SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 11,
1996
____________________
USMX, INC.
(Exact name of registrant as specified in its charter)
____________________
Delaware 0-9370 84-1076625
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) No.)
141 Union Boulevard,
Suite 100
Lakewood, Colorado 80228
(Address of principal (Zip Code)
executive offices)
(303) 985-4665
Registrant's telephone number, including area code
<PAGE>
Item 2. Acquisition or Disposition of Assets.
(a) Effective July 11, 1996, the Company acquired
leasehold and other property interests in the
Illinois Creek Project in north central Alaska from
North Pacific Mining Corporation ("NPMC"). The
Company made initial payments to NPMC totaling
$100,000 in 1994 to evaluate the Illinois Creek
property. The Company entered into an agreement
with NPMC effective December 16, 1994, which was
amended on February 5, 1996 (the "Agreement").
Pursuant to the Agreement, the Company agreed to
make a $1,000,000 non-refundable payment to NPMC in
cash or shares of the Company's $.001 par value
common stock (the "Common Stock"). The Company
elected to make the payment in Common Stock, and
based upon an average market price of the Common
Stock on The Nasdaq Stock Market as provided in the
Agreement, the Company was required to issue to NPMC
449,754 shares. The Company also agreed that, upon
obtaining the necessary permits and if no material
adverse economic change had occurred, the Company
would make a production decision and issue to NPMC
an additional $3,000,000 in cash or Common Stock.
The Company received the key permits related to the
Project, and determined that no material adverse
economic change had occurred with respect to the
Project economics. The Company made a production
decision and agreed to issue to NPMC an additional
1,090,909 shares of Common Stock. The calculation
of the number of shares was based on the average
market price of the Common Stock on The Nasdaq Stock
Market as provided in the Agreement.
Effective July 11, 1996, the Company issued the
aggregate of 1,540,663 shares of Common Stock to
NPMC. As a result of this transaction, NPMC owns
approximately 9.5% of the Company's issued and
outstanding Common Stock. The Company also granted
a security interest to NPMC in the property, which
is subject to a subordination arrangement with the
Company's lender on this Project. See Item 5 below
for a description of this facility. The Company had
also agreed with NPMC in the Agreement to file a
Registration Statement relating to the resale of
these shares, which Registration Statement has been
filed and declared effective by the Securities and
Exchange Commission. The Company has agreed to use
its best efforts to keep this Registration Statement
effective until NPMC has sold these shares or until
June 1999.
In addition to the Common Stock, NPMC had the
right to enter into a mining venture agreement with
the Company in which the Company would transfer to
NPMC an undivided 25% interest in the Illinois Creek
Mining Leases, or to receive a 5% net returns
royalty. NPMC chose to receive a 5% net returns
royalty on production from the Illinois Creek Upland
Mining Lease. No decision has been made regarding
the property covered by the Illinois Creek Roundtop
Mining Lease, which area has not yet been explored
by the Company.
<PAGE>
If the Company delineates the existence of
additional ore reserves on the lease known as the
Illinois Creek Upland Mining Lease, which increases
the total proven ore reserves to at least 1,000,000
ounces of equivalent gold ore reserves beyond the
mineralization stated in the Company's February 1996
feasibility report, then NPMC will have the right to
elect to participate in subsequent mining operations
with respect to those additional reserves for a 25%
working interest by reimbursing the Company 120% of
NPMC's 25% share of exploration, development and
capital costs incurred by the Company subsequent to
February 1996 which are directly related to
delineation and/or production of the additional
reserves.
Pursuant to the Agreement, the Company has
until December 16, 1997, to achieve "commercial
production" which is defined as the delivery to a
bona fide purchaser of minerals produced for a
minimum period of 45 consecutive days at not less
than 70% of the pro forma production capacity as set
forth in the Project feasibility report. This
period may be extended at the option of the Company
for two additional one-year periods upon payment by
the Company of a $300,000 advance royalty, adjusted
for inflation, for each one-year extension. The
Agreement terminates on December 16, 1999, if the
Company has not achieved commercial production by
that date.
NPMC is a wholly-owned subsidiary of Cook Inlet
Region, Inc., an Alaska Native Regional Corporation
("CIRI"). Except for the transactions involving the
Illinois Creek Project, the Company has not had any
material relationship with NPMC or CIRI and the
Company is unaware of any material relationship
between the Company's affiliates, any director or
officer of the Company, or any associate of any such
director or officer, with NPMC or CIRI.
The Company has transferred its property
interest in the Project to its wholly-owned
subsidiary, USMX of Alaska, Inc. ("AK"). The
Company intends to use its internal cash resources
and the proceeds from borrowings to finance the
development and construction costs of the Project.
See Item 5 for a discussion of the Company's
borrowings from N M Rothschild & Sons Limited.
(b) The Property acquired from NPMC consisted
principally of leasehold interests in the Illinois
Creek Project. The Company has conducted
exploration activities at the site since 1994. The
Company has received all necessary regulatory
authorization and has commenced construction of the
mining, processing and related facilities. It is
the Company's goal to commence mining in late
summer, 1996. The Company expects to conduct gold
and silver mining operations on this property.
<PAGE>
Item 5. Other Events
(a) Effective July 11, 1996, the Company
entered into credit agreements with N M Rothschild &
Sons Limited (the "Lender") for a $22,000,000
facility to finance the development and construction
costs of the Illinois Creek Project (the "Project").
The Company's wholly-owned subsidiary, AK, is the
borrower of $19.5 million of the $22 million
facility. Under certain circumstances, the loan to
AK may be in the form of a gold loan, in which event
the maximum credit amount would be the number of
ounces of gold equal to $19,500,000 divided by the
price of gold in London. However, the Company has
agreed with NPMC that it will not convert the loan
to a gold loan until such time as the Project has
achieved commercial production as defined in the
Agreement with NPMC. See Item 2. Advances will be
made by the Lender solely to an account dedicated to
Project operations and only if certain conditions
related principally to Project operations are
satisfactory to the Lender. In addition, AK will be
required to maintain a minimum balance in the
Proceeds Account equal to the sum of: (I) the
greater of $1,500,000 or a formula amount based on
the present value of future net cash flow from the
Project, (II) the lesser of $250,000 or interest
payable to the Lender for the following three
months, (III) capital expenditures scheduled for the
following three months and, (IV) any other payments
due to the Lender for the following three months.
It is expected that AK will need to deposit
approximately $1,500,000 for deposit in the Proceeds
Account by September 30, 1996, to maintain the
minimum balance. The Company has agreed to make a
$1,500,000 equity contribution to AK by that date.
AK will not be able to make withdrawals from
the Proceeds Account for its general corporate
purposes or to pay dividends until "Completion" has
occurred. The requirements for Completion include
the construction of the Project facilities, which
facilities and the equipment thereon must be
mechanically complete and electrically operable
("Mechanical Completion"), the achievement of
production amounts and grades, costs and reserves
similar to the development plan, and the absence of
any default in the credit agreement. The note
evidencing the $19.5 million obligation bears
interest, payable quarterly, at 2.25% above LIBOR
until Completion and 1.875% thereafter for the
remainder of the approximate four-year term of the
loan. Principal payments will be made in eight
amortized installments on September 30 and December
31 of each year, commencing September 30, 1997.
Subject to satisfaction of the requirements for
maintenance of the Proceeds Account, advances will
be made by the Lender to AK until the first to occur
of September 30, 1997, or Mechanical Completion. AK
paid an establishment fee of $292,500 to the Lender.
AK will also be required to pay a commitment fee of
one-half of one percent of the difference between
the principal amount outstanding and the maximum
credit amount.
<PAGE>
The balance of the facility is represented by a
$2.5 million note made by the Company which may be
converted into Common Stock at the conversion price
of $3.40 per share at the option of the Lender at
any time during the approximate four-year term of
the note. The Company may also require conversion
if the note is not in default and the daily closing
price of the Common Stock exceeds $4.75 for 30
consecutive trading days. A total of 735,294 shares
of Common Stock (subject to adjustment for certain
events) is reserved for issuance by the Company upon
conversion of the $2.5 million loan. The Company
has also agreed to register the Common Stock for
resale under certain circumstances. During the term
of the convertible note evidencing this loan, the
Lender will have the opportunity to profit from an
increase in the market price of the Common Stock
with resulting dilution to the holders of Common
Stock. The existence of such convertible securities
may adversely affect the terms on which the Company
can obtain additional financing, and the holders of
such convertible note can be expected to convert the
securities at a time when the Company may be able to
obtain additional capital by offering shares of the
Common Stock on terms more favorable to the Company
than those provided by the conversion of this note.
The $2.5 million loan bears interest at 2% above
LIBOR and will be payable no less frequently than
semi-annually.
In accordance with the requirements of the
related credit agreements, the Company deposited the
entire proceeds of the $2.5 million loan into the
Proceeds Account and such proceeds are not available
for general corporate purposes. Payments may be
made to the Company from the Proceeds Account in an
amount sufficient for the Company to make interest
payments. AK will not be permitted to repay the
$2.5 million to the Company or other advances by the
Company in the approximate amount of $3.4 million
unless certain conditions are satisfied, principally
related to repayment of the notes to the Lender and
satisfactory operation of the Project. The Company
has pledged to the Lender its stock in AK as well as
its notes from AK for advances made by the Company.
The Company is also a guarantor of the $19.5
million loan to AK until it has been demonstrated
that the Project is operating in a manner
satisfactory to the Lender. There can be no
assurance when, or if, this will occur, and the
Company could have a substantial debt burden without
other resources to make repayment. In addition, the
Company will be a continuing guarantor of AK's
covenant to comply with environmental laws.
The Company's subsidiary, AK, must deliver to
the Lender, among other things, financial
information, reserve, hedging and operating reports,
and must use all commercially reasonable efforts to
maintain, develop and operate the Illinois Creek
Project in accordance with the present development
plan and prudent mining industry practices. AK must
also comply with applicable laws and maintain its
property rights in the Project, including payment of
royalties which may become due to NPMC. In
addition, except for limited circumstances, without
<PAGE>
the Lender's consent, AK may not incur any
additional indebtedness, permit any liens on the
Project, assume or guarantee indebtedness of others,
invest in others, merge or change its capital
structure, sell the assets of the Project, or permit
Project reserves or future net cash flows to decline
materially from the present development plan. AK
must also achieve Mechanical Completion by July 31,
1997, and Completion by November 30, 1997. Such
restrictions could affect the Company's operations
and future plans.
The Company has also agreed with the Lender
that, so long as the $2.5 million Note made by the
Company is unpaid, or any other obligation of the
Company remains unsatisfied, including the Company's
Guaranty of the loan to AK, the Company will, among
other things, comply with all applicable laws,
provide the Lender with financial reports and
continue to engage principally in the mining
business. In addition, except for limited
circumstances, without the Lender's consent, the
Company may not incur indebtedness (other than
indebtedness after Completion to develop mining
properties where the sole recourse of the lender is
the mining property being developed), permit any
liens on the Project, assume or guarantee
indebtedness of others, invest in others, merge
(unless after Completion and the Company is the
survivor of the merger) or change its capital
structure, pay dividends or sell the assets of the
Project. Such restrictions could affect the
Company's operations and future plans.
The Company has also agreed with the Lender
that it shall not permit its (a) current ratio to be
less than 2.0 to 1.0; (b) consolidated tangible
stockholders' equity to be less than $17,500,000;
and (c) total consolidated liabilities to exceed
175% of its consolidated tangible stockholders'
equity.
There are substantial risk factors associated
with the Project and the Company's future
operations, including the substantial financial
commitment made by the Company to the development of
the Project, and the resultant strain on the
Company's liquidity and capital resources, delays
and other problems which may result from
difficulties in transportation of equipment,
supplies and personnel to the Project, potentially
adverse weather conditions and potentially
substantial costs to comply with environmental and
other laws, as well as gold price volatility and
other economic factors which are beyond the control
of the Company. Moreover, inasmuch as the Project
has not been fully constructed and is not yet
operational, there is no operating history upon
which to base estimates of future cash operating
costs and other operating requirements.
Accordingly, the Company is exploring alternatives
to provide additiional financing to enable it to
continue work to commence mining on the Project in
the near future, provide contingency funds for
unforeseen delays or other Project problems, and to
provide for future operations, including exploration
and development activities on other properties. The
Company is reviewing alternative means of augmenting
its capital base, but has no firm commitments for
<PAGE>
other funding. The failure to obtain other funding
would have a material adverse effect on the Company.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 2 Agreement, dated effective December 16, 1994,
between the Company and North Pacific Mining
Corporation, previously filed as Exhibit 10.46
to the Company's Report on Form 10-K for the
year ended December 31, 1994, and Letter dated
February 5, 1996, amending the Agreement dated
effective December 16, 1994, between the
Company and North Pacific Mining Corporation,
previously filed as Exhibit 10.46a to the
Company's Report on Form 10-K/A for the year
ended December 31, 1994, are incorporated
herein by this reference.
Exhibit 10(a) Credit Agreement between USMX of Alaska,
Inc. and N M Rothschild & Sons Limited.
Exhibit 10(b) Credit Agreement between USMX, INC. and N
M Rothschild & Sons Limited.
Exhibit 10(c) Guaranty of USMX, INC. to N M Rothschild &
Sons Limited
Exhibit 10(d) Hedging Agreement between USMX of Alaska,
Inc. and N M Rothschild & Sons Limited
Exhibit 10(e) Registration Rights Agreement between
USMX, INC. and N M Rothschild & Sons Limited.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned,
thereunto duly authorized.
USMX, INC.
(Registrant)
Date: July 24, 1996 By: /s/Donald E. Nilson
________________________
Donald E. Nilson, Vice
President - Finance, Chief
Financial Officer and
Secretary
CREDIT AGREEMENT
Between
USMX, INC.
as Borrower
and
N M ROTHSCHILD & SONS LIMITED
as Lender
Dated as of July 11, 1996
CREDIT AGREEMENT
Table of Contents
Page
ARTICLE 1 CERTAIN DEFINITIONS AND ACCOUNTING
PRINCIPLES 1
1.1 Certain Defined Terms 1
1.2 Accounting Principles 11
ARTICLE 2 COMMITMENT, FEES, USE OF PROCEEDS 11
2.1 Commitment 11
2.2 Fees 11
2.3 Use of Proceeds 12
ARTICLE 3 PROCEDURE AND PAYMENT 12
3.1 Borrowing Procedure 12
3.2 Convertible Note 12
3.3 Interest 12
3.4 Repayment of the Loan 13
3.5 Priority of Prepayments 13
3.6 Increased Costs and Reduction in Return 13
3.7 Payments and Computations 13
3.8 Payment on Non-Business Days 14
3.9 Taxes 14
ARTICLE 4 COLLATERAL SECURITY 15
4.1 Security Documents 15
4.2No Limitation on Application of
Security Interests 16
4.3Recordings and Filings of Security Documents 16
4.4 Protection of Security Document Liens 16
4.5 Right of Set-off 16
4.6 Additional Collateral 16
ARTICLE 5 CONDITIONS PRECEDENT 17
5.1 Conditions Precedent to the Advance 17
ARTICLE 6 REPRESENTATIONS AND WARRANTIES 19
6.1 Representations and Warranties of USMX 19
6.2 Representations and Warranties of Lender 25
<PAGE>
ARTICLE 7 AFFIRMATIVE COVENANTS OF USMX 26
7.1 Compliance with Laws, Etc. 26
7.2 Reporting Requirements 26
7.3 Inspection 27
7.4 Maintenance of Insurance 27
7.5 Keeping of Records and Books of Account 27
7.6 Preservation of Existence, Etc. 27
7.7 Conduct of Business 28
7.8 Notice of Default 28
7.9 Defense of Title 28
7.10 Operations 28
7.11 Maintenance of the Mining Properties 28
ARTICLE 8 NEGATIVE COVENANTS OF USMX 29
8.1 Indebtedness 29
8.2 Liens, Etc. 29
8.3 Assumptions, Guarantees, Etc. of Indebtedness
of Other Persons 31
8.4 Investments in Other Persons 31
8.5 Mergers, Changes in Capital Structures, Etc. 31
8.6 Restriction on Dividends and Redemptions 32
8.7 Disposition of Illinois Creek Gold Property 32
8.8 Restrictive and Inconsistent Agreements 32
ARTICLE 9 CONVERSION RIGHTS 32
9.1 Lender's Loan Conversion Rights 32
9.2 USMX's Loan Conversion Rights 32
9.3 Loan Conversion Procedures 33
9.4 Lender's Registration Rights Upon Loan
Conversion 34
ARTICLE 10 EVENTS OF DEFAULT 34
10.1 Event of Default 34
10.2 Remedies Upon Event of Default 37
ARTICLE 11 MISCELLANEOUS 37
11.1 Amendments, Etc. 37
11.2 Notices, Etc. 37
11.3 No Waiver; Remedies 39
11.4 Costs, Expenses and Taxes 39
11.5 Binding Effect; Assignment 39
11.6 GOVERNING LAW 39
11.7 VENUE; SUBMISSION TO JURISDICTION 39
<PAGE>
11.8 WAIVER OF JURY TRIAL 40
11.9 Execution in Counterparts 40
11.10 Inconsistent Provisions 40
11.11 Termination of Agreement 40
11.12Survival of Representations and Warranties 41
11.13 Concerning the Security Documents 41
11.14 No Third Party Beneficiary 41
11.15 Severability 41
11.16 Acknowledgments 41
11.17 Confidentiality 41
11.18 Entire Agreement 41
<PAGE>
SCHEDULES
Schedule 1.1(a) Mining Properties
Schedule 6.1(a) Subsidiaries
Schedule 6.1(c) Project Permits
Schedule 6.1(e) Litigation
Schedule 6.1(f) Additional Financial Disclosures
Schedule 6.1(h) Disclosure Schedule
Schedule 6.1(i) Permitted Liens
Schedule 6.1(l) USMX's and AK's Capital Structure
Schedule 6.1(m) Hedging Contracts
Schedule 6.1(n) Material Agreements
Schedule 6.1(q) Compliance With Laws
Schedule 6.1(r) USMX's and AK's Indebtedness
Schedule 6.1(s) Employee Benefits
Schedule 7.4 Insurance Policies
EXHIBITS
Exhibit A-1 Form of Convertible Note
Exhibit A-2 Form of $2,500,000 Pledged Note
Exhibit A-2 Form of $3,400,000 Pledged Note
Exhibit B Form of Pledge Agreement
Exhibit C-1 Form of Second Mortgage
Exhibit C-2 Form of Fourth Mortgage
Exhibit C-3 Form of Assignment Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of USMX's Omnibus Certificate
Exhibit F Form of Opinion of USMX's Counsel
Exhibit G Form of Security Opinion
Exhibit H Form of Request for Advance
Exhibit I Form of Interest Period Notice
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of July 11, 1996, is by
and between USMX, INC., a Delaware corporation ("USMX"), and
N M ROTHSCHILD & SONS LIMITED, a company organized and existing
under the laws of England ("Lender").
Recitals
A. By this Credit Agreement the parties hereto desire
to set forth the terms of their agreement pursuant to which
Lender will make a $2,500,000 loan to USMX, to be used by USMX in
connection with the development of the Illinois Creek Gold
Property.
B. The Mining Properties are owned and held of record
by USMX OF ALASKA, INC. ("AK"), an Alaska corporation and wholly-
owned subsidiary of USMX.
C. Coincident herewith, Lender and AK have entered
into a separate Credit Agreement (the "AK Credit Agreement")
providing project financing for the development of the Illinois
Creek Gold Property, with payment guarantied by USMX as provided
in the guaranty executed by USMX in connection with the AK Credit
Agreement.
D. The Loan to be made pursuant hereto, on the terms
and conditions provided herein, is convertible into shares of the
Common Stock of USMX, and will be secured by the pledge by USMX
of all of the stock of AK and of the Pledged Notes.
E. The Pledged Notes are secured, respectively, by
the Second Mortgage and the Fourth Mortgage on the Mining
Properties, which mortgages shall be assigned to Lender pursuant
to the Assignment Agreement.
Agreement
NOW, THEREFORE, in consideration of the following
mutual covenants and agreements, USMX and Lender hereby agree as
follows:
ARTICLE 1
CERTAIN DEFINITIONS AND ACCOUNTING PRINCIPLES
1.1 Certain Defined Terms. As used in this Agreement
and unless otherwise expressly indicated, the following terms
shall have the following meanings:
"Advance" means a single advance of the Loan by Lender
to USMX as provided in Section 3.1.
<PAGE>
"Advance Period" means the period during which Lender
will Advance the Loan to USMX, subject to all of the terms and
conditions hereof, which period shall commence on the date hereof
and shall continue until July 31, 1996.
"Affiliate" means any Person directly or indirectly
controlling or controlled by or under common control with another
Person, provided that, for purposes of this definition,
"control," as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by
contract or otherwise.
"Agreement" means this Credit Agreement, as it may be
amended, supplemented, or otherwise modified and in effect from
time to time.
"AK" shall have the meaning specified in Recital B.
"AK Credit Agreement" shall have the meaning specified
in Recital C.
"AK Shares" means 100,000 shares of the common stock of
the AK, par value $0.01 per share representing all of the issued
and outstanding shares of stock of AK.
"Applicable Margin" means, with respect to the rate of
interest payable by USMX on the Loan, two percent (2.0%).
"Assignment Agreement" means the agreement pursuant to
which USMX assigns the Second Mortgage and the Fourth Mortgage to
Lender, substantially in the form of Exhibit C-3.
"Breakage Costs" means all costs and losses which
Lender may incur as a result of payment of the Principal Amount
of the Loan other than at the end of an Interest Period.
"Business Day" means a day of the year on which banks
in Denver, Colorado, New York, New York and London, England are
open for business.
