Repayment The Borrower or Golden Star may repay all or
any portion of the principal (with all accrued
interest thereon) at any time without penalty.
Mandatory repayment of the facility will begin
60 days after closing and will be made in 12
equal monthly installments, based on the
principal amount outstanding 59 days after
drawdown, thereafter, subject to a maximum of
US$750,000 per month of principal (excluding
accrued interest). Any principal balance still
outstanding after this time will be paid in
full, with accrued interest, within 7 days
following the final monthly repayment.
Beginning 60 days after drawdown, any early
repayments made will be credited against the
latest dated scheduled repayments.
Interest Rate 15% per annum compounded monthly on the
outstanding principal and interest thereon,
paid monthly in arrears. In the event of a
default, interest will accrue on the
outstanding balance at a rate of 25% per annum
until such default is cured.
Equity Golden Star will issue common stock purchase
warrants ("Warrants") per separate
agreement.
Exercise of Warrants Golden Star will permit cashless exercise of
Warrant Expiry Date the Warrants through loan reduction.
Callability of Warrants Three years from the date of issuance.
If at any time beginning 12 months after
issuance or most recent price reset, the
closing price for GSR on Amex for 30
consecutive trading days is greater than 200%
of the exercise price of the Warrants, then 50%
of the Warrants will be callable by the Company
on 30 days notice. If at any time beginning 24
months after issuance or most recent price
reset, the closing price for GSR on Amex for 30
consecutive trading days is greater than 250%
of the exercise price of the Warrants, then 50%
of the Warrants will be callable by the Company
on 30 days notice. This call provision shall
not restrict the Lender from exercising the
Warrants at any time including during the call
notice period. The 50% shall refer to a
percentage of the number of Warrants originally
issued.
Warrant Terms The Warrants will contain customary anti-
dilution adjustments for reorganization, stock
dividends, stock splits, etc. If within 6
months of the date of issuance of the Warrants
or at any time that more than US$1 is
outstanding under this Credit Facility, in the
event of an issuance of common shares and/or
rights and/or warrants (either individually or
as a unit) by Golden Star at a discrete or
implied (in the case of a unit) price below 95%
of the strike price of the Warrants (excluding
an aggregate issuance(s) of up to 1% of the
outstanding Golden Star common shares pursuant
to director, officer and employee stock option
or stock bonus plans ("Plans")), then the
strike price of the Warrants will, at Lender's
option, be reset to a price equal to the
discrete or implied (in the case of a unit)
issuance price of such common shares, rights or
warrants. If, however, regulatory conditions
imposed upon any such reset (e.g., reduction in
the reset or a shortening of the exercise
period) renders the reset unsatisfactory to
Lender, Lender may instead elect to receive in
lieu thereof (i) cash in an amount equal to the
number of Warrants held multiplied by the
excess of the actual strike price over the
intended reset strike price, or (ii) if
regulatory approval is again denied, such other
consideration as will afford the Lender
reasonably equivalent value to such reset.
Golden Star shall be required to register (or
establish free tradeability) and list the
underlying common shares in the US and Canada
by the earlier of (a) the registration of any
other common shares (excluding any registration
of Plan shares on Form S-8), or (b) 180 days
following the closing or abandonment of the
Acquisition. The penalty with respect to any
registration failure will be cash per month of
3% of the aggregate value of the common stock
to be registered. However, provided the shares
have been properly registered or are freely
tradeable on the American Stock Exchange but
not the Toronto Stock Exchange, then the
penalty will be cash per month of 1% of the
aggregate value of the common stock to be
registered.
Production Bonus Payment Whether or not the Credit Facility is
established or used, for every continuous 12
month period (the "Production Interval") during
the first 72 months following the Acquisition
that total production from the Bogoso mine
concession is greater than 75,000 ounces, the
Lender will receive a cash payment of
US$250,000 with maximum payments over time
totaling not more than US$1,250,000. Production
Intervals will not represent fixed date time
but rather non-overlapping continuous 12 month
periods constructed to be most favorable to the
Lender in determining amounts due to the Lender
under this provision. Such cash payments will
be payable by the Borrower within 12 months
following the end of the Production Interval.
For example, if during the Production Interval
of July 1, 1999 to June 30, 2000, mine
production is greater than 75,000 ounces, the
Borrower would be required to pay to the Lender
US$250,000 before June 30, 2001. In the event
that the direct or indirect ownership of the
mine by GSR drops below
50%, then any remaining maximum payments,
including any unearned amounts, due under the
Production Bonus will become immediately due
and payable. Provided, however, if Golden Star,
in a single transaction, sells 100% of its
interest in the Bogoso mine concession, either
through a sale of stock or the asset, then any
unearned amounts due under the previous
sentence will be capped at 50% of the proceeds
of such transaction. For example, if Golden
Star sells its entire stake in the mine for
$300,000 and $500,000 of potential payments
remain to be earned under the Production Bonus,
then the Lender's payments will be capped at
$150,000. This cap does not refer, in any way,
to any amounts previously earned, but not yet
paid, under the Production Bonus. Such earned
payments will still be due in full and will
have no effect on calculations with regard to
the payments cap.