"Capitalized Lease Liabilities" means all monetary
obligations of USMX under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each
other Loan Document, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP,
and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
"Collateral" means all properties, rights and interests
subject to the Security Documents or subject to the Second
Mortgage or Fourth Mortgage.
<PAGE>
"Commitment" means the commitment of Lender set forth
in Section 2.1 to make the Loan.
"Common Stock" means the $0.001 par value common stock
of USMX.
"Conditions Precedent to USMX's Conversion Rights"
shall mean each of the following:
(i) the Principal Amount of the Loan is
outstanding and unpaid, and the due date thereof has not been
accelerated by Lender pursuant to the terms of this Agreement;
(ii) no Default exists and is continuing
hereunder;
(iii) the Daily Closing Price of the
Common Stock shall have exceeded the Minimum Stock Price for a
period of thirty (30) consecutive Trading Days; and
(iv) USMX or AK shall have obtained, and
hold free of defaults or notices of default by any Governmental
Authorities, all permits, authorizations, consents and approvals
of Governmental Authorities and other Project Permits necessary
for the Project to commence.
"Contingent Liability" means any agreement, undertaking
or arrangement by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or
indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor,
or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to any
limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby, less the
value of any bonds, letters of credit or cash collateral of such
Person securing such contingent liability.
"Conversion Date" means the date upon which conversion
of the Loan into Common Stock is effected.
"Conversion Price" means $3.40 per share of Common
Stock, or such other amount as may be established pursuant to
Section 9.3.
"Conversion Rights" means the rights of Lender and USMX
to convert the Loan into Common Stock as provided in Article 9.
<PAGE>
"Conversion Shares" means the shares of Common Stock to
be issued to Lender upon conversion of the Loan as provided in
Article 9. The number of Conversion Shares shall be determined
by dividing the Principal Amount by the Conversion Price.
"Convertible Note" means the Convertible Promissory
Note which evidences the Loan, dated as of July 11, 1996, which
Convertible Promissory Note is made by USMX and payable to the
order of Lender, in the form of Exhibit A-1 hereto.
"Daily Closing Price" of the Common Stock means the
closing price for the Common Stock on the NASDAQ on a Trading
Day.
"Date of Default" shall have the meaning specified in
Section 10.2(a).
"Default" means any Event of Default or any condition
or event, or combination thereof, which, after notice or lapse of
time or both, could constitute an Event of Default.
"Default Rate" means the Interest Rate applicable to
the Loan during periods when amounts payable by USMX as principal
repayments, interest payments or fee or expense payments are due
and payable but unpaid by USMX, which shall be an annual rate of
interest which is equal to the Interest Rate, plus four percent
(4%).
"Development Plan" means the Development Plan for the
construction and operation of the Illinois Creek Gold Property
through Completion (which Development Plan, among other things,
sets forth a construction budget, identifies all material
construction contracts, and sets forth a master construction
schedule, indicating scheduled monthly and cumulative
expenditures), and the plan for the operation of the Illinois
Creek Gold Property after Completion through the life of the
mine, as amended from time to time by AK and USMX with the
written approval of Lender, which approval Lender may withhold in
its sole discretion reasonably exercised. The Development Plan
is appended to the AK Credit Agreement as Exhibit F.
"Dollars" and the symbol "$" each mean lawful money of
the United States of America.
"Environmental Laws" means federal, state, local and
foreign laws or regulations, codes, orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder
relating to pollution or protection of the environment,
including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes.
"Establishment Fee" shall have the meaning specified in
Section 2.2(a).
<PAGE>
"Event of Default" has the meaning set forth in
Section 10.1.
"Feasibility Study" means the Illinois Creek Gold
Feasibility Study Mine Plan (and associated documents) dated
February 22, 1996 prepared by USMX pertaining to the construction
and operation of a commercial gold mining facility on the
Illinois Creek Gold Property, a complete and accurate copy of
which has been provided by USMX to Lender.
"Fourth Mortgage" means the Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement, dated as
of July 11, 1996, made by AK in favor of USMX covering all the
right, title and interest of AK in the Mining Properties and in
production therefrom and personal property associated therewith,
in the form of Exhibit C-2 hereto, assigned to Lender pursuant to
the Assignment Agreement and securing the $3,400,000 Pledged
Note. The Fourth Mortgage is subordinated to Lender's security
interests in the Mining Properties created pursuant to the AK
Credit Agreement, the Second Mortgage, and the NPMC Mortgage (as
defined in the AK Credit Agreement).
"GAAP" means generally accepted accounting principles
in the United States of America, consistently applied.
"Governmental Acts" has the meaning set forth in
Section 3.6.
"Governmental Authority" means any federal, state,
county, city or local government or political subdivision or
authority in which any property of USMX is located or which
exercises valid jurisdiction over any such property, or in which
USMX conducts business or is otherwise present, and any agency,
department, commission, board, bureau or instrumentality of any
of them which exercises valid jurisdiction over USMX.
"Governmental Requirement" means any law, statute,
code, ordinance, order, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authoriza
tion or other direction or requirement (including, without
limitation, Environmental Laws, energy regulations and occupa
tional, safety and health standards or controls) of any
Governmental Authority.
"guarantee" shall mean any obligation, contingent or
otherwise, of any Person guaranteeing any Indebtedness or obliga
tion of any other Person in any manner, whether directly or
indirectly, and including, without limitation, any obligation of
such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such
Indebtedness or obligation, or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of
such Indebtedness or obligation, (b) to purchase property,
securities or services for the purpose of assuring the owner of
such Indebtedness or obligation of the payment of such
Indebtedness or obligation, or (c) to maintain working capital,
equity capital or any other financial statement condition of the
primary obligor so as to enable the primary obligor to pay such
Indebtedness or obligation; provided, however, that the term
guarantee shall not include endorsements for collection or
deposit, in either case in the ordinary course of business.
<PAGE>
"Guaranty" means the guaranty of USMX issued to Lender
pursuant to the AK Credit Agreement on even date herewith whereby
USMX guaranties all of the obligations of AK under the AK Credit
Agreement until Completion (as defined in the AK Credit
Agreement), and certain obligations of AK thereafter.
"Hedging Contracts" means any agreement, facility,
contract or other transaction entered into relating to forward
contracts or hedging (including but not limited to forward sales,
which include spot deferred sales, options, swaps and price
protection and floor price arrangements) for the management
and/or protection of gold and other metals price risk, entered
into with Lender or with other counterparties acceptable to
Lender; and the proceeds of and all benefit and advantage derived
in respect of the foregoing or any dealings therewith (including
the closing out of any contracts or transactions).
"Holder" means a holder in due course of the
Convertible Note.
"Illinois Creek Loan Acceleration Date" means the date
on which USMX or AK either (a) sells or otherwise transfers any
interest in the Illinois Creek Gold Property to any other Person
except as required or permitted by this Agreement or the AK
Credit Agreement or (b) enters into a joint venture agreement,
partnership, operating agreement or any other similar kind of
agreement with any other Person pursuant to which such other
Person has a direct or indirect interest in any portion of the
Illinois Creek Gold Property or in the production therefrom or
the proceeds thereof, and USMX or AK and such other Person have
agreed to the shared, cooperative or joint maintenance,
exploration, development or exploitation of such portion of the
Illinois Creek Gold Property; provided that the election of NPMC
pursuant to the NPMC Agreement to participate for a 25% working
interest in Mining Properties other than the Illinois Creek Gold
Property shall not, in and of itself, constitute an Illinois
Creek Loan Acceleration Date.
"Illinois Creek Gold Property" means the Mining
Properties identified as the Illinois Creek Upland Mining Lease
in Schedule 1.1(a) hereto.
"Indebtedness" means, for any Person, without
duplication:
(a) all obligations of such Person for borrowed
money or metals (including (i) in the case of such obligations,
all notes payable and drafts accepted representing extensions of
credit; (ii) in the case of USMX, USMX's Obligations; and
(iii) in the case of such metals, gold and silver) and all
obligations evidenced by bonds, debentures, notes, or other
similar Instruments on which interest charges are customarily
paid;
(b) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether or
not drawn, and bankers' acceptances issued for the account of
such Person;
(c) all obligations of such Person as lessee
under leases which have been or should be, in accordance with
GAAP, recorded as Capitalized Lease Liabilities;
<PAGE>
(d) all other items which, in accordance with
GAAP, would be included as liabilities on the liability side of
the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) net liabilities of such Person under Hedging
Contracts;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay the
deferred purchase price of property or services, and indebtedness
(excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse; and
(g) all Contingent Liabilities of such Person in
respect of any of the foregoing.
"Instrument" means any contract, agreement, indenture,
mortgage, document or writing (whether formal agreement, letter
or otherwise) under which any obligation is evidenced, assumed or
undertaken, or any Lien (or right or interest therein) is granted
or perfected.
"Interest Period" has the meaning set forth in
Section 3.3(b).
"Interest Period Notice" means a notice from USMX to
Lender from time to time regarding USMX's election of an Interest
Period for a Loan to take effect on the completion of a current
Interest Period, substantially in the form of Exhibit I hereto.
"Interest Rate" means the interest rate applicable to
the Loan from time to time when the Default Rate is not
applicable with respect to each Interest Period for the Loan,
which is an interest rate per annum equal to the sum of (y) LIBOR
in effect on the first day of the Interest Period, plus (z) the
Applicable Margin.
"Lien" means, as to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance in or on,
or any interest or title of any vendor, lessor, lender or other
secured party to, or of such Person under any conditional sale or
other title retention agreement or capital lease with respect to,
any property or asset owned or held by such Person, or the
signing or filing of a financing statement which names such
Person as debtor, or the signing of any security agreement
authorizing any other party as the secured party thereunder to
file any financing statement. A Person shall be deemed to be the
owner of any assets that it has placed in trust for the benefit
of the holders of its indebtedness, which indebtedness is deemed
to be extinguished under GAAP but for which such Person remains
legally liable, and such trust shall be deemed to be a Lien.
"LIBOR" means, relative to any Interest Period for the
Loans, the rate of interest equal to the average (rounded
upwards, if necessary, to the nearest 1/16 of 1%) of the rates
<PAGE>
per annum quoted by the Reuter Monitor Money Rates Service at
which Dollar deposits in immediately available funds are offered
in the London interbank market as at or about 11:00 a.m., London
time, two Business Days prior to the beginning of such Interest
Period for delivery on the first day of such Interest Period, and
in an amount approximately equal to the Loan amount outstanding
to which the rate will apply and for a period approximately equal
to such Interest Period.
"Loan" means the loan of $2,500,000 of funds by Lender
to USMX hereunder pursuant to the Commitment and the terms and
conditions of this Agreement.
"Loan Documents" means this Agreement, the Convertible
Note, the Registration Rights Agreement, the Request for Advance,
the Interest Period Notices, the Security Documents, all Hedging
Contracts entered into by USMX or AK with Lender related in the
Project, the Second Mortgage, the Fourth Mortgage and each other
Instrument executed by USMX and delivered to Lender in connection
with this Agreement, or any of the foregoing Instruments, whether
or not specifically identified in this paragraph.
"Material Agreements" means the contracts, agreements,
leases and other binding commitments and undertakings of USMX and
AK, the performance or breach of which could have a Material
Adverse Effect on USMX or AK, which Instruments are identified in
Schedule 6.1(n).
"Material Adverse Effect" means, with respect to USMX,
AK or any Person, an effect, resulting from any occurrence of
whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or
proceeding), which is materially adverse to:
(a) the consolidated business, assets, revenues,
financial condition, operations or prospects of such Person;
(b) the ability of such Person to make any
payment or perform any other material obligation required under
any material agreement (including, with respect to USMX, this
Agreement or any of the Loan Documents); or
(c) USMX, AK or the Project, or involves a
liability or obligation (other than contractual commitments
entered into by USMX or AK in the ordinary course of business
which are not in default) of $100,000 or more.
"Minimum Stock Price" means $4.75 per share of Common
Stock.
"Mining Properties" means the patented and unpatented
mining and millsite claims, leases and other property interests
owned, or in which USMX directly or indirectly holds an interest
(including by its ownership of the stock of AK), related to the
mining leases listed on Schedule 1.1(a), and all facilities
situated thereon, together with all real and personal property
and assets associated with such property.
<PAGE>
"month" means a calendar month.
"NASDAQ" means the NASDAQ National Market of listed
stocks.
"NPMC" means North Pacific Mining Corporation, an
Alaska corporation.
"NPMC Agreement" means the agreement, as amended, dated
effective December 16, 1994, by and between NPMC and USMX
pursuant to which USMX acquired the Mining Properties, all of
which Mining Properties have been conveyed by USMX to AK.
"Obligations" means all obligations of USMX (monetary
or otherwise) arising under or in connection with this Agreement
and each other Loan Document.
"Omnibus Certificate" means a certificate from USMX,
substantially in the form of Exhibit E hereto.
"Opinion of USMX's Counsel" means the legal opinion of
counsel to USMX acceptable to Lender, substantially in the form
of Exhibit F hereto.
"Other Taxes" shall have the meaning specified in
Section 3.9(b).
"Permitted Liens" means the Liens identified in
Schedule 6.1(i) and the Liens permitted by clauses (i) through
(vi) of Section 8.2.
"Person" means an individual, partnership, corporation
(including a business trust), joint venture, limited liability
company or partnership, or other entity, or a foreign state or
political subdivision thereof or any agency of such state or
subdivision.
"Plan" means a pension plan providing benefits for
employees of USMX or any Affiliate and covered by Title IV of
ERISA.
"Pledge Agreement" means the Pledge and Security
Agreement providing for the pledge by USMX of (i) all of the AK
Shares owned by USMX, and (ii) the Pledged Notes, such agreement
substantially in the form of Exhibit B hereto.
"Pledged Notes" means the Promissory Notes, each dated
July 11, 1996, made by AK to the order of USMX in the principal
amounts of $2,500,000 and $3,400,000, respectively, the former
being secured by the Second Mortgage and the latter by the Fourth
Mortgage.
"Pre-Establishment Fee" shall have the meaning
specified in Section 2.2(a).
"Principal Amount" means, as of any date, with respect
to the Loan, the aggregate outstanding principal amount in
Dollars of the Loan at such date.
<PAGE>
"Proceeds Account" means the "Proceeds Account" as
defined by Section 3.14 of the AK Credit Agreement.
"Project" means the business and operations of the
Illinois Creek Gold Property and related assets in accordance
with the Development Plan.
"Project Permits" means all permits, consents and
agreements necessary to commence the Project and the production
of valuable minerals from the Illinois Creek Gold Property in a
manner consistent with the Development Plan. Project Permits are
listed in Schedule 6.1(c).
"quarter" means a calendar quarter.
"Request for Advance" means the irrevocable request for
the Advance of the Loan by USMX, in the form set forth in
Exhibit H hereto, signed by an authorized officer of USMX.
"Registration Rights Agreement" means the agreement in
the form of Exhibit D of USMX to register the sale or exchange of
the Conversion Shares by the Lender with the Securities and
Exchange Commission.
"Scheduled Maturity Date" means June 30, 2000.
"Second Mortgage" means the Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement, dated as
of July 11, 1996, made by AK in favor of USMX covering all the
right, title and interest of AK in the Mining Properties and in
production therefrom and personal property associated therewith,
in the form of Exhibit C-1 hereto, assigned to Lender pursuant to
the Assignment Agreement and securing the $2,500,000 Pledged
Note. The Second Mortgage is subordinated to Lender's security
interests in the Mining Properties created pursuant to the AK
Credit Agreement.
"Security Documents" means the Pledge Agreement, the
Assignment Agreement, the Second Mortgage, the Fourth Mortgage
and all modifications and amendments thereof, and all financing
statements or other instruments required to be filed or notices
required to be given in order to perfect the Liens created by any
of the foregoing on property of USMX described therein, wherever
located and of whatever nature, associated therewith.
"Security Opinion" means the legal opinion of Guess &
Rudd P.C. concerning the Security Documents, the Second Mortgage
and the Fourth Mortgage and Liens created thereby, the nature and
quality of AK's title to the Mining Properties and certain other
matters, substantially in the form of Exhibit G hereto.
"Subsidiary" means any corporation, association or
other business entity more than 50% of each class of equity or
voting securities of which is owned, directly or indirectly, by
USMX.
<PAGE>
"Taxes" shall have the meaning specified in
Section 3.9.
"Trading Day" means, so long as the Common Stock is
listed on the NASDAQ, a day on which the NASDAQ is open for the
transaction of business, or, if the Common Stock is not listed or
admitted to trading on the NASDAQ, a day on which the securities
exchange on which the Common Stock is traded is open for the
transaction of business, or, if the Common Stock is not so listed
or admitted for trading on any securities exchange, a Business
Day.
"year" means a calendar year.
1.2 Accounting Principles. All accounting terms not
otherwise defined herein shall be construed, all financial
computations required under this Agreement shall be made, and all
financial information required under this Agreement shall be
prepared, in accordance with GAAP applied on a basis consistent
with the financial statements referred to in Section 6.1(f)
except as specifically provided herein.
ARTICLE 2
COMMITMENT, FEES, USE OF PROCEEDS
2.1 Commitment. Subject to all of the terms and
conditions of this Agreement, Lender agrees to Advance the Loan
to USMX in a single Advance during the Advance Period.
2.2 Fees.
(a) Establishment Fee. USMX agrees to pay Lender
a fee (the "Establishment Fee") in the amount of $37,500 in
connection with the credit facility provided for in this
Agreement, which will be payable by USMX concurrently with USMX's
execution hereof. Lender and USMX acknowledge that USMX has
previously paid Lender $37,500 (the "Pre-Establishment Fee") at
the time of Lender's written commitment to USMX to make the Loan
contemplated by this Agreement. Neither the Establishment Fee
nor the Pre-Establishment Fee is refundable by Lender, in whole
or in part, under any circumstances.
(b) Fee Payments. Payment of the Establishment
Fee shall be made in Dollars, as provided in Section 3.7.
<PAGE>
2.3 Use of Proceeds. USMX will utilize the proceeds
of the Loan exclusively to fund capital costs and other expenses
of the Project.
ARTICLE 3
PROCEDURE AND PAYMENT
3.1 Borrowing Procedure. Not less than two Business
Days prior to the desired date of the Advance of the Loan, USMX
will submit the Request for Advance to Lender. The Request for
Advance, which will be effective only upon actual receipt by
Lender, will specify an initial Interest Period for the Loan and
the Business Day on which USMX wishes to have the Advance made.
The Advance of the Loan will be made by deposit thereof in the
Proceeds Account.
3.2 Convertible Note. The Loan and all rights of
Lender concerning conversion of the Loan into Common Stock, and
concerning Lender's rights to have the Common Stock registered
shall be evidenced by the Convertible Note.
3.3 Interest
(a) General. USMX shall pay interest on the
outstanding Principal Amount of the Loan calculated on a 360-day
year basis, at the Interest Rate or the Default Rate, as
applicable.
(b) Interest Periods. USMX may select an
interest period with respect to the Loan ("Interest Period") of
30, 90 or 180 days, or of such other period of days as may be
agreed to by Lender in its sole discretion, on a 360-day year
basis. USMX will select Interest Periods by giving notice to
Lender in the Request for Advance and thereafter at least three
Business Days prior to the expiration of the Interest Period then
in effect by an Interest Period Notice. If at any time USMX
fails to give timely notice of its Interest Period selection,
then USMX shall be deemed to have selected an Interest Period of
30 days. No Interest Period shall end after the Scheduled
Maturity Date. Interest will be payable in full at the end of
each Interest Period.
(c) Default Interest. Interest on the Loan shall
accrue and shall be payable by USMX at the Default Rate during
all periods when any amounts payable by USMX as principal repay
ments, interest payments or fee or expense payments are due and
payable hereunder, whether by acceleration or otherwise, but
remain unpaid by USMX; provided the Default Rate shall not apply
to past-due fees and expenses unless Lender has provided written
notice to USMX pursuant to Section 11.2, and such fees and
expenses remain due and unpaid for five (5) Business Days after
the giving of such notice. Without prejudice to the rights of
Lender under the preceding sentence, USMX shall indemnify Lender
against any direct loss or expense (not including lost profits on
re-employment of capital) which Lender may sustain or incur as a
<PAGE>
result of the failure by USMX to pay when due the Principal
Amount of the Loan. A certificate or other notice of Lender
submitted to USMX setting forth the basis for the determination
of Default Rate interest due and of the amounts necessary to
indemnify Lender in respect of such loss or expense, shall
constitute evidence of the accuracy of the information contained
therein in the absence of error and, absent notice from USMX of
such error, shall be conclusive and binding for all purposes.
Interest accruing at the Default Rate shall be payable on demand.
3.4 Repayment of the Loan.
(a) Principal Repayment Generally. USMX agrees
to repay the Loan as provided herein. Except as provided by
Section 3.4(c) or Article 9, USMX may not prepay the Principal
Amount of the Loan prior to the Scheduled Maturity Date.
(b) Scheduled Principal Payment. Subject to the
other terms hereof pertaining to mandatory prepayments of the
Loan, USMX will make payment in full of the unpaid Principal
Amount of the Loan not later than the Scheduled Maturity Date.
(c) Mandatory Prepayment Upon Loan Acceleration.
USMX will repay the Loan in full, together with accrued interest
thereon, Breakage Costs and fees, upon acceleration of the
Scheduled Maturity Date of the Loan by Lender pursuant to Section
10.2.
3.5 Priority of Prepayments. All prepayments made by
USMX pursuant to Section 3.4(c) shall be accompanied by payment
of Lender's Breakage Costs, and shall be applied first to accrued
and unpaid interest on the Loan as of the end of the most recent
Interest Period, then to any other amounts then payable by USMX
hereunder including Breakage Costs and fees, then to the
Principal Amount.
3.6 Increased Costs and Reduction in Return. If due
to (a) the introduction of, or any change (including, without
limitation, any change by way of imposition or increase of
reserve requirements) in, or in the interpretation of, any law or
regulation or (b) the compliance by Lender with any guideline or
request from any central bank or other governmental agency having
jurisdiction over Lender (whether or not having the force of
law), collectively referred to as "Governmental Acts," there
shall be any increase in the cost or reduction in return to
Lender of agreeing to make or making, funding or maintaining the
Loan, then USMX shall from time to time, upon demand by Lender,
pay to Lender additional amounts sufficient to indemnify it
against such increased costs or reduction in return; provided
that Lender agrees to use reasonable efforts to mitigate the
increased cost or reduction in return to the extent reasonably
practicable. A certificate as to the amount of such increased
cost or reduced return, submitted to USMX by Lender, shall be
conclusive absent manifest error.
3.7 Payments and Computations. USMX shall make each
payment due hereunder and under the Convertible Note in
immediately available funds not later than 5:00 p.m. (New York
City time) on the day before the day when due Lender as follows
(or as Lender shall otherwise advise USMX by notice as provided
herein):
<PAGE>
to: Chase Manhattan Bank N.A.
1 Chase Manhattan Plaza
New York, New York
ABA No. 02100021
for the account of:
N M Rothschild & Sons Limited
A/C No.: 001-1-948262
USMX hereby authorizes Lender, if and to the extent payment of
money owed to it is not made when due hereunder or under the
Convertible Note, to charge from time to time against USMX's
accounts with Lender any amount so due. All computations of
interest hereunder shall be made on the basis of a year of 360
days for the actual number of days elapsed (including the first
day but excluding the last day).
3.8 Payment on Non-Business Days. Whenever any
payments to be made hereunder or under the Convertible Note shall
be stated to be due on a day which is not a Business Day, such
payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the
computation of payment of interest or fees, as the case may be,
unless such next succeeding Business Day is after the end of the
Interest Period, in which case the payment will be made on the
next preceding Business Day and such payment shall not reflect
the actual payment date in the computation of interest or fees
due and payable.
3.9 Taxes.
(a) General. Any and all payments by USMX
hereunder shall be made free and clear of and without deduction
for any and all present or future taxes, levies, duties, imposts,
deductions, charges or withholdings, and all liabilities with
respect thereto (excluding taxes imposed on Lender's income and
franchise taxes imposed on Lender) imposed by the jurisdiction
under the laws of which Lender is organized, or the United States
of America or any other jurisdiction under the laws of which
Lender is otherwise subject to tax, or any political subdivision
thereof (all such non-excluded taxes, levies, duties, imposts,
deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If USMX shall be required
by law to deduct any Taxes from or in respect of any sum payable
hereunder to Lender, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under
this Section 3.9) Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) USMX
shall make such deductions and (iii) USMX shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable law. The foregoing
obligation of USMX will apply with respect to any assignee of
Lender.
(b) Other Taxes. In addition, USMX agrees to pay
any present or future stamp, sales, use or documentary taxes or
any other excise or property taxes, charges, duties or similar
levies which arise from any payment made hereunder or from the
<PAGE>
execution, delivery or registration of, or otherwise with respect
to, this Agreement, any of the Loan Documents, or any Instrument
contemplated thereby (hereinafter referred to as "Other Taxes").
To Lender's knowledge, no Other Taxes will be applicable to the
transactions contemplated by this Agreement.
(c) Tax Indemnity. USMX hereby indemnifies
Lender for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 3.9) paid by
Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. Lender
shall use commercially reasonable efforts to mitigate any Taxes
or Other Taxes to the extent practicable, and to refund to USMX
its proportionate share of any Taxes or Other Taxes paid by USMX
pursuant hereto ultimately refunded to Lender.
(d) Payment of Taxes. Within 30 days after the
date of any payment of Taxes or Other Taxes withheld by USMX in
respect of any payment to Lender, USMX will furnish to Lender the
original or a certified copy of a receipt evidencing payment
thereof.
(e) Lender's Taxes. To Lender's knowledge, under
applicable law and treaties in effect as of the date hereof
between the United States and the United Kingdom, no United
States federal taxes will be required to be withheld by USMX with
respect to any payment to be made to Lender in respect of this
Agreement. Lender agrees upon written request of USMX to deliver
to USMX, in duplicate, duly completed and signed copies of either
Form 1001 (relating to Lender and entitling Lender to a complete
exemption from withholding on all amounts to be received by
Lender pursuant to this Agreement, the Loans and Notes as a
result of a tax treaty concluded with the United States) or Form
4224 (relating to all amounts to be received by Lender pursuant
to this Agreement, the Loan and the Convertible Note) of the
Internal Revenue Service.
(f) Survival. Without prejudice to the survival
of any other agreement hereunder, the agreements and obligations
contained in this Section 3.9 shall survive the payment in full
of the Loan and interest hereunder.
ARTICLE 4
COLLATERAL SECURITY
4.1 Security Documents. As security for the due
repayment of the Loan, for the payment of all moneys due
hereunder, for the performance of all Obligations of USMX
hereunder and under the other Loan Documents to which it is a
party, USMX shall, contemporaneously with the execution of this
Agreement, execute and deliver to Lender the Security Documents,
including amendments or assignments thereof and notices to third
Persons as Lender may require in connection with the perfection
of its security interests in the property and interests in the
property of USMX subject to the Security Documents.
<PAGE>
4.2 No Limitation on Application of Security
Interests. USMX and Lender agree that notwithstanding any
provision of any Security Document to the contrary, all Liens on
property of USMX created and perfected pursuant to the Security
Documents executed by USMX shall secure all Obligations of USMX
hereunder and under the other Loan Documents.
4.3 Recordings and Filings of Security Documents.
Lender will record, file or deliver to account debtors as
necessary the Security Documents, as appropriate, at USMX's
expense, promptly after execution and delivery thereof by USMX.
4.4 Protection of Security Document Liens. As and
when requested to do so by Lender, USMX will deliver to Lender
from time to time any financing statements, continuation
statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by USMX
in form and substance satisfactory to Lender, for the purpose of
perfecting or protecting Lender's Liens on the property and
interests subject to the Security Documents.
4.5 Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default, Lender is hereby
authorized at any time and from time to time, without notice to
USMX (any such notice being expressly waived by USMX), to set off
and 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 Lender to or for the credit or
the account of USMX against any and all of the Obligations of
USMX now or hereafter existing, although such Obligations may be
contingent and unmatured. Lender agrees promptly to notify USMX
after any such set-off and application, provided that the failure
to give such notice shall not affect the validity of such set-off
and application. The rights of Lender under this Section 4.5 are
in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Lender may have.
4.6 Additional Collateral. USMX and Lender intend
that the Security Documents cover and extend to all property
rights and interests of USMX, real or personal, tangible or
intangible, presently held or hereafter acquired which are
related to the Mining Properties, the production therefrom,
Hedging Contracts related to the Project and the proceeds of all
of the foregoing. In the event that USMX acquires any additional
property right or interest related to the Mining Properties, the
production therefrom or Hedging Contracts related to the Project
which is not subject to the Lien of the Security Documents, upon
request therefor from Lender, USMX shall promptly execute, and
deliver such Instruments and take such actions as Lender may
reasonably request in order to perfect a first and prior Lien
(subject to Permitted Liens) on such right or interest. Whether
or not Lender requests that any such right or interest be
subjected to the Security Documents, USMX agrees to keep such
rights or interests free and clear of all Liens other than
Permitted Liens.
<PAGE>
ARTICLE 5
CONDITIONS PRECEDENT
5.1 Conditions Precedent to the Advance. The obliga
tion of Lender to Advance the Loan, and to perform its other
obligations hereunder, are subject to satisfaction of the
following conditions precedent.
(a) Lender or its counsel shall have received the
following on or before the date of the Advance of Loan, with each
Instrument dated on or no more than five days prior to such date
(except for item (xiii) below which shall be of the dates
specified in Section 6.1(f) and except as otherwise agreed by
Lender), and in form and substance as shall be satisfactory to
Lender:
(i) this Agreement, duly executed by USMX;
(ii) the Convertible Note, duly executed by
USMX;
(iii) the Establishment Fee;
(iv) the Registration Rights Agreement, duly
executed by USMX;
(v) the Security Documents, duly executed by
USMX and AK, as required, together with any financing statements
or similar evidences of Liens, amendments thereto, notices or
other Instruments determined by Lender to be necessary or
desirable to perfect the Liens established pursuant to the
Security Documents;
(vi) the Opinion of USMX's Counsel;
(vii) the Security Opinion;
(viii) the Request for Advance, duly
executed by USMX;
(ix) USMX's Omnibus Certificate, duly
executed by an officer of USMX;
(x) a Certificate from the Alaska Department
<PAGE>
of Commerce and Economic Development, confirming the due
organization and good standing of AK in such state;
(xi) a Certificate from the Delaware
Secretary of State, confirming the due organization and good
standing of USMX in such state;
(xii) a Certificate from the Alaska
Department of Commerce and Economic Development, confirming that
USMX is duly qualified to transact business in such state as a
foreign corporation;
(xiii) accurate and complete copies of the
financial statements referred to in Section 6.1(f);
(xiv) evidence reasonably satisfactory to
Lender that the Convertible Note has been issued in accordance
with applicable federal and state law, and the rules and
regulations of the NASDAQ and the Toronto Stock Exchange;
(xv) certificates of issuing insurance
companies, confirming compliance by USMX with the insurance
requirements set forth in Section 7.4 or other evidence
concerning insurance satisfactory to Lender; and
(xvi) such other approvals, opinions or
documents as Lender may reasonably request.
(b) The following shall be correct as of the date
of the Advance of the Loan by Lender:
(i) all conditions precedent to the advance
of funds pursuant to the AK Credit Agreement shall be satisfied
in form and substance satisfactory to Lender;
(ii) since the date of the financial
statements of USMX most recently delivered to Lender (referred to
in Section 6.1(f)), there has been no material adverse change in
the financial condition, operations or business of USMX or AK;
(iii) there is no pending or threatened
action or proceeding affecting USMX, AK or the Mining Properties
before any court, Governmental Authority or arbitrator, including
any matter involving Environmental Laws, which could be
reasonably expected to have a Material Adverse Effect upon the
financial condition, operations or business of USMX or AK;
(iv) there shall exist no Default under this
Agreement or the AK Credit Agreement;
(v) all representations and warranties made
by USMX herein or made by AK in the AK Credit Agreement shall be
true and correct on the date of the Advance, except for such
changes therein as shall be acceptable to Lender;
(vi) all approvals and authorizations of
Governmental Authorities or other Persons, if any, required in
connection with the Advance of the Loan or exercise of rights by
Lender under the Convertible Note or any advance of loaned funds
by Lender to AK pursuant to the AK Credit Agreement, shall have
been obtained and remain in effect;
<PAGE>
(vii) Lender shall have approved USMX's
and AK's title to the Mining Properties and the Liens established
by the Security Documents shall be in full force and effect as
valid, enforceable first priority Liens on the Collateral, except
for Permitted Liens;
(viii) no event shall have occurred or
condition exist which could have a Material Adverse Effect on
USMX or AK;
(ix) USMX or AK shall have established a
hedging program that is reasonably acceptable to Lender to
provide the Project with protection from declines in the price of
gold;
(x) Lender shall have completed and, in its
sole discretion, be satisfied with its due diligence
investigations of USMX, AK and the Project, including technical,
legal, financial and permitting matters;
(xi) USMX shall be in compliance with
relevant securities regulations, and all information concerning
USMX required to be publicly disclosed shall have been so
disclosed; and
(xii) AK shall have executed and
delivered to USMX the Second and Fourth Mortgages, and the Liens
on Mining Properties established thereby shall be in full force
and effect as valid, enforceable Liens on the Mining Properties.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of USMX. USMX
represents and warrants as follows:
(a) Organization, Qualification and Subsidiaries.
USMX is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and AK is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Alaska. Each of USMX and
AK has all requisite corporate power and authority to enter into
the Loan Documents to which it is a party and to carry out the
transactions contemplated thereby. Each of USMX and AK is duly
qualified to do business as a foreign corporation in each
jurisdiction where the nature of its business or properties
requires such qualification. Neither USMX nor AK has any
Subsidiaries, except as listed on Schedule 6.1(a).
(b) Authorization; No Conflict. The execution,
delivery and performance by USMX and AK of the Loan Documents to
which they are respectively party have been duly authorized by
all necessary corporate action on the part of USMX and AK, and do
not and will not (i) require any consent or approval of the
stockholders of USMX or AK which have not been obtained;
(ii) contravene USMX's or AK's articles of incorporation,
<PAGE>
charter, bylaws or other such constituent document; (iii) violate
any provision of any law, rule, regulation (including, without
limitation, Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award presently in effect
having applicability to USMX or AK; (iv) result in a breach of or
constitute a default under or require the consent of any party
which has not been obtained pursuant to any indenture or loan or
credit agreement or any other agreement, lease or instrument to
which USMX or AK is a party or by which either of them or their
properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than Liens
arising under the Security Documents) upon or with respect to any
of the properties now owned by USMX or AK; and, to the best
knowledge of USMX, neither USMX nor AK is in breach or default in
any material respect under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any
such indenture, agreement, lease or instrument.
(c) Governmental Consents. No authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority is required (i) for the due execution and
delivery of, and due performance of, the financial obligations of
USMX or AK under any Loan Document, or (ii) for the due
performance of all other obligations of USMX or AK under any of
the Loan Documents (other than registrations or filings to
perfect the liens created by the Security Documents and to
register the Conversion Shares pursuant to the Registration
Rights Agreement) except such authorizations, approvals or other
actions as have been obtained or notices or filings as have been
made. All material Project Permits are identified in Schedule
6.1(c). All Project Permits have been duly issued to or are held
by USMX or AK, are valid and in good standing and free of any
violation thereof by USMX and AK that upon disclosure, notice or
the passage of time could result in a delay in the commencement
of the Project or otherwise have a Material Adverse Effect on the
Project, and neither USMX nor AK have received any notice of an
asserted violation or proposed revocation, withdrawal or material
modification thereof.
(d) Binding Obligations. Each of the Loan
Documents when delivered hereunder will be the legal, valid and
binding obligations of USMX or AK, as the case may be,
enforceable against USMX and AK in accordance with such documents
respective terms (except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws or
equitable principles affecting enforcement of creditors' rights
generally at the time in effect).
(e) Litigation. Except as indicated in
Schedule 6.1(e), there is no action, proceeding or investigation
pending or threatened in writing against or involving USMX or AK
which alleges the violation of any laws, including Environmental
Laws, or which questions the validity of this Agreement, or any
of the Loan Documents, or any action taken or to be taken
pursuant to this Agreement, or any of the Loan Documents, or
which questions the nature or extent of USMX's or AK's equitable
or record title to the Mining Properties or assets related
thereto, or to the AK Shares, or which might result, either in
any case or in the aggregate, in any Material Adverse Effect on
the business, operations, condition (financial or otherwise),
aggregate properties or aggregate assets of USMX or AK, or in any
material liability on the part of USMX or AK.
<PAGE>
(f) Financial Statements; No Material Adverse
Change. The audited consolidated balance sheet of USMX
(including AK) as of December 31, 1995, and the related
consolidated statements of income, cash flow and stockholders'
equity of USMX (including AK) for the year then ended, audited by
KPMG Peat Marwick LLP, and the unaudited consolidating balance
sheet of USMX (including AK) as of March 31, 1996, and the
related unaudited consolidating statement of income, cash flow
and stockholders' equity of USMX for the period then ended
certified by the chief financial officer of USMX, copies of which
have been furnished to Lender, fairly present the financial
condition of USMX as at such date and the results of the
operations of USMX for the period ended on such date, all in
accordance with GAAP consistently applied. Neither USMX nor AK
have on the date hereof any material Contingent Liability or
liability for taxes, long-term leases or unusual forward or long-
term commitments which are not reflected in such financial
statements or listed in Schedule 6.1(f). Since December 31,
1995, except as previously disclosed in writing to Lender,
neither the business, operations or prospects of USMX, nor any of
its properties or assets, have been affected by any occurrence or
development (whether or not insured against) which would result,
either in any case or in the aggregate, in a Material Adverse
Effect on USMX. The unaudited consolidating balance sheet and
statement of cash flow of AK as of March 31, 1996, and the
related unaudited consolidating statement of income and retained
earnings of AK for the period then ended, copies of which have
been furnished to Lender, fairly present the financial condition
of AK as at such date and the results of the operations of AK for
the period ended on such date, all in accordance with GAAP
consistently applied. AK has on the date hereof no material
Contingent Liability or liability for taxes, long-term leases or
unusual forward or long-term commitments which are not reflected
in such financial statements or listed in Schedule 6.1(f). Since
December 31, 1995, except as previously disclosed in writing to
Lender, neither the business, operations or prospects of AK, nor
any of its properties or assets, have been affected by any
occurrence or development (whether or not insured against) which
would result, either in any case or in the aggregate, in a
Material Adverse Effect on AK.
(g) Other Agreements. Neither USMX nor AK is a
party to any indenture, loan or credit agreement or any lease or
other agreement or instrument (other than the Material
Agreements) or subject to any charter or other corporate
restriction which would, upon a default thereunder or otherwise,
result in a Material Adverse Effect on USMX or AK, or materially
impair the ability of USMX or AK to carry out their respective
Obligations under this Agreement, or any of the Loan Documents.
(h) Information Accurate. Except as disclosed to
Lender on Schedule 6.1(h) hereto, none of the information
delivered to Lender by USMX or AK in connection with the
transactions contemplated by this Agreement and the AK Credit
Agreement, including all representations and warranties, contains
any material misstatement of fact or omits to state a material
fact, and all projections contained in any such information,
exhibits or reports (including in particular the Feasibility
Study and the Development Plan), were based on information which
when delivered was, to the best knowledge of USMX, true and
correct, and to the best knowledge of USMX all calculations
contained in such projections were accurate, and such projections
presented USMX's then-current estimate of its future business,
<PAGE>
operations and affairs and, since the date of the delivery of
such projections, to the best knowledge of USMX, there has been
no material change in the assumptions underlying such
projections, or the basis therefor or the accuracy thereof.
(i) Title to Properties; Liens.
(i) With respect to the Mining Properties
owned by USMX and AK which are subject to any of the Security
Documents, the Second Mortgage or the Fourth Mortgage, USMX and
AK are in exclusive possession of and own such properties free
and clear of all material defects of title, burdens on production
or Liens, except Liens disclosed in Schedule 6.1(i) and
specifically identified in the Security Opinion delivered by USMX
pursuant hereto.
(ii) With respect to the Mining Properties
held under leases or other contracts which are subject to any of
the Security Documents: (A) USMX and AK are in exclusive
possession of such properties other than the airstrip located on
those properties and any navigable waters; (B) neither USMX nor
AK has received any notice of, and has no knowledge of any facts
or circumstances that, with the passage of time or notice, or
both, could result in default of any of the terms or provisions
of such leases or contracts; (C) under such leases and contracts
USMX or AK (as the case may be) has the authority to perform
fully, and no provision of any such lease prohibits or would be
breached by USMX's or AK's performance of, their respective
obligations under this Agreement and the other Loan Documents;
(D) to the best of USMX's knowledge and belief, such leases and
contracts are valid and are in good standing; and (E) to the best
of USMX's knowledge and belief, the properties covered thereby
are free and clear of all defects of title or Liens, except for
those specifically identified in the Security Opinion or
disclosed in Schedule 6.1(i) hereto. USMX has delivered or will
make available to Lender all information concerning title to the
properties in USMX's or AK's possession or control, or to which
USMX or AK has access, which Lender requests.
(iii) With respect to mining claims,
leases and other property interests (for purposes of this Section
6.1(i)(iii), "Claims") which are subject to any of the Security
Documents, except as provided in the Security Opinion: (A) the
Claims are free of Liens, except as disclosed in Schedule 6.1(i);
(B) to the best of USMX's knowledge (w) the Claims were properly
located and monumented; (x) all required location and validation
work was properly performed; (y) location notices and
certificates were properly recorded and filed with appropriate
Government Authority; and (z) all assessment work or fees, or
both, required to hold the Claims have been paid or performed in
a manner consistent with generally accepted standards of major
companies in the mining industry through the assessment year
ending August 31, 1996; (C) all maintenance fee or rental
payments have been duly and timely made in order to maintain such
Claims through August 31, 1996; (D) all affidavits of assessment
work or other filings required to maintain the Claims in good
standing have been timely recorded or filed with the appropriate
Governmental Authorities; and (E) USMX has no knowledge of
conflicting claims, except overlaps to avoid gaps or to maintain
parallel end lines, or inadvertent overstakings which do not
impair USMX's property position.
<PAGE>
(iv) Except as disclosed on Schedule 6.1(i),
no approval or consent of any Governmental Authority or any other
party is necessary to authorize the execution and delivery of any
Loan Document or any other Instrument constituting or evidencing
obligations under this Agreement or the AK Credit Agreement.
(j) Securities Activities. The proceeds of the
Loan hereunder will not be used to acquire any security in any
transaction which is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended. USMX is not engaged
in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation X of
the Federal Reserve Board) or carrying any margin stock.