Gold Price Protection Program The Borrower or Golden Star will use its
reasonable best efforts to put in place a gold
price protection program, in a form reasonably
acceptable to the Lender, sufficient to cover
75% of mine production for the anticipated 13
month life of the loan, to be in place within
15 days of the closing under the Credit
Facility. The Borrower or Golden Star will
communicate with the Lender as to the status of
such program.
Representations and Warranties Customary for this type of transaction.
Affirmative Covenants Customary for this type of transaction.
Negative Covenants No senior or pari passu indebtedness or liens
at any level. The only permitted distributions
or existing debt repayments, at any level, will
be (a) to make payments, both principal and
interest, in connection with the Credit
Facility, (b) to make payments, both principal
and interest, with respect to outstanding debt
in connection with the Omai Mine (but not to
make distributions for such purpose), and (c)
provided the Borrower places and keeps in
escrow, monies sufficient to make principal and
interest payments for 2 payment periods, then
the Borrower will be allowed to make
distributions to Golden Star to fund expenses
in the ordinary course of business. For as long
as the principal amount outstanding under the
Credit Facility is greater than $6 million, for
any non-ordinary course asset sales by Golden
Star, 75% of the proceeds from such sales will
be used to repay principal outstanding under
the Credit Facility.
Other customary for this type of transaction.
Events of Default Customary for this type of transaction,
including any failure of first priority
security.
EXHIBIT B
GOLDEN STAR RESOURCES LTD.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
May 5 1999
Xxxxxxx Associates, L. P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxx Xxxxxxx
Dear Sirs:
We refer to the Credit Facility Letter, dated the date hereof (the "Credit
Facility Letter"), regarding a proposed loan to be made by you to us in a
principal amount not to exceed US$12 million. Capitalized terms used herein,
unless otherwise defined, have the meanings ascribed to them in the Credit
Facility Letter.
We hereby agree to pay you in immediately available funds (i) upon execution of
the Credit Facility Letter, a non-refundable option premium (the "Premium") of
US$250,000 and (ii) upon closing of the Acquisition (or any transaction whereby
we directly or indirectly acquire an ownership position in the Bogoso Mine), a
non-refundable additional interest payment (the "Funding Payment") of
US$250,000. Upon execution of an agreement for such an acquisition (the
"Acquisition Agreement"), we shall deposit with you the sum of US$50,000 to be
credited against any fees and expenses incurred by you with respect to entering
into the Credit Facility Letter.
Within 10 days of the execution of the Acquisition Agreement by all of the
parties, you will also have the right to receive 1,500,000 common share purchase
warrants (the "Warrants"). Upon closing of the Credit Facility, you will also
have the right to receive that number of common share purchase warrants (the
"Additional Warrants") which is equal to 3,000,000 multiplied by the ratio of
(a) the amount of the Credit Facility drawn down divided by (b) US$12 million,
less 1,500,000. Each Warrant and Additional Warrant will entitle you to
subscribe for and purchase from Golden Star Resources Ltd. ("Golden Star") one
common share of Golden Star at an exercise price which is equal to the weighted
average of the closing prices of Golden Star shares on the American Stock
Exchange for the ten trading days immediately preceding their issuance and will
have the terms and conditions set forth in Exhibit A to the Credit Facility.
(If any regulatory body does not permit the issuance of any such Warrants or
Additional Warrants, it shall constitute a breach.)
Upon closing of the Acquisition, you will also become entitled to be paid at
certain times certain amounts as production bonus payments in accordance with
the terms and conditions set forth in Exhibit A to the Credit Facility Letter.
We hereby agree to reimburse you promptly upon demand for all reasonable out-of-
pocket costs and expenses incurred by you in connection with the negotiation and
entry into, and the transactions
contemplated by the Credit Facility Letter (including, without limitation,
consultant's fees and US, Canadian, Ghanaian and other counsel fees), whether or
not the Acquisition is consummated.
This Letter Agreement and the terms and conditions contained herein shall not be
disclosed by any party to any person or entity (except such of our agents and
representatives on a need to know basis if they agree to be bound by the
provisions of this paragraph).
We may not assign any of our rights or be relieved of our obligations hereunder
without your prior written consent.
This Letter Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of laws thereof.
If you are in agreement with the foregoing, kindly sign and return to us the
enclosed copy of this Letter Agreement.
GOLDEN STAR RESOURCES LTD.
By: /s/ Xxxxx X. Xxxxx
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AGREED TO AND ACCEPTED
this 5/th/ day of May, 1999
XXXXXXX ASSOCIATES, L.P.
By: /s/ Xxxx Xxxxxx
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