(k) Solvency. USMX is not entering into the
arrangements contemplated by this Agreement or any of the other
Loan Documents with actual intent to hinder, delay or defraud
either present or future creditors. On and as of the date
hereof, and thereafter on and as of the date of the undertaking
of any actions contemplated by this Agreement, including, without
limitation, the Advance of the Loan, after giving effect to the
Loan, and all such Instruments, and to any fees and expenses in
connection with such undertaking, (i) USMX's property at a fair
valuation, is, and will be, greater than the sum of its
Indebtedness (including its Contingent Liabilities); (ii) the
present fair salable value of USMX's assets exceeds, and will
exceed, the probable liability of USMX on its Indebtedness
(including its Contingent Liabilities) as they become absolute
and mature; (iii) USMX has not, and will not have, incurred, and
does not intend to, or believe that it will, incur debts
(including its Contingent Liabilities) beyond its ability to pay
such debts as such debts mature (taking into account the timing
and amounts of cash to be received by USMX from any source, and
of amounts to be payable on or in respect of its debts), and the
cash available to USMX after taking into account all other
anticipated uses of the cash, is, and is anticipated to be,
sufficient to pay all such amounts on or in respect of such debts
(including its Contingent Liabilities), when such amounts are
required to be paid; and (iv) subject to receipt of the Loan,
USMX has sufficient capital with which to conduct its business
and USMX's capital does not constitute unreasonably small capital
with which to conduct its business. As used in
clauses (i) through (iv) above, the terms therein shall have the
meanings as used in Section 548 of the United States Bankruptcy
Code, the Uniform Fraudulent Conveyance Act and any applicable
state law concerning fraudulent conveyances as such may from time
to time have been amended or developed by judicial interpretation
to the date the representations herein are made.
(l) USMX's and AK's Capital Structure. USMX and
AK have the number of authorized, issued and outstanding shares
specified in Schedule 6.1(l). All shares of stock and other
shares or interests identified in such Schedule were duly and
validly issued and are non-assessable. Except as indicated in
Schedule 6.1(l), USMX and AK have no outstanding warrants or
other obligations to issue additional shares or other equity
interests, including any stock or securities convertible into or
exercisable or exchangeable for any shares of their respective
capital stock or any rights or options to purchase any of the
foregoing, or to convert any existing Indebtedness to equity
interests in USMX or AK.
(m) Hedging Contract Obligations. Except as set
<PAGE>
forth in Schedule 6.1(m), USMX has no Hedging Contracts currently
in effect for Gold.
(n) Material Agreements; Absence of Default. All
of USMX's and AK's Material Agreements are identified in
Schedule 6.1(n). Neither USMX nor AK is in default under any of
the Material Agreements and has not received any notice of an
asserted default thereunder from any other Person that is a party
to any such agreement.
(o) Taxes and Other Payments. USMX and AK have
filed all tax returns (including all property tax returns and
other similar tax returns applicable to the Mining Properties)
and reports required by law to have been filed by either of them
and have paid all taxes and governmental charges thereby shown to
be owing and due, and all claims for sums due for labor,
material, supplies, personal property and services of every kind
and character provided with respect to, or used in connection
with the Mining Properties and no claim for the same exists
except as permitted hereunder, except any such taxes, charges or
amounts which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside on the books of USMX or
AK, or for which failure to file any return or pay any tax or
charge could not have a Material Adverse Effect on the Project or
materially delay commencement of the Project.
(p) Development Plan. The Development Plan has
been prepared in accordance with prudent mining practices and
after diligent inquiry by USMX, and USMX is not aware of any
facts or state of affairs which would materially hinder or
prevent USMX or AK from operating the Mining Properties in
accordance with the Development Plan and achieving, after
allowance for existing royalty burdens, the net gold production
provided for therein.
(q) Compliance With Laws. Except as set forth in
Schedule 6.1(q):
(i) USMX and AK are in compliance with all
laws, regulations and rules of federal, state and local
Governmental Authorities and, in the case of USMX, of the NASDAQ,
including in particular, all requirements for public disclosure
of information concerning USMX, AK, their properties, business
and prospects.
(ii) all facilities and property (including
underlying groundwater) comprising the Mining Properties have
been, and continue to be, owned, operated, leased or utilized by
USMX and AK in material compliance with all applicable laws,
including Environmental Laws; and
(iii) with respect to the Mining
Properties, there have been no past, and there are no pending or
threatened claims, complaints, notices or requests for
information received by USMX or AK with respect to any alleged
violation of any law, including Environmental Laws.
(r) USMX's and AK's Indebtedness. Except as
disclosed on Schedule 6.1(r) or specifically identified in the
financial statements of USMX and AK identified in Section 6.1(f),
USMX and AK have no existing Indebtedness which is not in the
ordinary course of business.
<PAGE>
(s) Employee Benefit Plans. Except as disclosed
on Schedule 6.1(s), USMX has not established, does not maintain
and has made no contributions to, nor has any liability with
respect to, any Plan
(t) Insurance. USMX maintains in effect the
insurance identified in Schedule 7.4, and such insurance is with
responsible and reputable insurance companies or associations in
such amounts and covering such risks as is prudent and consistent
with good operating practices.
6.2 Representations and Warranties of Lender. Lender
represents and warrants as follows:
(a) Authorization. Lender has full power and
authority to enter into this Agreement and each of the Loan
Documents when delivered hereunder will be the legal, valid and
binding obligations of the Lender enforceable against the Lender
in accordance with such documents' respective terms (except as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws generally at the time in effect).
(b) Purchase Entirely for Own Account. This
Agreement is made with the Lender in reliance upon the Lender's
representation to USMX, which by the Lender's execution of this
Agreement Lender hereby confirms, that the Convertible Note to be
received by Lender and the Common Stock issuable upon conversion
thereof (collectively, the "Securities") will be acquired for
investment for Lender's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part
thereof, and that Lender has no present intention of selling,
granting any participation in, or otherwise distributing the
Securities. By executing this Agreement, Lender further
represents that Lender does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer, or
grant participation to such person or any third party with
respect to any of the Securities.
(c) Disclosure of Information. Lender believes
it has received all the information it considers necessary or
appropriate for deciding whether to enter into this Agreement and
acquire the Convertible Note. Lender further represents that it
has had an opportunity to ask questions and receive answers from
USMX regarding the terms and conditions of the Convertible Note
and the business, properties, prospects and financial condition
of USMX.
(d) Investment Experience. Lender is an investor
in securities of companies which can be considered speculative in
nature and acknowledges that it is able to fend for itself, can
bear the economic risk of its investment, and has such knowledge
and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment in
the Securities.
(e) Restricted Securities. Lender understands
that the Securities it is purchasing are characterized as
"restricted securities" under the federal securities laws
<PAGE>
inasmuch as they are being acquired from USMX in a transaction
not involving a public offering and that under such laws and
applicable regulations, such securities may be resold without
registration under the Securities Act of 1933, as amended, only
in certain limited circumstances.
ARTICLE 7
AFFIRMATIVE COVENANTS OF USMX
So long as the Loan or the Convertible Note shall
remain unpaid, or any other Obligation of USMX hereunder or under
the Guaranty shall not have been fully performed or waived by
Lender, USMX shall, unless Lender otherwise consents in writing
(which consent Lender may grant or withhold in its sole
discretion), perform all covenants in this Article 7.
7.1 Compliance with Laws, Etc. USMX shall comply in
all material respects with all applicable laws (including without
limitation Environmental Laws), rules, regulations and orders,
such compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments, and governmental
charges imposed upon its property, except to the extent contested
in good faith and adequately reserved for in accordance with
GAAP.
7.2 Reporting Requirements. USMX shall deliver to
Lender the reports, information and certificates set forth below:
(a) Quarterly Financial Information. As soon as
available and in any event within 60 days after the end of each
of the first three quarters of each year, a consolidated balance
sheet of USMX, and consolidated statements of income, cash flow
and retained earnings of USMX for such quarter and for the period
commencing at the end of the previous year and ending with the
end of such quarter.
(b) Annual Financial Information. As soon as
available and in any event within 105 days after the end of each
year, a consolidated balance sheet of USMX, as of the end of such
year and consolidated statements of income, cash flow and
retained earnings of USMX for such year, certified in a manner
acceptable to Lender by KPMG Peat Marwick LLP, or other certified
public accountants reasonably acceptable to Lender.
(c) Litigation. Promptly after initiation
thereof, notice of any litigation by or against USMX, AK or the
Illinois Creek Gold Property, or litigation against USMX's or
AK's other properties which could have a Material Adverse Effect
on USMX or AK.
(d) Other Information. Such other information
concerning the condition or operations, financial or otherwise,
of USMX and AK as Lender may from time to time reasonably
request. USMX shall keep Lender informed regarding all material
developments concerning the Illinois Creek Gold Property,
including all developments concerning Project Permits.
<PAGE>
7.3 Inspection. At any reasonable time during normal
business hours and from time to time, on reasonable notice, USMX
shall permit Lender or its agents or representatives to examine
and make copies of and abstracts from the records and books of
account of, and visit the properties of, USMX and to discuss the
affairs, finances and accounts of USMX with any of its officers,
directors, employees or agents. USMX will not be responsible for
injuries to or damages suffered by agents or representatives of
Lender while visiting the properties of USMX unless such injuries
or damage are caused or contributed to by the negligence or
willful misconduct of USMX or its employees or agents in which
event USMX shall indemnify Lender proportionally to the extent
such injuries or damages are directly or indirectly attributable
to such negligence or misconduct. Lender shall be entitled to
conduct a technical due diligence review of the Project at any
time, and will be entitled to be reimbursed by USMX for the
reasonable costs thereof.
7.4 Maintenance of Insurance. USMX shall maintain,
with respect to its assets and its business generally (or, with
respect to the Mining Properties, cause AK to maintain),
insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is
prudent and consistent with good operating practices, with such
insurance listed in Schedule 7.4. All such insurance shall name
Lender as an additional insured or loss payee, as the case may
be, and shall contain an endorsement providing that such
insurance cannot be terminated without at least ten days' prior
notice to Lender.
7.5 Keeping of Records and Books of Account. USMX
shall keep adequate records and books of account, in which
complete entries shall be made in accordance with GAAP
consistently applied, reflecting all financial transactions of
USMX.
7.6 Preservation of Existence, Etc. USMX shall
preserve and maintain, and shall cause AK to preserve and
maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and will,
and will cause AK to, qualify and remain qualified as a foreign
corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or
the ownership of its properties. USMX will comply with all
requirements of applicable law and all rules, regulations and
requirements of stock exchanges on which the Common Stock is
traded concerning disclosure of matters relevant to USMX and its
properties, and will timely file full and complete reports
concerning its business and operations as required by such laws,
rules, regulations and requirements.
7.7 Conduct of Business. USMX shall engage
principally in the business of exploring for, developing and
operating mining properties, and in activities incident thereto,
in accordance with generally accepted industry practices. USMX
shall cause AK to comply with all of its obligations, agreements
and covenants under the AK Credit Agreement and documents and
other Instruments entered into by AK pursuant thereto.
7.8 Notice of Default. USMX shall furnish to Lender
as soon as possible and in any event within five Business Days
after the occurrence of each Event of Default or each event or
condition which with the giving of notice or lapse of time, or
both, would constitute an Event of Default, continuing on the
date of such statement, a statement of the president or chief
financial officer of USMX setting forth the details of such Event
of Default or event or condition, and the action which USMX
<PAGE>
proposes to take with respect thereto.
7.9 Defense of Title. USMX shall, or shall cause AK
to, defend, at its expense, title to the Mining Properties, as
such title is represented and warranted in Section 6.1(i), and
the Liens in favor of Lender under the Security Documents, and
maintain and preserve such Liens as first Liens upon the
properties and interests subject to the Security Documents,
subject only to Permitted Liens.
7.10 Operations. USMX agrees to use, or cause AK to
use, all commercially reasonable efforts to maintain, develop and
operate the Illinois Creek Gold Property in accordance with
prudent mining industry practices, the Feasibility Study and the
Development Plan.
7.11 Maintenance of the Mining Properties. USMX agrees
to maintain, and cause AK to maintain, its property rights and
interests in the Mining Properties in full force and effect, and
to do all acts reasonably determined by USMX to be necessary to
preserve such rights and interests, including, by way of example
and not limitation, payment and performance of all terms of
leases pertaining to such rights and interests, and timely
performance of work reasonably intended to satisfy any annual
assessment work requirements for unpatented mining or millsite
claims included in such properties, or timely payment of
appropriate sums in lieu of performance of assessment work, and
timely filing of federal, provincial and state notices with
respect thereto; provided, however, that USMX or AK may, in the
ordinary course of its and AK's business, abandon unpatented
mining or millsite claims and/or leased properties which USMX
does not believe warrant further maintenance expenditures.
ARTICLE 8
NEGATIVE COVENANTS OF USMX
So long as the Loan and the Convertible Note shall
remain unpaid, or any other Obligation of USMX hereunder or under
the Guaranty shall not have been fully performed by USMX, or
waived by Lender, USMX shall, unless Lender otherwise consents in
writing (which consent Lender may grant or withhold in its sole
discretion), perform all covenants in this Article 8.
8.1 Indebtedness. USMX shall not, and shall not
permit AK to, directly or indirectly, create, incur, assume or
suffer to exist, any Indebtedness except (a) Indebtedness
hereunder and under the Convertible Note; (b) Indebtedness
secured by Liens permitted by Section 8.2; (c) Indebtedness
existing on the date hereof disclosed to Lender, (d) unsecured
trade payables; (e) Indebtedness incurred in the ordinary course
of business; (f) Indebtedness consisting of purchase or leasehold
obligations associated with the Project contemplated by the
Development Plan; (g) Indebtedness incurred by USMX for purposes
of developing the Illinois Creek Gold Property in accordance with
the Development Plan which has been approved by Lender, such
approval not to be unreasonably withheld by Lender; and (h) after
Completion (as that term is defined in the AK Credit Agreement),
<PAGE>
indebtedness incurred by USMX for purposes of developing mining
properties where the sole recourse of the lender is the mining
property being developed.
8.2 Liens, Etc. USMX shall not, and shall not permit
AK to, directly or indirectly, create, incur, assume or suffer to
exist any Lien, upon or with respect to any portion of the Mining
Properties, now owned or hereafter acquired, or assign or
otherwise convey any right to receive the production, proceeds or
income therefrom, except:
(i) Liens for taxes, assessments or
governmental charges or levies if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings;
(ii) Liens imposed by law, such as carriers,
warehousemen and mechanics' liens and other similar liens arising
in the ordinary course of business associated with amounts not
yet due and payable, or which are being disputed in good faith by
USMX or AK;
(iii) Liens of purchase money mortgages
and other security interests on equipment acquired, leased or
held by USMX or AK (including equipment held by USMX or AK as
lessee under leveraged leases) in the ordinary course of business
to secure the purchase price of or rental payments with respect
to such equipment or to secure indebtedness incurred solely for
the purpose of financing the acquisition (including acquisition
as lessee under leveraged leases), construction or improvement of
any such equipment to be subject to such mortgages or security
interests, or mortgages or other security interests existing on
any such equipment at the time of such acquisition, or
extensions, renewals or replacements of any of the foregoing for
the same or a lesser amount, provided that no such mortgage or
other security interest shall extend to or cover any equipment
other than the equipment being acquired, constructed or improved,
and no such extension, renewal or replacement shall extend to or
cover any property not theretofore subject to the mortgage or
security interest being extended, renewed or replaced, and
provided further, that any such Indebtedness shall not otherwise
be prohibited by the terms of this Agreement;
(iv) Liens outstanding on the date hereof and
described in Schedule 6.1(i) hereto;
(v) Liens arising under the Security
Documents, the AK Credit Agreement, the Second Mortgage, the
Fourth Mortgage, the NPMC Agreement or this Agreement;
(vi) the Lien or any right of distress
reserved in or exercisable under any lease for rent and for
compliance with the terms of such lease, provided there is no
rent in arrears under such lease;
(vii) cash labor or governmental
obligations deposited in the ordinary course of business in
connection with contracts, bids, tenders or to secure workmen's
<PAGE>
compensation, unemployment insurance, surety or appeal bonds,
costs of litigation, when required by law, public and statutory
obligations, Liens or claims incidental to current construction,
mechanics', warehousemen's, carriers' and other similar Liens;
(viii) Liens given in the ordinary course
of business to a public utility or any municipality or
governmental or other public authority when required by such
utility or municipality or governmental or other authority in
connection with the operations of USMX or AK;
(ix) easements, rights-of-way and servitudes
which in the opinion of Lender (in its sole discretion) will not
in the aggregate materially impair the use of the Illinois Creek
Gold Property by USMX or AK for the Project;
(x) title defects or irregularities which in
the opinion of Lender (in its sole discretion reasonably
exercised) are of a minor nature and in the aggregate will not
materially impair the use of the Illinois Creek Gold Property for
the Project or materially affect the security created hereby;
(xi) liens related to Indebtedness permitted
by Section 8.1(h); and
(xii) all rights reserved to or vested in
any governmental body by the terms of any lease, license,
franchise, grant or permit held by USMX or AK or by any statutory
provision to terminate any such lease, license, franchise, grant
or permit or to require annual or other periodic payments as a
condition of the continuance thereof or to distrain against or to
obtain a lien on any property or assets of USMX or AK in the
event of failure to make such annual or other periodic payments.
8.3 Assumptions, Guarantees, Etc. of Indebtedness of
Other Persons. USMX shall not, and shall not permit AK to,
directly or indirectly, assume, guarantee, endorse or otherwise
become directly or contingently liable (including, without
limitation, liable by way of agreement, contingent or otherwise,
to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor or otherwise to assure the
creditor against loss) in connection with any Indebtedness of any
other Person, except guarantees by endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of business, or in respect of provision of
labor or materials for the Project or in connection with bonds,
letters of credit or other security posted by USMX in the
ordinary course of business in connection with the Project
(including the Guaranty) or the guarantee of obligations of
USMX's subsidiaries listed on Schedule 6.1(a) for the development
of mining properties, which guarantees are approved by Lender in
its sole discretion reasonably exercised.
8.4 Investments in Other Persons. USMX shall not
directly or indirectly, (i) make any loan to any Person other
than AK utilizing the Loan proceeds, (ii) make any loan (other
than loans approved by Lender for capital expenditures and
exploration expenses by Affiliates) to any Person in aggregate
exceeding $50,000, or (iii) purchase or otherwise acquire the
<PAGE>
capital stock, assets, or obligations of, or any interest in, any
Person other than (y) wholly-owned subsidiaries of USMX formed
by USMX, or (z) readily marketable direct obligations of the
United States of America and certificates of time deposit issued
by Lender or commercial banks of recognized standing operating in
the United States of America or other investment grade
instruments reasonably approved by Lender); provided, however,
that to the extent USMX invests in any such Person, it shall
inform Lender thereof promptly upon such investment and shall
provide all information with respect to such Person as Lender may
require.
8.5 Mergers, Changes in Capital Structures, Etc.
USMX shall not, and shall not permit AK to, directly or
indirectly, merge or consolidate with any Person, or sell,
assign, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person,
or acquire (whether in one transaction or in any series of
transactions) all or substantially all of the assets of any
Person, without the prior written consent of Lender. USMX will
not, and shall not permit AK to, establish, or enter into
agreements or other arrangements which obligate USMX or AK, as
the case may be, to establish, any capital structure which
consists of equity interests in USMX or AK other than the Common
Stock (in the case of USMX) or the common stock of AK currently
issued and outstanding; provided that after Completion, USMX may
do any of the foregoing so long as USMX is the survivor of any
merger, consolidation or other combination, and at all times
before and after such combination is in full compliance with its
agreements, obligations and covenants hereunder and pursuant to
the Guaranty.
8.6 Restriction on Dividends and Redemptions. USMX
shall not declare, order, pay or make any dividend, stock
repurchase or other distribution, directly or indirectly, in
respect of any shares of any class of stock of USMX, now or
hereafter outstanding, except for dividends payable solely in
shares of that class of stock to the holders of that class.
8.7 Disposition of Illinois Creek Gold Property. USMX
shall not, directly or indirectly, nor shall USMX permit AK to
directly or indirectly, sell, transfer, assign or otherwise
dispose of any of its assets or properties related to the
Project, except (i) for sales of gold, other mineral production
and other properties and assets related to the Project, (ii) as
provided by Section 7.11 with regard to abandoning certain
rights, (iii) for the transfer of the Mining Properties or other
property related to the Project from USMX to AK, and (iv) for
disposition of equipment that is replaced by equipment of equal
or higher capacity or value.
8.8 Restrictive and Inconsistent Agreements. USMX
will not enter into any agreement or undertaking or incur or
suffer any obligation prohibiting or inconsistent with the
performance by USMX of the Obligations or of AK of its
obligations under the AK Credit Agreement.
<PAGE>
ARTICLE 9
CONVERSION RIGHTS
9.1 Lender's Loan Conversion Rights. At any time
after the date of the Advance while the Loan remains outstanding
and unpaid, Lender may by notice to USMX and at any time that the
Principal Amount remains outstanding, elect to convert all or any
part of the Principal Amount into all or any portion of the
Conversion Shares in accordance with the provisions of this
Article 9. Upon such conversion, the Principal Amount of the
Loan shall be deemed to have been paid in full.
9.2 USMX's Loan Conversion Rights. Upon the
satisfaction of the Conditions Precedent to USMX's Conversion
Rights and while such conditions remain satisfied, USMX may for a
period of five (5) Trading Days beginning on the first Trading
Day after the Conditions Precedent to USMX's Conversion Rights
are first satisfied, by notice to Lender, elect to convert the
Loan into the Conversion Shares in accordance with the provisions
of this Article 9. Upon any such conversion, the Principal
Amount of the Loan will be deemed to have been paid in full.
Failure of USMX to provide Lender with notice herein required
within the five (5) Trading Day period specified in this Section
9.2 shall terminate any right USMX has to require Lender to
convert the Loan into shares of Common Stock.
9.3 Loan Conversion Procedures.
(a) Conversion Date. The Conversion Date will be
the fifth Business Day following the date of exercise by either
Lender or USMX of its Conversion Right.
(b) Conversion Procedures. Not later than the
Conversion Date, USMX will have taken all actions, including
filing reports required by Governmental Authorities or with stock
exchanges on which the Common Stock is traded and preparation of
a certificate or certificates for the Common Stock to be issued
upon conversion in the denominations requested by Lender, as are
necessary to enable USMX to deliver to Lender on the Conversion
Date the certificates for the Conversion Shares. Whether or not
USMX delivers such certificates on the Conversion Date, Lender
will be deemed to be the owner of the Conversion Shares as of the
Conversion Date, with all voting rights, rights to receive
dividends and distributions and all other rights associated with
ownership of the Conversion Shares. Upon delivery of
certificates for such Common Stock, Lender will deliver the
Convertible Note to USMX, marked paid and endorsed by Lender or
the Holder thereof.
(c) Certain Agreements Regarding Conversion
Rights.
(i) No fractional shares of Common Stock
will be issued upon exercise of a Conversion Right. Instead of
any fractional share of Common Stock that would otherwise be
issuable upon such conversion, USMX will pay Lender or Holder a
cash adjustment in respect of such fraction determined by
multiplying such fraction times the Conversion Price.
<PAGE>
(ii) If after the date hereof USMX
A. pays a
dividend or makes a distribution on
the Common Stock in shares of
Common Stock;
B. subdivides
the shares of Common Stock
outstanding on the date hereof into
a greater number of shares of
Common Stock;
C.
consolidates the number of shares
of Common Stock outstanding on the
date hereof into a smaller number
of shares of Common Stock; or
D. issues any
shares of Common Stock by reason of
any reclassification of shares;
the Conversion Price in effect immediately prior thereto shall be
adjusted so that Lender will, upon exercise of the Conversion
Rights be entitled to receive the number of shares of Common
Stock which Lender would have owned or have been entitled to
receive after the happening of any of the events described above
in this clause (ii) had the Loan been converted immediately prior
to the happening of such event. An adjustment made pursuant to
this clause (ii) shall become effective immediately after the
close of business on the record date in the case of a dividend or
distribution and shall become effective immediately after the
close of business on the record date in the case of a
subdivision, consolidation or reclassification.
(iii) If after the date hereof USMX shall
issue rights or warrants entitling any Persons to subscribe for,
purchase or otherwise receive Common Stock to be issued by USMX
at a price less than the Daily Closing Price on the Trading Day
preceding the date of issuance of such rights or warrants, then
the Conversion Price in effect immediately prior thereto shall be
adjusted to equal an amount determined by multiplying (I) the
Conversion Price in effect immediately prior to the date of
issuance of such rights or warrants by (II) a fraction, the
numerator of which shall be the sum of (w) the number of shares
of Common Stock outstanding on the date of issuance of such
rights or warrants (without giving effect to shares of Common
Stock which may be issued upon exercise thereof) and (x) the
number of shares of Common Stock which the consideration received
or to be received by USMX in connection with issuance and
exercise of such rights or warrants would purchase at such Daily
Closing Price; and the denominator of which shall be the sum of
(y) the number of shares of Common Stock determined in (w) above
and (z) the number of shares of Common Stock issued or issuable
upon exercise of such rights or warrants in accordance with the
terms thereof.
<PAGE>
9.4 Lender's Registration Rights Upon Loan Conversion.
USMX shall execute and deliver herewith the Registration Rights
Agreement in the form of Exhibit D providing for the registration
of the Conversion Shares as freely tradable shares of stock
pursuant to applicable federal and state securities laws.
ARTICLE 10
EVENTS OF DEFAULT
10.1 Event of Default. Each of the following events
shall be an "Event of Default" hereunder:
(a) Nonpayment. USMX shall fail to pay any
principal when due hereunder (whether at stated maturity or by
prepayment or otherwise), or shall fail to pay interest hereunder
or on the Convertible Note when due.
(b) Other Defaults. USMX or AK shall fail to
observe or perform any of their respective covenants,
undertakings or agreements contained in this Agreement, the AK
Credit Agreement or any other Loan Document other than the
covenants referred to in paragraph (a) above, and USMX or AK has
not remedied such default within ten days after notice of default
has been given by Lender to USMX or AK, as the case may be.
(c) Representation or Warranty. Any representa
tion or warranty made by USMX or AK (or any of their officers)
under or in connection with this Agreement, the AK Credit
Agreement and related agreements and Instruments, or the other
Loan Documents shall prove to have been incorrect in any material
respect when made.
(d) Cross-Default. A default shall occur under
the AK Credit Agreement or related agreements and Instruments,
any of the other Loan Documents, or under any agreement
pertaining to Indebtedness permitted by Section 8.1, or USMX or
AK shall fail to pay any Indebtedness in excess of $100,000 in
principal amount (but excluding Indebtedness evidenced by the
Convertible Note and the Pledged Notes), or any interest or
premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such
failure to pay is not being contested by USMX or AK, as
appropriate, in good faith; or any other default under any
agreement or instrument relating to any such Indebtedness or any
other event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument,
if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Indebtedness,
unless such default or event shall be waived by the holders or
trustees for such Indebtedness; or any such Indebtedness shall be
declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), prior to the
stated maturity thereof.
(e) Insolvency. Either USMX or AK shall
<PAGE>
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 USMX or AK
seeking to adjudicate it a bankrupt or insolvent, or seeking a
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 any order for relief
or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property and,
if instituted, shall remain undismissed for a period of 60 days;
or USMX or AK shall take any corporate action to authorize any of
the actions set forth in this paragraph (f).
(f) Judgments. A final judgment or order for
the payment of money in excess of $100,000 shall be rendered
against USMX or AK and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order
or (ii) a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect
for any period of ten consecutive days.
(g) Security Interest. Any of the Security
Documents or Instruments creating security interests delivered by
USMX or AK pursuant to the AK Credit Agreement, after delivery
thereof shall for any reason, except to the extent permitted by
the terms thereof, cease to create a valid and perfected security
interest with the priority required by this Credit Agreement or
the AK Credit Agreement in any of the Collateral purported to be
covered thereby, or USMX or AK shall so state in writing.
(h) Condemnation. Any of the interests of USMX
or AK in the Mining Properties is taken by power of expropriation
or eminent domain or sold under threat of such taking, or
possession of any portion of the lands necessary for the
operation of the Project is taken through exercise of such power,
and such taking, loss or sale has or could have a Material
Adverse Effect on the Project, as determined by the Lender in its
sole discretion reasonably exercised.
(i) Regulatory Action. Any Governmental
Authority shall take any action with respect to USMX, AK or the
Project or any other Collateral subject to the Security Documents
which would have a Material Adverse Effect on USMX, AK,
operations on the Project or USMX's ability to repay the Loan
unless such action is set aside, dismissed or withdrawn within 90
days of its institution or such action is being contested in good
faith and its effect is stayed during such contest.
(j) Adverse Project Developments. If any of the
following occurs:
(i) The Project is abandoned or terminated,
or the Board of Directors of USMX or AK elects not to proceed
with the Project for whatever reason;
(ii) An Illinois Creek Loan Acceleration
Date occurs;
(iii) NPMC elects to participate for a
<PAGE>
25% working interest in the Project and NPMC has not become a
party to this Agreement and the Loan Documents, and executed and
delivered such other agreements and Instruments as Lender, in its
sole discretion, deems necessary or desirable in order to
evidence and secure Lenders interests in the Mining Properties
and the Project in the manner and to the extent contemplated by
this Agreement and the Loan Documents;
(iv) USMX breaches any agreement, covenant
or undertaking under the NPMC Agreement which is not waived or
cured within the applicable grace period, including without
limitation, its obligation to register as provided by the NPMC
Agreement the shares of USMX common stock issued to NPMC pursuant
to such agreement; or
(v) A material adverse change occurs in the
permitting process involving the Project Permits.
(k) Default Under Hedging Contract. Any
condition or event or combination thereof exists under a Hedging
Contract which, of itself, or, with notice or the passage of
time, will constitute a default by USMX or AK under such contract
or give rise to remedies of the other party of acceleration of
time of performance by USMX or AK of its obligations thereunder.
10.2 Remedies Upon Event of Default.
(a) Upon the occurrence of an Event of Default
specified in Section 10.1(e) of this Agreement or, in the case of
any other Event of Default, upon notice by Lender to USMX of
Lender's election to declare USMX in default, the obligations of
Lender hereunder including, without limitation, Lender's
obligation to Advance the Loan, shall terminate. The date on
which such notice is sent or, in the case of an Event of Default
specified in Section 10.1(e) of this Agreement, the date of such
Event of Default, shall be the "Date of Default."
(b) Upon the Date of Default, upon notice
thereof from Lender to USMX in all cases other than the
occurrence of an Event of Default as specified in
Section 10.1(e), the Loan, all interest thereon, Breakage Costs
and all other amounts owed by USMX hereunder shall be immediately
due and payable in full. In the case of an Event of Default
specified in Section 10.1(e), no notice from Lender shall be
required, and all amounts owed by USMX hereunder shall be
immediately due and payable on the Date of Default, without
notice from Lender.
(c) Upon the occurrence of an Event of Default,
all of the remedies provided to Lender in all of the Security
Documents shall immediately become available to Lender.
(d) Except as expressly provided above in this
Section 10.2, presentment, demand, protest and all other notices
of any kind are hereby expressly waived. From and after the Date
of Default, interest shall accrue at the Default Rate provided in
<PAGE>
Section 3.3(c) and shall be payable on demand.
ARTICLE 11
MISCELLANEOUS
11.1 Amendments, Etc. Except as otherwise expressly
provided in this Agreement, no amendment or waiver of any
provision of this Agreement or of the Convertible Note, nor
consent to any departure by USMX therefrom, shall in any event be
effective unless the same shall be in writing and signed by
Lender, and, in the case of any amendment, by USMX, and then such
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
11.2 Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telex, telegraphic and facsimile communication) and
mailed, transmitted, telegraphed, sent by facsimile, or
delivered,
if to USMX,
USMX, INC.
141 Union Blvd., Suite 100
Lakewood, Colorado 80228
Attention: Chief Financial Officer
Telephone: (303)-985-4665
Facsimile: (303)-980-1363;
if to AK,
USMX OF ALASKA, INC.
141 Union Blvd., Suite 100
Lakewood, Colorado 80228
Attention: President
Telephone: (303) 985-4665
Facsimile: (303) 980-1363;
and if to Lender,
N M Rothschild & Sons Limited
New Court, St. Swithin's Lane
London EC4P 4DU
Attention: Nick Wood
Telephone: 011 44-171-280-5000
Facsimile: 011 44-171-280-5139;
<PAGE>
with a copy to
Rothschild Denver Inc.
3020 Republic Plaza
370 Seventeenth Street
Denver, Colorado 80202
Attention: Mark Williamson
Telephone: (303) 607-9890
Facsimile: (303) 572-5472
as to each party, at such other address or number as shall be
designated by such party in a written notice to the other
parties. All such notices and communications shall be effective
(a) when received, if mailed by registered or certified mail or
physically delivered; (b) five days after being sent by mail, if
sent by ordinary mail; and (c) upon confirmation of transmission,
if sent by telex or facsimile on a Business Day, addressed in
each case as aforesaid, except that notices to Lender under
Articles 2 or 3 shall not be effective until received by Lender.
11.3 No Waiver; Remedies. No failure on the part of
Lender to exercise, and no delay in exercising, any right here
under or under the Convertible Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right
hereunder or under the Convertible Note 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.
11.4 Costs, Expenses and Taxes. USMX agrees to pay
within five (5) Business Days of demand all reasonable costs and
expenses in connection with the preparation, execution, delivery
and administration of this Agreement, the Loan Documents, and the
other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of legal counsel and
any independent consultants to Lender and all other out-of-pocket
expenses of Lender, and all costs and expenses, if any, in
connection with the enforcement of this Agreement, the Loan
Documents, and the other documents to be delivered hereunder.
All such expenses will be itemized in reasonable detail. In
addition, USMX shall pay any and all stamp, mortgage recording
and other taxes, filing fees or charges payable or determined to
be payable in connection with the execution and delivery of this
Agreement, the Loan Documents, and the other documents to be
delivered hereunder, and agrees to save 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, filing fees or
charges.
11.5 Binding Effect; Assignment. This Agreement shall
be binding upon and inure to the benefit of USMX, Lender and
their respective permitted successors and assigns; provided that
USMX shall not have the right to assign any of its rights or
obligations hereunder or any interest herein without the prior
written consent of the Lender. Lender may assign to its
successors and affiliates, or may grant participations to one or
more banks or other Persons in or to all or any part of, and may
assign to one or more banks or other Persons all or any part of,
this Agreement, the Loan Documents and the Loan, and, to the
extent of such assignment, such assignee shall have the same
obligations, rights and benefits with respect to USMX as it would
<PAGE>
have had if it were Lender hereunder.
11.6 GOVERNING LAW. THIS AGREEMENT AND THE
CONVERTIBLE NOTE AND THE OTHER LOAN DOCUMENTS, EXCEPT THE
SECURITY DOCUMENTS, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, INCLUDING THE
CONFLICTS OF LAW PROVISIONS THEREOF. THE SECURITY DOCUMENTS
SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED
THEREIN, OR IF NONE IS SPECIFIED, BY THE LAWS OF THE JURISDICTION
IN WHICH THE COLLATERAL SUBJECT THERETO IS PRINCIPALLY LOCATED.
11.7 VENUE; SUBMISSION TO JURISDICTION. FOR THE
PURPOSE OF ASSURING THAT LENDER MAY ENFORCE ITS RIGHTS UNDER THIS
AGREEMENT, USMX, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS,
HEREBY IRREVOCABLY (A) AGREES THAT ANY LEGAL OR EQUITABLE ACTION,
SUIT OR PROCEEDING AGAINST USMX, OR BY USMX AGAINST LENDER,
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS
OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT
MATTER OF ANY OF THE FOREGOING SHALL BE INSTITUTED ONLY IN STATE
AND FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF DENVER,
COLORADO OR, IN THE CASE OF THE SECURITY DOCUMENTS, IN THE VENUES
SPECIFIED THEREIN; (B) WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO SUCH VENUE OF ANY SUCH ACTION, SUIT OR
PROCEEDING OR ANY CLAIM OF FORUM NON CONVENIENS; (C) SUBMITS
ITSELF TO THE NONEXCLUSIVE JURISDICTION OF ANY SUCH STATE OR
FEDERAL COURT FOR PURPOSES OF ANY SUCH ACTION, SUIT OR
PROCEEDING; AND (D) WAIVES ANY IMMUNITY FROM JURISDICTION TO
WHICH IT MIGHT OTHERWISE BE ENTITLED IN ANY SUCH ACTION, SUIT OR
PROCEEDING WHICH MAY BE INSTITUTED IN ANY SUCH STATE OR FEDERAL
COURT, AND WAIVES ANY IMMUNITY FROM THE MAINTAINING OF AN ACTION
AGAINST IT TO ENFORCE IN ANY SUCH STATE OR FEDERAL COURT OR
ELSEWHERE, ANY JUDGMENT FOR MONEY OBTAINED IN ANY SUCH ACTION,
SUIT OR PROCEEDING AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY IMMUNITY FROM EXECUTION. USMX HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY OF THE AFORESAID COURTS BY THE MAILING OF
COPIES OF SUCH PROCESS TO THE BORROWER, BY CERTIFIED OR
REGISTERED MAIL, AT THE ADDRESS SPECIFIED FOR USMX IN
SECTION 11.2.
11.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO
IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY
IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT MATTER
OF ANY OF THE FOREGOING.
<PAGE>
11.9 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.
11.10 Inconsistent Provisions. In the event of any
conflict between this Agreement and any of the Loan Documents,
the provisions of this Agreement shall govern and be controlling.
11.11 Termination of Agreement. Upon payment in full
or satisfaction of the Principal Amount of the Loan by conversion
to Common Stock as provided in Article IX, and upon payment in
full of all other amounts due hereunder and performance of all of
its obligation hereunder by USMX, this Agreement will terminate.
Upon such termination, at the request of USMX, Lender will
provide written evidence of such termination, including
appropriate releases.
11.12 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or
in connection herewith shall survive the execution and delivery
of this Agreement.
11.13 Concerning the Security Documents. In the event
that any amount payable by any Guarantor under any Security
Document is not paid in accordance with the terms thereof, USMX
agrees to pay such amount to the extent not so paid.
11.14 No Third Party Beneficiary. Nothing herein
contained shall be construed to confer upon any other party,
other than the Lender, the rights of a third party beneficiary.
No reference to Liens on Schedule 6.1(i) or other Permitted Liens
shall be deemed to constitute a recognition or acceptance by USMX
or the Lender for the benefit of the holders of such Liens, as to
the validity, subsistence or priority of such Liens.
11.15 Severability. The invalidity of any one or more
covenants, phrases, clauses, sentences or paragraphs of this
Agreement shall not affect the remaining portions of this
Agreement or any part hereof, and in case of any such invalidity,
this Agreement shall be construed as if such invalid covenants,
phrases, clauses, sentences or paragraphs had not been inserted.
11.16 Acknowledgments. USMX hereby acknowledges that:
(a) it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the
other Loan Documents;
(b) the Lender does not have any fiduciary duty
or relationship to or with USMX; and
(c) no joint venture exists between USMX and the
Lender.
<PAGE>
11.17 Confidentiality. Lender agrees that it will keep
confidential and not disclose or divulge any confidential,
proprietary, or secret information that Lender may obtain from
USMX or AK pursuant to financial reports and other material
submitted by USMX or AK to Lender pursuant to this Agreement, or
pursuant to visitation or inspection rights granted hereunder,
unless such information is known, or until such information
becomes known, to the public; provided, however, that Lender may
disclose such information to its attorneys, accountants,
consultants and other professionals in connection with the
provision of professional services to the Lender.
11.18 Entire Agreement. This Agreement and the other
Loan Documents represent the final agreement among the parties
hereto and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties
hereto. There are no unwritten oral agreements among the parties
hereto, and there are no promises, undertakings, representations
or warranties by the Lender relative to the subject matter hereof
not expressly set forth or referred to herein.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
<PAGE>
USMX, INC.
By:
Name:
Title:
By:
Name:
Title:
PER PRO
N M ROTHSCHILD & SONS LIMITED
CREDIT AGREEMENT
Between
USMX OF ALASKA, INC.
as Borrower
and
N M ROTHSCHILD & SONS LIMITED
as Lender
Dated as of July 11, 1996
<PAGE>
CREDIT AGREEMENT
Table of Contents
Page
ARTICLE 1 CERTAIN DEFINITIONS AND ACCOUNTING
PRINCIPLES 1
1.1 Certain Defined Terms 1
1.2 Accounting Principles 18
ARTICLE 2 COMMITMENT, USE OF PROCEEDS 18
2.1 Commitment 18
2.2 Use of Proceeds 19
2.3 Fees 19
ARTICLE 3 PROCEDURE AND PAYMENT 19
3.1 Advance Procedure 19
3.2 Notes 20
3.3 Loan Conversion Elections 20
3.4 Principal and Interest Payments Generally 21
3.5 Interest 21
3.6 Repayment of the Loans 22
3.7 Priority of Prepayments 23
3.8 Risk of Loss 23
3.9 Inability to Continue to Provide Gold;
Mandatory Switching 23
3.10 Increased Costs and Reduction in Return 23
3.11 Payments and Computations 23
3.12 Payment on Non-Business Days 24
3.13 Taxes 24
3.14 Proceeds Account 26
ARTICLE 4 HEDGING FACILITY 27
4.1 Establishment of Hedging Facility 27
ARTICLE 5 COLLATERAL SECURITY 27
5.1 Security Documents 27
5.2 No Limitation on Application of Security
Interests 28
5.3 Recordings and Filings of Security Documents 28
5.4 Protection of Security Document Liens 28
5.5 Right of Set-off 28
5.6 Additional Collateral 28
5.7 Partial Release of USMX Upon Completion of
<PAGE>
the Project 28
ARTICLE 6 CONDITIONS PRECEDENT 29
6.1Conditions Precedent to the Initial Advance 29
6.2 Conditions Precedent to all Advances 31
ARTICLE 7 REPRESENTATIONS AND WARRANTIES 32
7.1 Representations and Warranties of Borrower 32
ARTICLE 8 AFFIRMATIVE COVENANTS OF BORROWER 39
8.1 Compliance with Laws, Etc. 39
8.2 Reporting Requirements 39
8.3 Inspection 41
8.4 Maintenance of Insurance 41
8.5 Maintenance of Equipment, Etc. 41
8.6 Keeping of Records and Books of Account 41
8.7 Preservation of Existence, Etc. 41
8.8 Conduct of Business 41
8.9 Notice of Default 42
8.10 Defense of Title 42
8.11 Operation of the Project; Completion 42
8.12 Hedging Requirements 42
8.13 Maintenance of the Mining Properties 42
ARTICLE 9 NEGATIVE COVENANTS OF BORROWER 43
9.1 Indebtedness 43
9.2 Liens, Etc. 43
9.3 Assumptions, Guarantees, Etc. of Indebtedness
of Other Persons 45
9.4 Investments in Other Persons 45
9.5 Mergers, Changes in Capital Structure, Etc. 45
9.6 Borrower's Financial Covenants 45
9.7 Project Reserves 46
9.8 Minimum Reserves 46
9.9 Restriction on Dividends and Redemptions 46
9.10 Limitations on Hedging Contracts 46
9.11 Sale of Project Assets 46
9.12Restrictions on Capital Expenditures, Etc. 46
9.13 Arm's Length and Take or Pay Contracts 47
9.14 Restrictive and Inconsistent Agreements 47
<PAGE>
ARTICLE 10 EVENTS OF DEFAULT 47
10.1 Event of Default 47
10.2 Remedies Upon Event of Default 49
10.3 Conversion upon Acceleration 50
ARTICLE 11 MISCELLANEOUS 51
11.1 Amendments, Etc. 51
11.2 Notices, Etc. 51
11.3 No Waiver; Remedies 52
11.4 Costs, Expenses and Taxes 52
11.5 Binding Effect; Assignment 53
11.6 GOVERNING LAW 53
11.7 VENUE; SUBMISSION TO JURISDICTION 53
11.8 WAIVER OF JURY TRIAL 54
11.9 Execution in Counterparts 54
11.10 Inconsistent Provisions 54
11.11 Survival of Representations and Warranties 54
11.12 Concerning the Security Documents 54
11.13 No Third Party Beneficiary 54
11.14 Severability 55
11.15 Acknowledgments 55
11.16 Confidentiality 55
11.17 Entire Agreement; Merger 55
<PAGE>
SCHEDULES
Schedule 1.1(a) Mining Properties
Schedule 3.6(b) Amortization Schedule
Schedule 7.1(c) Project Permits
Schedule 7.1(e) Litigation
Schedule 7.1(f) Additional Financial Disclosures
Schedule 7.1(h) Disclosure Schedule
Schedule 7.1(i) Employee Benefit Plans
Schedule 7.1(j) Permitted Liens
Schedule 7.1(o) Hedging Contracts
Schedule 7.1(p) Material Agreements
Schedule 7.1(t) Compliance with Environmental Laws
Schedule 7.1(u) Borrower's Indebtedness
Schedule 8.4 Insurance Policies
EXHIBITS
Exhibit A-1 Form of Dollar Note
Exhibit A-2 Form of Gold Note
Exhibit B Form of Request for Disbursement
Exhibit C-1 Form of Mortgage
Exhibit C-2 Form of Second Mortgage
Exhibit C-3 Form of NPMC Mortgage
Exhibit C-4 Form of Fourth Mortgage
Exhibit C-5 Form of NPMC Subordination Agreement
Exhibit D Form of Hedging Agreement
Exhibit E-1 Form of Guaranty
Exhibit E-2 Form of Assignment Agreement
Exhibit F Development Plan
Exhibit G-1 Form of Borrower's Omnibus Certificate
Exhibit G-2 Form of USMX's Omnibus Certificate
Exhibit G-3 Form of NPMC's Omnibus Certificate
Exhibit H-1 Form of Opinion of Borrower's and USMX's
Counsel
Exhibit H-2 Form of Opinion of NPMC's Counsel
Exhibit H-3 Form of Security Opinion
<PAGE>
Exhibit I Form of Conversion/Interest Period Notice
Exhibit J Form of Proceeds Account Agreement
Exhibit K Form of Request for Advance
Exhibit L Form of Completion Certificate
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of July 11, 1996, is by
and between USMX OF ALASKA, INC., a corporation organized and
existing under the laws of Alaska ("Borrower"), and
N M ROTHSCHILD & SONS LIMITED, a company organized and existing
under the laws of England ("Lender").
Recitals
A. By this Credit Agreement the parties hereto desire
to set forth the terms of their agreement pursuant to which
Lender will make available to Borrower certain loans in Gold or
in United States Dollars, to be used by Borrower to partially
fund development of the Illinois Creek Gold Property in Alaska.
B. The loans provided for herein will be guarantied
by USMX, INC., a Delaware corporation ("USMX") as provided
herein, of which Borrower is a wholly-owned subsidiary, and will
be secured by first and prior liens (other than Permitted Liens,
as defined below) in favor of Lender on the real and personal
property comprising the Project and all other real and personal
property rights and interests of Borrower.
C. USMX and Lender have, as of the date hereof,
entered into a separate Credit Agreement (the "USMX Credit
Agreement") pursuant to which, inter alia, Lender will loan to
USMX certain funds which will also be used to partially fund
development of the Illinois Creek Gold Property in Alaska.
Agreement
NOW, THEREFORE, in consideration of the following
mutual covenants and agreements, Borrower and Lender hereby agree
as follows:
ARTICLE 1
CERTAIN DEFINITIONS AND ACCOUNTING PRINCIPLES
1.1 Certain Defined Terms. As used in this Agreement and unless
otherwise expressly indicated, the following terms shall have the following
meanings:
"Acceptable Delivery Location" means the offices of Lender in
London, England; Golden West Refining (Canada) Ltd., Vancouver, B.C.;
Johnson Matthey Refining, Inc., Salt Lake City, Utah; Metalor USA Refining
Corp., North Attleboro, Massachusetts; Handy and Harman, Attleboro,
<PAGE>
Massachusetts; or any other location as mutually agreed by Borrower and
Lender.
"Advance" means an advance of Loans, in Gold or Dollars as the
case may be, by Lender to Borrower pursuant to Articles 2 and 3.
"Advance Period" means the period from the date hereof until the
first to occur of July 31, 1997 and Mechanical Completion of the Project,
during which period Lender will Advance Loans to Borrower, subject to all
of the terms and conditions hereof.
"Affiliate" means any Person directly or indirectly controlling
or controlled by or under common control with another Person, provided
that, for purposes of this definition, "control," as used with respect to
any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract
or otherwise.
"Agreement" means this Credit Agreement, as it may be amended,
supplemented, or otherwise modified and in effect from time to time.
"Applicable Margin" means, with respect to the rate of interest
payable by Borrower on Loans, two and one-quarter percent (2.25%) per annum
for any time period prior to Completion, and one and seven-eighths percent
(1.875%) per annum for any time period commencing on the date of and
following after Completion.
"Assignment Agreement" means the agreement pursuant to which USMX
assigns the Second Mortgage and the Fourth Mortgage to Lender,
substantially in the form of Exhibit E-2.
"Breakage Costs" means all costs and losses which Lender may
incur as a result of payment of the Principal Amount of any Loan other than
at the end of an Interest Period.
"Business Day" means a day of the year (i) on which banks in
Denver, Colorado, New York, New York and London, England are open for
business and (ii) on which a London Gold Fixing occurs.
"Capitalized Lease Liabilities" means all monetary obligations of
Borrower under any leasing or similar arrangement which, in accordance with
GAAP, would be classified as capitalized leases, and, for purposes of this
Agreement and each other Loan Document, the amount of such obligations
shall be the capitalized amount thereof, determined in accordance with
GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601, et seq., as
amended, reformed or otherwise modified from time to time.
"CERCLIS" means the Comprehensive Environmental Response
<PAGE>
Compensation Liability Information System List, as amended, reformed or
otherwise modified from time to time.
"Collateral" means all properties, rights and interests subject
to the Security Documents.
"Commitment" means the undertakings of Lender set forth in
Section 2.1 to Advance Loans to Borrower from time to time during the
Advance Period, with the aggregate Principal Amount of such Loans at no
time to exceed the Maximum Credit Amount.
"Commitment Fee" shall have the meaning specified in
Section 2.3(b).
"Completion" means each of the following shall have occurred and
be in effect simultaneously with respect to the Project and with respect to
Borrower generally:
(i) Economic Completion shall have occurred;
(ii) Borrower shall have submitted to Lender its
written certificate that the Completion Test for the Illinois
Creek Gold Property has been met and that Borrower is in
compliance with all of the affirmative and negative covenants and
other provisions of this Agreement, and Lender shall have
reasonably satisfied itself that Borrower is so in compliance;
(iii) Borrower shall have prepared and submitted to
Lender, and Lender shall have approved in its sole discretion,
reasonably exercised and, if requested by Borrower, in
consultation with the Independent Consultant, all revisions to
the Development Plan for the Illinois Creek Gold Property, if
any;
(iv) no event shall have occurred with respect to
Borrower or the Illinois Creek Gold Property which has a Material
Adverse Effect on Borrower or the Illinois Creek Gold Property;
(v) no Default shall exist;
(vi) Lender shall have received from Borrower evidence
reasonably satisfactory to Lender that Borrower has paid all
amounts due, and received releases from all obligations, under
all contracts that are contemplated by the Development Plan to be
completed at the time of Mechanical Completion; and
(vii) the Proceeds Account, minus any amounts
funded from sources other than cash flow generated by sales of
Precious Metals from the Project, shall have a minimum balance at
least equal to the Retention Amount.
"Completion Test" means the Project has met and satisfied all of
the requirements and parameters comprising Economic Completion during a
continuous period of not less than ninety consecutive days, beginning not
less than three (3) days nor more than ten (10) days after written notice
thereof has been given to Lender.
<PAGE>
"Consolidated Current Assets" means the consolidated current
assets of any Person, determined in accordance with GAAP.
"Consolidated Current Liabilities" means the consolidated current
liabilities of any Person, determined in accordance with GAAP.
"Consolidated Tangible Stockholders' Equity" means for any
Person, its Total Consolidated Tangible Assets, less its Total Consolidated
Liabilities.
"Contingent Liability" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes
or is contingently liable upon (by direct or indirect agreement, contingent
or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) the indebtedness, obligation or any other liability of any other
Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions
upon the shares of any other Person. The amount of any Person's obligation
under any Contingent Liability shall (subject to any limitation set forth
therein) be deemed to be the outstanding principal amount (or maximum
principal amount, if larger) of the debt, obligation or other liability
guaranteed thereby, less the value of any bonds, letters of credit or cash
collateral of such Person securing such contingent liability.
"Conversion/Interest Period Notice" means a notice from Borrower
to Lender concerning a conversion of all Gold Loans to Dollar Loans, or a
conversion of all Dollar Loans to Gold Loans, or a notice regarding
Borrower's election concerning an Interest Period for a Loan to take effect
on the completion of a current Interest Period, substantially in the form
of Exhibit I hereto.
"Cost of Future Production" means, for any period, the total
operating costs and capital costs (if any) of the Project for such period
as set forth in the Development Plan, and projected based on the
Development Plan.
"Current Ratio" means the ratio of Consolidated Current Assets to
Consolidated Current Liabilities.
"Date of Default" shall have the meaning specified in
Section 10.2(a).
"Debt Service Ratio" means for any six month period, the ratio of
(y) the Future Net Cash Flow from the Project for such period based on the
Development Plan plus the Principal Retention Amount and the Interest
Retention Amount to (z) principal and interest payments payable by Borrower
scheduled during such period on all Indebtedness of Borrower. The
determination of Future Net Cash Flow shall take into account existing
hedging and sales arrangements, and forecast operating and capital costs
(including taxes).
"Default" means any Event of Default or any condition or event,
or combination thereof, which, after notice or lapse of time or both, could
constitute an Event of Default.
"Default Rate" means the Interest Rate applicable to the Loans
<PAGE>
during periods when amounts payable by Borrower as principal repayments,
interest payments or fee or expense payments are due and payable but unpaid
by Borrower, which shall be an annual rate of interest which is equal to
the Dollar Loan Interest Rate or Gold Loan Interest Rate (whichever is
applicable to the Loan), plus four percent (4%).
"Development Plan" means the Development Plan appended hereto as
Exhibit F for the construction and operation of the Illinois Creek Gold
Property through Completion (which Development Plan, among other things,
sets forth a construction budget, identifies all material construction
contracts, and sets forth a master construction schedule, indicating
scheduled monthly and cumulative expenditures) and the plan for the
operation of the Illinois Creek Gold Property after Completion and through
the life of the mine, as amended from time to time by Borrower with the
written approval of Lender, which approval Lender may withhold in its sole
discretion reasonably exercised.
"Discount Rate" means five percent (5%) per annum when applied to
a Gold Loan, and eight percent (8%) per annum when applied to Dollar Loans.
"Dollar Loan" or "Dollar Loans" means an Advance or Advances of
Dollars by Lender to Borrower pursuant to Articles 2 and 3.
"Dollar Loan Interest Rate" means with respect to an Interest
Period pertaining to a Dollar Loan, an interest rate per annum equal to the
sum of (y) LIBOR in effect on the first day of the Interest Period, plus
(z) the Applicable Margin.
"Dollar Note" means a promissory note made by Borrower in favor
of Lender in the Maximum Credit Amount, which promissory note evidences all
Dollar Loans hereunder, which note is in the form of Exhibit A-1 hereto.
"Dollar Value" shall mean with reference to the valuation of
Ounces of Gold, for all purposes hereunder other than determining the
Original Dollar Value of a Gold Loan, an amount determined by multiplying
(y) the Ounces of Gold for which the Dollar Value is being calculated by
(z) the London Price in effect two (2) Business Days prior to the date of
determination.
"Dollars" and the symbol "$" each mean lawful money of the United
States of America.
"Economic Completion" means a determination and certification by
the Independent Consultant substantially in the form of Exhibit L with
respect to the Project, that:
(i) Mechanical Completion has been achieved;
(ii) Proven and Probable Reserves are in accordance
with comparable figures set out for reserves in the Development
Plan;
(iii) production from the Illinois Creek Gold
Property has achieved at least 90% of budgeted ore production and
metallurgical recovery levels, and has met the other technical
parameters set forth in the Development Plan;
<PAGE>
(iv) the head grade of the ore delivered to the leach
pads on the Illinois Creek Gold Property during the Completion
Test has achieved at least 90% of ore head grades specified in
the Development Plan;
(v) total Project Operating Costs for operations of
the Illinois Creek Gold Property during the Completion Test do
not exceed 110% of the operating cost assumptions in the
Development Plan; and
(vi) operations at the Illinois Creek Gold Property
during the Completion Test have met such other standards or
requirements as may reasonably be required by Lender to confirm
compliance with the Completion Test, the Feasibility Study and
the Development Plan.
"Environmental Laws" means federal, state, local and foreign laws
or regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder relating to pollution or
protection of the environment, including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Establishment Fee" shall have the meaning specified in
Section 2.3(a).
"Event of Default" has the meaning set forth in Section 10.1.
"Feasibility Study" means the Illinois Creek Gold Feasibility
Study Mine Plan (and associated documents) dated February 22, 1996 prepared
by USMX pertaining to the construction and operation of a commercial gold
mining facility on the Illinois Creek Gold Property, a complete and
accurate copy of which has been provided by USMX to Lender.
"Fourth Mortgage" means the Mortgage, Deed of Trust, Assignment,
Security Agreement and Financing Statement, dated as of July 11, 1996,
granted by Borrower to USMX covering all the right, title and interest of
Borrower in the Mining Properties and in production therefrom and personal
property associated therewith, in the form of Exhibit C-4 hereto, securing
the $3,400,000 USMX Secured Loan and subordinate to the Mortgage, the
Second Mortgage and the NPMC Mortgage.
"Future Net Cash Flow" means for any period:
(a) Borrower's net share of the total revenue to be
realized from the Project, projected based on the Development Plan during
such period, with revenue calculated (i) in the case of Ounces of Gold
<PAGE>
which are covered by a Hedging Contract in effect on the relevant date of
calculation, at the price for delivery of Gold specified in such Hedging
Contract (or, if no price other than a floor price for delivery of Gold is
specified in such Hedging Contract, the Minimum price for delivery of Gold
referred to therein), and (ii) in the case of all other Ounces of Gold, at
the lesser of the average London Price for the six (6) months immediately
preceding the relevant date of calculation and $375 per Ounce of Gold; less
(b) the Cost of Future Production for such period.
"GAAP" means generally accepted accounting principles in the
United States of America, consistently applied.
"GOFO" means the rate per annum (rounded upwards if necessary to
the nearest five one-hundredths of one percent (0.05%)) equal to (a) the
mean of the offered rates as of 11:00 a.m., London time, appearing on the
display designated as page "GOFO" on the Reuter Monitor Money Rates Service
(or such other page as may replace the GOFO page on that service for the
purpose of displaying London interbank gold forward offered rates of major
bullion traders) for a term equivalent to the Interest Period, or (b) if
fewer than two offered rates appear on the display referred to in (a)
above, the rate determined by Lender in good faith (which determination
shall be conclusive in the absence of manifest error) to be the average of
the rates at which major bullion traders are offering Gold deposits for a
term equivalent to the Interest Period in the London interbank Gold market
at about 11:00 a.m., London time.
"Gold" means various amounts of ounces of gold of a purity of at
least .995 fine, and otherwise of grade and quality conforming to the usual
requirements for good delivery in the London Gold market. As used herein,
the term "ounces" means fine troy ounces.
"Gold Loan" means an Advance of Gold by Lender to Borrower
pursuant to Section 2.1.
"Gold Loan Interest Rate" means, with respect to an Interest
Period pertaining to a Gold Loan, an interest rate per annum equal to the
sum of (y) LIBOR minus GOFO in effect on the first day of the Interest
Period (provided, however that such calculation shall not result in a value
less than zero), plus (z) the Applicable Margin.
"Gold Note" means a promissory note made by Borrower in favor of
Lender in the Maximum Credit Amount, which promissory note evidences all
Gold Loans hereunder, which note is in the form of Exhibit A-2 hereto.
"Governmental Acts" has the meaning set forth in Section 3.10.
"Governmental Authority" means the federal, state, county, city
or local government or political subdivision or authority in which any
property of Borrower is located or which exercises valid jurisdiction over
any such property, or in which Borrower conducts business or is otherwise
present, and any agency, department, commission, board, bureau or
instrumentality of any of them which exercises valid jurisdiction over
Borrower.
<PAGE>
"Governmental Requirement" means any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other direction
or requirement (including, without limitation, Environmental Laws, energy
regulations and occupational, safety and health standards or controls) of
any Governmental Authority.
"guarantee" shall mean any obligation, contingent or otherwise,
of any Person guaranteeing any Indebtedness or obligation of any other
Person in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or obligation, or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness or obligation, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness or
obligation of the payment of such Indebtedness or obligation, or (c) to
maintain working capital, equity capital or any other financial statement
condition of the primary obligor so as to enable the primary obligor to pay
such Indebtedness or obligation; provided, however, that the term Guarantee
shall not include endorsements for collection or deposit, in either case in
the ordinary course of business.
"Guaranty" means the guaranty by USMX of payment of monies owed
to Lender by Borrower pursuant to this Agreement, substantially in the form
of Exhibit E-1 hereto.
"Hazardous Material" means:
(a) any "hazardous substance", as defined by CERCLA or by
applicable state or provincial law;
(b) any "hazardous waste", as defined by RCRA;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state, provincial or local law, regulation, ordinance
or requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or material, all as amended,
reformed or otherwise modified from time to time.
"Hedging Agreement" means the agreement between Borrower and
Lender, substantially in the form of Exhibit D hereto.
"Hedging Contracts" means any agreement, facility, contract or
other transaction entered into by Borrower relating to forward contracts or
hedging (including but not limited to forward sales, which include spot
deferred sales, options, swaps and price protection and floor price
arrangements) for the management and/or protection of gold and other metals
price risk, entered into with Lender or with other counterparties
acceptable to Lender; and the proceeds of and all benefit and advantage
derived in respect of the foregoing or any dealings therewith (including
the closing out of any contracts or transactions).
<PAGE>
"Holder" means a holder in due course of the Note.
"Illinois Creek Gold Property" means the Mining Properties
identified as the Illinois Creek Upland Mining Lease in Schedule 1.1(a)
hereto.
"Indebtedness" means, for any Person, without duplication:
(a) all obligations of such Person for borrowed money or
metals (including (i) in the case of such obligations, all notes payable
and drafts accepted representing extensions of credit; (ii) in the case of
Borrower, Borrower's Obligations; and (iii) in the case of such metals,
Gold and silver) and all obligations evidenced by bonds, debentures, notes,
or other similar Instruments on which interest charges are customarily
paid;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and
bankers' acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(d) all other items which, in accordance with GAAP, would
be included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under Hedging Contracts
or Price Fixing Commitments;
(f) whether or not so included as liabilities in accordance
with GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding prepaid interest
thereon) secured by a Lien on property owned or being purchased by such
Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have
been assumed by such Person or is limited in recourse; and
(g) all Contingent Liabilities of such Person in respect of
any of the foregoing.
"Independent Consultant" means any consulting firm selected by
Lender after consultation with Borrower qualified to make the
investigations and determinations required to evaluate the Project, monitor
and evaluate the Completion Test, and provide the Completion Test
Certificates.
"Initial Advance" means the first Advance of a Loan made by
Lender to Borrower under this Agreement.
"Instrument" means any contract, agreement, indenture, mortgage,
<PAGE>
document or writing (whether formal agreement, letter or otherwise) under
which any obligation is evidenced, assumed or undertaken, or any Lien (or
right or interest therein) is granted or perfected.
"Interest Period" has the meaning set forth in Section 3.5(b).
"Interest Rate" shall mean the interest rate applicable to the
Loans from time to time, which shall be one of the Dollar Loan Interest
Rate, the Gold Loan Interest Rate or the Default Rate, as applicable.
"Interest Retention Amount" means the lesser of $250,000 or
interest payable by Borrower to Lender under this agreement during the
immediately following three months from the date of determination.
"LIBOR" means, relative to any Interest Period for Dollar Loans,
the rate of interest equal to the average (rounded upwards, if necessary,
to the nearest 1/16 of 1%) of the rates per annum quoted by the Reuter
Monitor Money Rates Service at which Dollar deposits in immediately
available funds are offered in the London interbank market as at or about
11:00 a.m., London time, two Business Days prior to the beginning of such
Interest Period for delivery on the first day of such Interest Period, and
in an amount approximately equal to the Dollar Loans outstanding to which
the rate will apply and for a period approximately equal to such Interest
Period.
"Lien" means, as to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance in or on, or any interest or
title of any vendor, lessor, lender or other secured party to, or of such
Person under any conditional sale or other title retention agreement or
capital lease with respect to, any property or asset owned or held by such
Person, or the signing or filing of a financing statement which names such
Person as debtor, or the signing of any security agreement authorizing any
other party as the secured party thereunder to file any financing
statement. A Person shall be deemed to be the owner of any assets that it
has placed in trust for the benefit of the holders of its indebtedness
which indebtedness is deemed to be extinguished under GAAP but for which
such Person remains legally liable, and such trust shall be deemed to be a
Lien.
"Loan" or "Loans" means Gold Loans and Dollar Loans made pursuant
to this Agreement.
"Loan Documents" means this Agreement, the Notes, the Guaranty,
each Request for Advance, the Conversion/Interest Period Notices, the
Security Documents, the Hedging Agreement, and each other Instrument
executed by Borrower or USMX and delivered to Lender in connection with
this Agreement or any of the foregoing Instruments, whether or not
specifically identified in this paragraph.
"Loan Life Ratio" means, at any date, the ratio, expressed as a
percentage, of
(a) the Present Value of Future Net Cash Flow from the
Project for the period commencing on such date and ending on the Scheduled
Maturity Date, to
(b) Net Project Debt on such date.
<PAGE>
"London Gold Fixing" means a gold price fixing meeting among the
five members from time to time of the London gold market.
"London Price" means, on any day, the fixing price per fine ounce
troy (in Dollars) for gold as announced at the afternoon London Gold Fixing
for such day; provided, however, that if the afternoon London Gold Fixing
shall not have occurred for such day, the "London Price" for such day shall
be the fixing price per fine ounce troy (in Dollars) for gold as announced
at the morning London Gold Fixing for such day or if the morning London
Gold Fixing shall not have occurred for such day, the "London Price" for
such day shall be the publicly quoted price per fine ounce troy (in
Dollars) for Gold on such other accessible international gold market
(allowing for physical delivery of such Gold) as may be reasonably selected
by Lender, unless such day is a Saturday, Sunday or other recognized
holiday in London, England, in which case the "London Price" shall be the
last quoted London Price.
"Material Agreements" means the contracts, agreements, leases and
other binding commitments and undertakings of Borrower, the performance or
breach of which could have a Material Adverse Effect on Borrower, which
Instruments are identified in Schedule 7.1(p).
"Material Adverse Effect" means, with respect to Borrower, USMX
or any Person, an effect, resulting from any occurrence of whatever nature
(including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), which is materially adverse to:
(a) the consolidated business, assets, revenues, financial
condition, operations or prospects of such Person;
(b) the ability of such Person to make any payment or
perform any other material obligation required under any material agreement
(including, with respect to Borrower, this Agreement or any of the Loan
Documents) or, in the case of Borrower, to develop and operate the Illinois
Creek Gold Property in accordance with the Feasibility Study; or
(c) the Borrower and involves a liability or obligation
(other than contractual commitments entered into by Borrower in the
ordinary course of business which are not in default) of $100,000 or more.
"Maximum Credit Amount" means with respect to the Loan the
maximum Principal Amount, which shall be $19,500,000 for Dollar Loans and,
for Gold Loans, the number of Ounces of Gold equal to $19,500,000 divided
by the London Price applicable on the date of advance of the Gold Loan.
"Mechanical Completion" means (a) a determination and
certification by the Independent Consultant substantially in the form of
Annex A of Exhibit L with respect to the Project, that Project facilities
have been constructed and project equipment has been obtained in accordance
with the description thereof contained in the Development Plan and such
facilities and equipment are mechanically complete and electrically
operable, and (b) Lender shall have been provided with lien waivers and
other written notices from all contractors utilized in construction of
Project facilities that such contractors have received payment of all
amounts due in connection with their respective construction contracts.
<PAGE>
"Minimum Gold Price" means $375 per Ounce of Gold.
"Mining Properties" means the leases and other property interests
owned by Borrower, or in which Borrower directly or indirectly holds an
interest, related to the mining leases described on Schedule 1(a), and all
facilities situated thereon, together with all real and personal property
and assets associated with such property.
"Monetary Cap" means, with reference to a Gold Loan, the maximum
permitted Dollar Value of the Principal Amount of the Gold Loan, which is
one hundred fifty percent (150%) of the Original Dollar Value of the Gold
Loan.
"month" means a calendar month.
"Mortgage" means the Mortgage, Deed of Trust, Assignment,
Security Agreement and Financing Statement, dated as of July 11, 1996,
granted by Borrower to Lender covering all the right, title and interest of
Borrower in the Mining Properties and in production therefrom and personal
property associated therewith, in the form of Exhibit C-1 hereto.
"Net Project Debt" means the Principal Amount of the outstanding
Loans plus the principal amount of loans outstanding to USMX pursuant to
the USMX Credit Agreement less the Principal Retention Amount.
"Notes" means the Dollar Note and the Gold Note.
"NPMC" means North Pacific Mining Corporation, an Alaska
corporation.
"NPMC Agreement" means the agreement, as amended, dated effective
December 16, 1994, by and between NPMC and USMX pursuant to which USMX
acquired the Mining Properties, all of which it subsequently conveyed to
Borrower.
"NPMC Mortgage" means the Illinois Creek Deed of Trust,
Assignment of Leases and Security Agreement, dated as of July 11, 1996,
granted by Borrower to NPMC in the form of Exhibit C-3 hereto, securing
NPMC's rights under the NPMC Agreement to the Mining Properties and
subordinate to the Mortgage and the Second Mortgage pursuant to the
Subordination Agreement.
"NPMC Subordination Agreement" means an agreement between NPMC
and Lender pursuant to which NPMC subordinates the NPMC Mortgage to the
Mortgage and Second Mortgage, in the form of Exhibit C-5 hereto.
"Obligations" means all obligations of Borrower (monetary or
otherwise) arising under or in connection with this Agreement and each
other Loan Document.
<PAGE>
"Omnibus Certificates" means the certificates from Borrower, USMX
and NPMC respectively, substantially in the form of Exhibits G-1, G-2 and
G-3 hereto.
"Opinion of Borrower's and USMX's Counsel" means the legal
opinion of Bearman, Talesnick & Clowdus, counsel to Borrower, substantially
in the form of Exhibit H-1 hereto.
"Opinion of NPMC's Counsel" means the legal opinion of Hartig,
Rhodes, Norman, Mahoney & Edwards, P.C., counsel to NPMC, in the form of
Exhibit H-2 hereto.
"Original Dollar Value" shall mean (a) with respect to Ounces of
Gold Advanced as a Gold Loan hereunder, the Dollar Value thereof determined
by reference to the London Price of such Ounces of Gold on a date two (2)
Business Days prior to the date of Advance thereof, and (b) with respect to
a Gold Loan established by conversion of the Dollar Loans to a Gold Loan as
provided herein, the Dollar Value of the Ounces of Gold comprising such
Gold Loan determined by reference to the London Price of such Ounces of
Gold on a date two (2) Business days prior to the date on which the Dollar
Loans were converted to a Gold Loan.
"Original Gold Price" shall have the meaning specified in
Section 3.1(b).
"Other Taxes" shall have the meaning specified in
Section 3.13(b).
"Ounce of Gold" means a fine ounce troy weight of gold in form
readily tradeable with members of The London Bullion Market Association (or
any successor thereto) from time to time.
"Permitted Liens" means the Liens identified in Schedule 7.1(j)
and the Liens permitted by clauses (a) through (f) of Section 9.2.
"Person" means an individual, limited liability company or
partnership, corporation (including a business trust), joint venture or
other entity, or a foreign state or political subdivision thereof or any
agency of such state or subdivision.
"Plan" means a pension plan providing benefits for employees of
Borrower or any Affiliate and covered by Title IV of ERISA.
"Precious Metals" means Gold and various amounts of troy ounces
of silver of grade and quality conforming to the usual requirements for
good delivery in the London silver market.
"Present Value of Future Net Cash Flow" means, for any period (a
"Calculation Period"), the aggregate of Future Net Cash Flow for such
period, discounted, with respect to any Future Net Cash Flow scheduled to
accrue during such Calculation Period at the Discount Rate to the first day
of such Calculation Period from the last day of such Calculation Period.
"Price Fixing Commitments" means the Gold Loan hereunder and net
forward sale contracts for Gold or put options with respect to Gold,
including forward sale contracts pursuant to the Hedging Agreement, with
counterparties satisfactory to Lender, entered into by Borrower.
<PAGE>
"Principal Amount" means, as of any date, (a) with respect to a
Gold Loan, the number of Ounces of Gold of such Gold Loan outstanding at
such date, and (b) with respect to Dollar Loans, the aggregate principal
amount in Dollars of such Dollar Loans outstanding at such date.
"Principal Retention Amount" means the greater of $1,500,000 or
that sum when subtracted from the sum of the Principal Amount of the Loans
plus the principal amount of loans outstanding to USMX pursuant to the USMX
Credit Agreement will yield a Loan Life Ratio of at least 1.6:1 and a
Project Life Ratio of at least 2.0:1.
"Proceeds Account" shall have the meaning specified in
Section 3.14.
"Project" means the construction, start-up and operation of the
Illinois Creek Gold Property and related assets by Borrower in accordance
with prudent mining industry practice, the Feasibility Study and the
Development Plan.
"Project Assets" means all properties, assets or other rights,
whether now owned or hereafter acquired, by or for the benefit of Borrower,
which are used or intended for use in or forming part of the Project,
including all properties, assets or other rights acquired by Borrower with
the portion of the proceeds of the Loans used for the Project.
"Project Capital Costs" means, for any quarter, the aggregate of
all Capital Expenditures scheduled to be paid in accordance with the
Development Plan by Borrower during such quarter in respect of the
development and operation of the Project.
"Project Construction Reports" means reports concerning
construction activities at the Project to be submitted by Borrower to
Lender from time to time as provided herein, in a form reasonably
acceptable to Lender.
"Project Costs" means, for any period, the Project Operating
Costs and the Project Capital Costs scheduled to be paid during such
period.
"Project Life Ratio" means, at any date, the ratio, expressed as
a percentage, of:
(a) the Present Value of Future Net Cash Flow from the
Project for the period commencing on such date and ending on the date on
which the Proven and Probable Reserves of the Mining Properties included in
the Project are projected by the Development Plan to be extracted, milled,
refined and sold, to
(b) the Net Project Debt on such date.
"Project Operating Costs" means, for any quarter, the aggregate
of all payments scheduled to be paid in accordance with the Development
Plan by Borrower, including:
(a) costs scheduled to be paid in accordance with the
Development Plan during such quarter in connection with the operation of
the Project in order to mine, leach, mill, refine and deliver Project
<PAGE>
output for sale, including operating costs, leaching costs, milling costs,
refining costs, smelting costs, plant service costs, transportation costs,
administrative costs, reclamation costs or sustaining capital expenditures;
(b) costs of scheduled principal and interest payments
hereunder and in connection with all Indebtedness of Borrower; and
(c) all royalties, overrides and other burdens on
production.
"Project Permits" means all permits, consents and agreements
necessary to commence the Project and the production of valuable minerals
from the Illinois Creek Gold Property in a manner consistent with the
Development Plan. Project Permits are listed in Schedule 7.1(c).
"Project Review Report" means the Illinois Creek Project Due
Diligence Review Report prepared by Fluor Daniel, Inc. for Lender.
"Proven and Probable Reserves" means with respect to the Project,
the aggregate of proven and probable reserves of gold at the Project
economically recoverable at a gold price of U.S. $375/ounce (or other price
approved by Lender in its sole discretion reasonably exercised) pursuant to
the Development Plan, defined as follows: (a) "Proven Reserves" are such
reserves for which (i) quantity is computed from dimensions revealed in
outcrops, trenches, workings or drill holes, (ii) grade and/or quality are
computed from the results of detailed sampling and (iii) the sites for
inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth and mineral content of
reserves are well established and (b) "Probable Reserves" are such reserves
for which quantity and grade and/or quality are computed from information
similar to that used for Proven Reserves, but the sites for inspection,
sampling and measurement are farther apart or are otherwise less adequately
spaced and the degree of assurance, although lower than that for Proven
Reserves, is high enough for an experienced mining engineer reasonably to
assume continuity between points of observation; or such other definition
of such terms as may hereafter be adopted by the U.S. Securities and
Exchange Commission.
"quarter" means a calendar quarter.
"Release" means a release, as such term is defined in CERCLA.
"Request for Advance" means the irrevocable request for an
Advance of a Gold Loan or Dollar Loan by Borrower, in the form set forth in
Exhibit K hereto, signed by an authorized officer of Borrower.
"Retention Amount" means an amount equal to the sum of (i) the
Principal Retention Amount, (ii) the Interest Retention Amount, (iii) all
Project Capital Costs during the immediately following three months from
the date of determination and (iv) all payments scheduled or otherwise due
and payable by Borrower to Lender (other than Principal and Interest
payments related to the Loans and the loan pursuant to the USMX Credit
Agreement) and to any other Person for or related to Indebtedness during
the three months immediately following the date of determination.
<PAGE>
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., as amended, reformed or otherwise modified
from time to time.
"Scheduled Maturity Date" means September 30, 2000.
"Second Mortgage" means the Mortgage, Deed of Trust, Assignment,
Security Agreement and Financing Statement, dated as of July 11, 1996,
granted by Borrower to USMX covering all the right, title and interest of
Borrower in the Mining Properties and in production therefrom and personal
property associated therewith, in the form of Exhibit C-2 hereto, securing
the $2,500,000 USMX Secured Loan and subordinate to the Mortgage.
"Security Documents" means the Mortgage, the Second Mortgage, the
Fourth Mortgage, the NPMC Subordination Agreement, the Guaranty and related
Assignment Agreement, and all modifications and amendments thereof, and all
financing statements or other instruments required to be filed or notices
required to be given in order to perfect the Liens created by any of the
foregoing on the Mining Properties and the personal property of Borrower,
wherever located and of whatever nature, associated therewith.
"Security Opinion" means the legal opinion of Guess & Rudd, P.C.
concerning the Mortgage and Liens created thereby, the Second Mortgage and
Liens created thereby, the Fourth Mortgage and Liens created thereby, the
nature and quality of Borrower's title to the Mining Properties and certain
other matters, substantially in the form of Exhibit H-3 hereto.
"Statement of Reserves" shall have the meaning specified in
Section 8.2(c).
"Subsidiary" means any corporation, association or other business
entity more than 50% of each class of equity or voting securities of which
is owned, directly or indirectly, by Borrower.
"Tangible Assets" means the tangible assets of a Person,
expressly excluding goodwill, determined in accordance with GAAP.
"Taxes" shall have the meaning specified in Section 3.13.
"Total Consolidated Liabilities" means all liabilities of a
Person, including Indebtedness, determined on a consolidated basis in
accordance with GAAP.
"Total Consolidated Tangible Assets" means for any Person, its
Tangible Assets, determined on a consolidated basis in accordance with
GAAP.
"USMX" means USMX, INC., a Delaware corporation, guarantor of
Borrower's Obligations hereunder pursuant to the Guaranty, and parent and
sole shareholder of Borrower.
"USMX Secured Loans" means a loan of $2,500,000 from USMX to
Borrower secured by the Second Mortgage and a loan of $3,400,000 from USMX
to Borrower secured by the Fourth Mortgage, the proceeds of each to be used
solely for the purpose of developing the Illinois Creek Gold Property.
<PAGE>
"year" means a calendar year.
1.2 Accounting Principles. All accounting terms not otherwise
defined herein shall be construed, all financial computations required
under this Agreement shall be made, and all financial information required
under this Agreement shall be prepared, in accordance with GAAP applied on
a basis consistent with the financial statements referred to in
Section 7.1(f) except as specifically provided herein.
ARTICLE 2
COMMITMENT, USE OF PROCEEDS
2.1 Commitment. Subject to all of the terms and conditions of
this Agreement, Lender agrees, during the Advance Period, to Advance Dollar
Loans to Borrower in multiple Advances of not less than Two Million Five
Hundred Thousand Dollars ($2,500,000) each, or to Advance a Gold Loan to
Borrower in a single Advance up to the Maximum Credit Amount, in either
case as provided in Section 3.1 hereof; provided, however, that the
aggregate Dollar Value of the Principal Amount of Loans outstanding, valued
in the case of a Gold Loan at the Original Gold Price of such Loan, shall
not exceed the Maximum Credit Amount; and provided further that all Loans
outstanding at any time must be either exclusively a Gold Loan or
exclusively Dollar Loans. After the Advance Period the Commitment shall
automatically terminate and Lender shall have no obligation to make any
additional Advances to Borrower.
2.2 Use of Proceeds. Borrower will utilize the proceeds of the
Loans solely to fund costs and expenses associated with developing the
Illinois Creek Gold Property, substantially in accordance with the
Development Plan, including costs associated with the Hedging Agreement.
2.3 Fees.
(a) Establishment Fees. Borrower agrees to pay Lender a
fee (the "Establishment Fee") in the amount of $146,250 in connection with
the credit facility provided for in this Agreement, which will be payable
by USMX concurrently with USMX's execution hereof. Lender and Borrower
acknowledge that USMX has previously paid Lender $146,250 (the "Pre-
Establishment Fee") at the time of Lender's written commitment to USMX to
make the Loans contemplated by this Agreement. Neither the Establishment
Fee nor the Pre-Establishment Fee is refundable by Lender, in whole or in
part, under any circumstances.
(b) Commitment Fee. Borrower agrees to pay to Lender a fee
(the "Commitment Fee") with respect to the unused credit available
hereunder from time to time as follows. The Commitment Fee shall be
determined daily during the Advance Period and paid quarterly in arrears at
the rate of one-half of one percent (1/2%) per annum on the difference
between the Principal Amount of Dollar Loans outstanding and the Maximum
Credit Amount if Dollar Loans are outstanding, or while no Loans are
outstanding until the Maximum Credit Amount has been Advanced or the
Advance Period terminates or a Gold Loan is outstanding. The Commitment
<PAGE>
Fee will be payable on the fifteenth Business Day of each quarter following
conclusion of the quarter in which the Commitment Fee accrued.
(c) Payment of Fees. Payment of the Establishment Fee and
Commitment Fees shall be made in Dollars by wire transfer to Lender's
account as specified in Section 3.11.
ARTICLE 3
PROCEDURE AND PAYMENT
3.1 Advance Procedure.
(a) Requests for Loans. No more frequently than once
during any 30-day period, and not less than two Business Days prior to the
desired date of the Advance of a Loan, Borrower will submit a Request for
Advance to Lender. The Request for Advance, which will be effective only
upon actual receipt by Lender, will specify whether a Gold Loan or a Dollar
Loan is requested. Each Request for Advance shall be irrevocable when it
becomes effective upon receipt by Lender.
(b) Gold Loan. A Gold Loan shall be Advanced only in a
single Advance for the Maximum Credit Amount, and only if no Dollar Loans
are outstanding. The Request for Advance will specify an initial Interest
Period for the Gold Loan and the Business Day on which Borrower wishes to
have the Advance made. The number of Ounces of Gold Advanced shall be
equal to the result of the Maximum Credit Amount divided by the London
Price two (2) Business Days prior to the date of Advance of the Gold Loan,
and such price per Ounce of Gold shall be the "Original Gold Price".
Lender shall sell such number of Ounces of Gold at the Original Gold Price
and shall deposit the proceeds thereof by wire transfer in the Proceeds
Account.
(c) Dollar Loans. If a Dollar Loan is requested, the
Request for Advance will specify the amount of the Advance in Dollars, an
initial Interest Period for the Advance and the Business Day on which
Borrower wishes to have the Advance made. On the date specified in the
Request for Advance, Lender shall wire transfer each Advance to the
Proceeds Account.
3.2 Notes. A Gold Loan shall be evidenced by the Gold Note and
Dollar Loans shall be evidenced by the Dollar Note.
<PAGE>
3.3 Loan Conversion Elections.
(a) Conversion. Subject to the terms and conditions
hereof, Borrower is hereby granted the right to elect to convert an
outstanding Gold Loan to a Dollar Loan, or all (but not part) of the
outstanding Dollar Loans to a Gold Loan, from time to time after the
Advance Period and prior to the Scheduled Maturity Date, (i) only if Lender
is able to provide the requested type of Loan; (ii) only if no Default
exists or would be caused by such conversion; (iii) only if the Scheduled
Maturity Date has not been accelerated by Lender; (iv) in the case of
outstanding Dollar Loan to be converted to a Gold Loan, only if the London
Price is above the Minimum Gold Price; (v) only concurrently with the end
of the Interest Period applicable to the Loans; (vi) only if modifications
to hedging arrangements of Borrower satisfying the requirements of
Section 8.12 are taken simultaneously with such conversion; and (vii) only
on a Business Day. Each such election shall be effected by Borrower's
delivery to Lender of a Conversion/Interest Period Notice and shall be
effective three Business Days after receipt by Lender of such notice.
Notwithstanding the foregoing, the Borrower may not request that more than
one conversion of Loans from one type to another type thereof be effected
during any twelve (12) month period.
For purposes of effecting any such conversion, the equivalency
calculations shall be made by Lender on the effective date of such
conversion. Subject to other relevant provisions of this Agreement,
Borrower shall make a repayment in full of the relevant type and Principal
Amount of the Loans to be converted and the Lender shall make Loans of the
relevant type and Principal Amounts of Loans which are to be outstanding
immediately following such conversion. A Gold Loan will be converted to a
Dollar Loan by multiplying the Principal Amount of the Gold Loan in Ounces
of Gold by the Original Dollar Value thereof, with the resultant Dollar
amount being the Principal Amount of the Dollar Loan into which such Gold
Loan will convert. Dollar Loans will be converted to a Gold Loan by
dividing the Principal Amount of the Dollar Loans by the London Price in
effect on a date two (2) Business Days prior to the date of conversion,
with the resultant amount being the Ounces of Gold comprising the Principal
Amount of the Gold Loan into which such Gold Loan shall convert.
3.4 Principal and Interest Payments Generally. All principal
and interest payments of a Gold Loan shall be made in Gold. All principal
and interest payments of Dollar Loans shall be made in Dollars. If a
conversion of a Loan occurs during an Interest Period pursuant to
Section 3.9, interest will be payable through the date of conversion in the
form of the Loan prior to conversion and after the date of conversion in
the form of the Loan after conversion.
<PAGE>
3.5 Interest.
(a) General. Borrower shall pay interest on the
outstanding Principal Amount of Loans calculated on a 360-day year basis,
at the Gold Loan Interest Rate if a Loan is a Gold Loan or at the Dollar
Loan Interest Rate if Loans are Dollar Loans or at the Default Rate, as
applicable. Interest payable shall be calculated daily. Interest
calculated at the Gold Loan Interest Rate or at the Dollar Loan Interest
Rate shall be payable either quarterly in arrears on the first Business Day
of each quarter with respect to the preceding quarter or, in the case of an
Interest Period which ends within a quarter, in arrears at the end of such
Interest Period. Interest calculated at the Default Rate shall be payable
on demand.
(b) Interest Periods. Borrower may select an interest
period with respect to each Advance ("Interest Period") of 30, 90 or
180 days, or of such other period of days as may be agreed to by Lender in
its sole discretion, on a 360-day year basis; provided that in no event may
more than three (3) different Interest Periods be in effect hereunder at
any one time. Borrower will select Interest Periods by giving notice to
Lender in the Request for Advance and thereafter at least three (3)
Business Days prior to the expiration of the Interest Period then in effect
by a Conversion/Interest Period Notice. If at any time Borrower fails to
give timely notice of its Interest Period selection, then Borrower shall be
deemed to have selected an Interest Period of thirty (30) days. No
Interest Period shall end after the Scheduled Maturity Date.
(c) Default Interest. Interest on the Loans shall accrue
and shall be payable by Borrower at the Default Rate during all periods
when any amounts payable by Borrower as principal repayments, interest
payments or fee or expense payments are due and payable hereunder, whether
by acceleration or otherwise, but remain unpaid by Borrower; provided the
Default Rate shall not apply to past-due fees and expenses unless Lender
has provided written notice to Borrower pursuant to Section 11.2, and such
fees and expenses remain due and unpaid for five (5) Business Days after
the giving of such notice. Without prejudice to the rights of Lender under
the preceding sentence, Borrower shall indemnify Lender against any direct
loss or expense (not including lost profits on re-employment of capital)
which Lender may sustain or incur as a result of the failure by Borrower to
pay when due the Principal Amount of the Loans. A certificate or other
notice of Lender submitted to Borrower setting forth the basis for the
determination of Default Rate interest due and of the amounts necessary to
indemnify Lender in respect of such loss or expense, shall constitute
evidence of the accuracy of the information contained therein in the
absence of error and, absent notice from Borrower of such error, shall be
conclusive and binding for all purposes. Interest accruing at the Default
Rate shall be payable on demand.
3.6 Repayment of the Loans.
(a) Principal Repayment Generally. Borrower agrees to
repay the Loans as provided herein. Loan amounts repaid may not be
reborrowed.
(b) Scheduled Principal Payments. Subject to the other
terms hereof pertaining to mandatory prepayments of the Loans, Borrower
shall repay the Principal Amount of the Loans in the amounts and on the
dates set forth in the amortization schedule attached hereto as
<PAGE>
Schedule 3.6(b), with each payment equal to an amount determined by
multiplying the Principal Amount as of July 31, 1997 by the percentage
stated in the amortization schedule for the corresponding payment date,
subject to adjustment for any voluntary prepayments pursuant to
Section 3.6(c) and mandatory prepayments pursuant to Sections 3.6(d)
and 3.6(e).
(c) Voluntary Prepayment. Upon not less than thirty
(30) days' prior written notice to Lender, Borrower may, without premium or
penalty, prepay at the end of any Interest Period applicable to the portion
of the Loan so prepaid, in the case of a Dollar Loan, One Million Dollars
($1,000,000) or larger portion of the Principal Amount of Dollar Loans, or
in the case of a Gold Loan, a number of Ounces of Gold that when multiplied
by the Original Gold Price results in a Dollar Value that is greater than or
equal to One Million Dollars ($1,000,000). Upon the giving of such notice,
which shall be irrevocable, the prepayment, together with all interest
accrued through the prepayment date, shall be due and payable on the date
set forth therein. Any such voluntary prepayment of the Loans shall be
applied to the outstanding Principal Amount, and shall be applied to the
scheduled principal payments of the Loan provided for in Section 3.6(b) in
inverse order of maturity.
(d) Mandatory Prepayment Upon Loan Acceleration. Borrower
will repay the Principal Amount of Loans in full, together with accrued
interest thereon, Breakage Costs and fees, upon acceleration of the due
date thereof by Lender pursuant to Section 10.2
(e) Mandatory Prepayments Where a Gold Loan Principal
Amount Exceeds Monetary Cap. If at any time the Dollar Value of a Gold
Loan exceeds the Monetary Cap, within not more than three (3) Business Days
after notice thereof by Lender, Borrower will prepay a portion of the
Principal Amount of the Gold Loan which is sufficient to reduce the Dollar
Value of the Gold Loan to an amount which is less than the Monetary Cap.
3.7 Priority of Prepayments. All Loan prepayments made by
Borrower pursuant to Sections 3.6(d) and (e) shall be accompanied by
payment of Lender's Breakage Costs, if any, and shall be applied first to
accrued and unpaid interest on the Loans so prepaid as of the end of the
most recent Interest Period, then to any other amounts then payable by
Borrower hereunder including Breakage Costs and fees, then to the Principal
Amount in inverse order of maturity thereof.
3.8 Risk of Loss. Borrower will assume all risk of loss of, or
damage to, any Gold to be delivered by it to Lender hereunder until it has
been delivered to Lender at an Acceptable Delivery Location. Unless
Borrower has received notice of error within fourteen (14) Business Days of
Lender's receipt of Gold so delivered, Lender's receipt of the quantity and
quality of the Gold will be conclusively deemed to be as set out in
Borrower's delivery order.
3.9 Inability to Continue to Provide Gold; Mandatory Switching.
Lender shall not be liable for any failure to comply with its obligations
under or pursuant to this Article 3, and shall be entitled to terminate any
arrangements entered into under this Article without liability, if such
failure is caused directly or indirectly, wholly or partly, by act or
omission of any government or competent authority, lack of availability of
Gold, force majeure or other contingency, circumstance or event of any
nature beyond the control of Lender. Notwithstanding any other provision
hereof, a Gold Loan will be converted to Dollar Loans upon any such event
effective as of the date Lender gives Borrower notice of the foregoing.
<PAGE>
3.10 Increased Costs and Reduction in Return. If due to (a) the
introduction of, or any change (including, without limitation, any change
by way of imposition or increase of reserve requirements) in, or in the
interpretation of, any law or regulation or (b) the compliance by Lender
with any guideline or request from any central bank or other governmental
agency having jurisdiction over Lender (whether or not having the force of
law) collectively referred to as "Governmental Acts," there shall be any
increase in the cost or reduction in return to Lender of agreeing to make
or making, funding or maintaining the Loan, then Borrower shall from time
to time, upon demand by Lender, pay to Lender additional amounts sufficient
to indemnify it against such increased costs or reduction in return;
provided that Lender agrees to use reasonable efforts to mitigate the
increased cost or reduction in return to the extent reasonably practicable.
A certificate as to the amount of such increased cost or reduced return,
submitted to Borrower by Lender, shall be conclusive absent manifest error.
3.11 Payments and Computations. Borrower shall make each payment
due in Gold hereunder and under the Note not later than 5:00 p.m. (New York
City time) on the day before the day when due. Borrower shall make each
payment due in Dollars hereunder and under the Note in immediately
available funds not later than 5:00 p.m. (New York City time) on the day
before the day when due Lender as follows (or as Lender shall otherwise
advise Borrower by notice as provided herein):
to:
Chase Manhattan Bank N.A.
1 Chase Manhattan Plaza
New York, New York
ABA No. 02100021
for the account of N M Rothschild & Sons Limited
A/C No.: 001-1-948262
Payments in Gold shall be made by delivery of Gold to the account of Lender
at any Acceptable Delivery Location. Borrower agrees to pay all shipping,
insurance, refining charges and other costs related to such delivery and
warrants that such Gold upon its delivery to the account of Lender shall be
free and clear of all Liens, encumbrances, charges and security interests
except those in favor of Lender. Borrower hereby authorizes Lender, if and
to the extent payment of money owed to it is not made when due hereunder or
under the Note, to charge from time to time against Borrower's accounts
with Lender any amount so due. All computations of interest hereunder
shall be made on the basis of a year of 360 days for the actual number of
days elapsed (including the first day but excluding the last day).
3.12 Payment on Non-Business Days. Whenever any payments of Gold
or Dollars to be made hereunder or under the Note shall be due on a day
which is not a Business Day, such return or payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may
be, unless such next succeeding Business Day is after the end of the
<PAGE>
Interest Period, in which case the payment will be made on the next
preceding Business Day and such payment shall not reflect the actual
payment date in the computation of interest or fees due and payable.
3.13 Taxes.
(a) General. Any and all payments by Borrower hereunder
shall be made free and clear of and without deduction for any and all
present or future taxes, levies, duties, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto (excluding taxes
imposed on Lender's income and franchise taxes imposed on Lender) imposed
by the jurisdiction under the laws of which Lender is organized, or the
United States of America, the state of Alaska or any other jurisdiction
under the laws of which Lender is otherwise subject to tax, or any
political subdivision thereof (all such non-excluded taxes, levies, duties,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder to
Lender, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.13) Lender receives an amount
equal to the sum it would have received had no such deductions been made,
(ii) Borrower shall make such deductions and (iii) Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law. The foregoing obligation of Borrower
will apply with respect to any assignee of Lender.
(b) Other Taxes. In addition, Borrower agrees to pay any
present or future stamp, sales, use or documentary taxes or any other
excise or property taxes, charges, duties or similar levies which arise
from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, any of the
Loan Documents, or any Instrument contemplated thereby (hereinafter
referred to as "Other Taxes"). To Lender's knowledge, no Other Taxes will
be applicable to the transactions contemplated by this Agreement.
(c) Tax Indemnity. Borrower hereby indemnifies Lender for
the full amount of Taxes and Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Section 3.13) paid by Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto. Lender shall use commercially reasonable efforts to mitigate any
Taxes or Other Taxes to the extent practicable, and to refund to Borrower
its proportionate share of any Taxes or Other Taxes paid by Borrower
pursuant hereto ultimately refunded to Lender.
(d) Payment of Taxes. Within 30 days after the date of any
payment of Taxes or Other Taxes withheld by Borrower in respect of any
payment to Lender, Borrower will furnish to Lender the original or a
certified copy of a receipt evidencing payment thereof.
(e) Lender's Taxes. To Lender's knowledge, under
applicable law and treaties in effect as of the date hereof between the
United States and the United Kingdom, no United States federal taxes will
be required to be withheld by Borrower with respect to any payment to be
made to Lender in respect of this Agreement. Lender agrees upon written
request of Borrower to deliver to Borrower, in duplicate, duly completed
and signed copies of either Form 1001 (relating to Lender and entitling
Lender to a complete exemption from withholding on all amounts to be
<PAGE>
received by Lender pursuant to this Agreement, the Loans and Notes as a
result of a tax treaty concluded with the United States) or Form 4224
(relating to all amounts to be received by Lender pursuant to this
Agreement, the Loans and Notes) of the Internal Revenue Service.
(f) Survival. Without prejudice to the survival of any
other agreement hereunder, the agreements and obligations contained in this
Section 3.13 shall survive the payment in full of the Loan and interest
hereunder.
3.14 Proceeds Account.
(a) Prior to the Initial Advance of the Loans, Borrower
will execute and deliver the Proceeds Account Agreement, will establish an
account with a national banking institution, satisfactory to Lender in its
sole discretion reasonably exercised (the "Proceeds Account"), will enter
into an escrow agreement with such banking institution in form acceptable
to Lender and will at all times upon and after Completion while any portion
of the Loans remains outstanding maintain a balance in the Proceeds Account
at least equal to the Retention Amount. Borrower will promptly deposit all
gross revenues of, and all other payments received in relation to, the
Project including the proceeds of Dollar Loans, the Dollar equivalent
(calculated on the date of making of any Gold Loan as set forth in
Section 3.1) of the proceeds of such Gold Loan, the proceeds derived from
the exercise of any Hedging Contract, the net proceeds of any equity or
debt offering by Borrower to any Person, including USMX or a Subsidiary of
USMX, all funds received from USMX (whether as loans or equity
contributions), the net proceeds of any disposition of Project Assets and
any insurance proceeds received in connection with the Project to, and
shall disburse all funds, including funds disbursed for Project Costs from,
such account.
Disbursements or withdrawals from the Proceeds Account will be
made by Borrower only pursuant to a Request for Disbursement in the form of
Exhibit B hereto.
Credit balances in the Proceeds Account shall be applied as
follows:
First, to payment of Project Capital Costs and Project Operating
Costs, incurred by Borrower in accordance with the Development
Plan;
Second, to payment of fees or other amounts due Lender hereunder
or under any of the Loan Documents which are due and payable and
which remain unpaid;
Third, to payment of interest and the Principal Amount due and
payable hereunder, and principal and interest payments of the
$2,500,000 USMX Secured Loan; and
Fourth, after Completion and provided that no Default or Event of
Default is outstanding hereunder, Borrower may, on a quarterly
basis, withdraw funds for general corporate purposes, including
permitted dividends to stockholders, so long as after any such
withdrawal the Proceeds Account contains an amount greater than
or equal to the Retention Amount.
(b) On each principal repayment date referred to in
<PAGE>
Section 3.6(b), and on any other due date of any portion of the Loans, Loan
repayments shall (without prejudice to the right of Lender to such
repayment of any Obligation from any other source) be made (i) in the case
of Dollar Loans in Dollars by payment to Lender of an amount sufficient to
provide for such repayment or prepayment, or (ii) in the case of a Gold
Loan, in Ounces of Gold by payment to Lender or any other member of The
London Bullion Market Association reasonably acceptable to Lender a Dollar
amount sufficient to provide for such repayment or prepayment in Ounces of
Gold with irrevocable instructions to transfer such Ounces of Gold to an
Acceptable Delivery Location.
(c) Borrower hereby pledges, assigns and grants to Lender a
security interest in the Proceeds Account and all funds in the Proceeds
Account from time to time, in accordance with common law pledge
requirements and the Uniform Commercial Code. Upon occurrence of a Default
or Event of Default, Borrower agrees that, notwithstanding the provisions
of clause (a) above concerning application of funds in the Proceeds
Account, Lender may elect not to honor a Request for Disbursement received
from Borrower; Lender may prohibit any withdrawals or transfers of funds by
Borrower or by any Persons claiming interests by, through or under Borrower
(and for this purpose shall return marked "NSF" any checks or other
instruments or orders for payment of money received by Lender); and Lender
shall be entitled to exercise its rights hereunder with respect to all
funds in the Proceeds Account in accordance with law, including, without
limitation, transfer of such funds to Lender in payment or partial payment
of Borrower's Obligations. In connection therewith, Borrower agrees and
covenants to indemnify Lender against any claim, cost or liability incurred
by Lender in connection with its refusal, as permitted herein, to honor a
Request for Disbursement received from Borrower or in connection with its
application of funds in the Proceeds Account, as permitted herein, in
satisfaction of Borrower's Obligations.
ARTICLE 4
HEDGING FACILITY
4.1 Establishment of Hedging Facility. Concurrently herewith,
Lender has established a Gold hedging facility in favor of Borrower on the
terms and conditions of the Hedging Agreement.
ARTICLE 5
COLLATERAL SECURITY
5.1 Security Documents. As security for the due repayment of
Loans hereunder, for the payment of all moneys due hereunder, for the
performance of all Obligations of Borrower and USMX hereunder and under the
other Loan Documents, Borrower shall contemporaneously with the execution
of this Agreement, execute and deliver to Lender the Security Documents to
which it is a party, including amendments or assignments thereof and
notices to third Persons as Lender may require in connection with the
perfection of its security interests in the property and interests subject
to the Security Documents.
5.2 No Limitation on Application of Security Interests.
<PAGE>
Borrower and Lender agree that notwithstanding any provision of any
Security Document to the contrary, all Liens created and perfected pursuant
to the Security Documents shall secure all Obligations of Borrower
hereunder and under the other Loan Documents.
5.3 Recordings and Filings of Security Documents. Lender will
record, file or deliver to account debtors as necessary the Security
Documents, as appropriate, at Borrower's expense, promptly after execution
and delivery thereof by Borrower.
5.4 Protection of Security Document Liens. As and when
requested to do so by Lender, Borrower will deliver to Lender from time to
time any financing statements, continuation statements, extension
agreements and other documents, properly completed and executed (and
acknowledged when required) by Borrower in form and substance satisfactory
to Lender, for the purpose of perfecting or protecting Lender's Liens on
the property and interests subject to the Security Documents.
5.5 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, Lender is hereby authorized at any
time and from time to time, without notice to Borrower or USMX (any such
notice being expressly waived by Borrower), to set off and 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 Lender to or for
the credit or the account of Borrower against any and all of the
Obligations of Borrower now or hereafter existing, although such
Obligations may be contingent and unmatured. Lender agrees promptly to
notify Borrower after any such set-off and application, provided that the
failure to give such notice shall not affect the validity of such set-off
and application. The rights of Lender under this Section 5.5 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which Lender may have.
5.6 Additional Collateral. Borrower and Lender intend that the
Security Documents cover and extend to all property rights and interests of
Borrower, real or personal, tangible or intangible, presently held or
hereafter acquired, which are related to the Project, the production
therefrom, Hedging Contracts related to the Project and the proceeds of all
of the foregoing. In the event that Borrower acquires any property right
or interest related to the Project which is not subject to the Lien of the
Security Documents, upon request therefor from Lender, Borrower shall
promptly execute and deliver such Instruments and take such actions as
Lender may reasonably request in order to perfect a first and prior Lien on
such right or interest, subject only to Permitted Liens with the priority
expressly provided hereunder or under the USMX Credit Agreement. Whether
or not Lender requests that any such right or interest be subjected to the
Security Documents, Borrower agrees to keep such rights or interests
related to the Project free and clear of all Liens other than Permitted
Liens.
5.7 Partial Release of USMX Upon Completion of the Project.
Upon Completion, if no Default or Event of Default is outstanding, Lender's
recourse with respect to the obligations of USMX under the Guaranty will be
limited to the Pledged Collateral pursuant to the Pledge Agreement, as
those latter two terms are defined in the Pledge Agreement and the USMX
Credit Agreement, respectively, and the Assignment Agreement; provided that
the obligations of USMX under the Guaranty with respect to Obligations of
Borrower which arise under a breach of the representation in Section 7.1(t)
or the covenants in Section 8.1 insofar as Environmental Laws are concerned
<PAGE>
shall remain unchanged and unaffected by Completion, and shall remain the
full recourse obligation of USMX.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions Precedent to the Initial Advance. The obligation
of Lender to make the Initial Advance of the Loan and to perform its other
obligations hereunder, are subject to satisfaction of the following
conditions precedent:
(a) Lender or its counsel shall have received the following
on or before the date of the Initial Advance of the Loan, each dated on or
no more than five days prior to such date of delivery (or as otherwise
agreed by Lender), and in form and substance as shall be satisfactory to
Lender:
(i) this Agreement, duly executed by Borrower;
(ii) the Gold Note or Dollar Note, as the case may be,
duly executed by Borrower;
(iii) the Hedging Agreement;
(iv) the Establishment Fee;
(v) the Security Documents, duly executed by Borrower,
NPMC and USMX, as the case may be, together with any financing statements
or similar evidences of Liens, amendments thereto, notices or other
Instruments determined by Lender to be necessary or desirable to perfect
the Liens established pursuant to the Security Documents;
(vi) the Proceeds Account Agreement, duly executed by
Borrower;
(vii) the NPMC Subordination Agreement, duly
executed by NPMC;
(viii) an Omnibus Certificate for each of Borrower,
NPMC and USMX, duly executed by an officer thereof;
(ix) a Certificate from the Department of Commerce and
Economic Development of the State of Alaska confirming the due organization
and good standing of Borrower in Alaska;
(x) the Opinion of Borrower's and USMX's Counsel;
(xi) the Opinion of NPMC's Counsel;
<PAGE>
(xii) the Security Opinion in form and content
reasonably acceptable to Lender;
(xiii) the Development Plan;
(xiv) certificates of issuing insurance companies,
confirming compliance by Borrower with the insurance requirements set forth
in Section 8.4;
(xv) accurate and complete copies of the financial
statements referred to in Section 7.1(f); and
(xvi) such other approvals, opinions or documents
as Lender may reasonably request.
(b) The following shall be correct as of the date of the
Initial Advance of the Loan by Lender:
(i) all conditions precedent to the advance of funds
pursuant to the USMX Credit Agreement shall have been satisfied or waived
by Lender;
(ii) since the date of the financial statements of
Borrower and USMX most recently delivered to Lender (referred to in
Section 7.1(f)), there has been no Material Adverse Effect on the financial
condition, operations or business of Borrower or USMX;
(iii) there is no pending or threatened action or
proceeding affecting Borrower, USMX or the Project before any court,
Governmental Authority or arbitrator, including any matter involving
Environmental Laws, which seeks to prevent prosecution of the Project or
performance by Borrower, USMX or Lender hereunder or which could be
reasonably expected to have a Material Adverse Effect upon the financial
condition, operations or business of Borrower or USMX or the Project;
(iv) all Governmental Requirements and all material
approvals and consents (including, without limitation, all Project Permits)
of Governmental Authorities or other Persons, if any, required in
connection with the operation of the Project, including specifically the
activities contemplated by the Development Plan shall have been obtained
and remain in effect;
(v) the Liens established by the Security Documents
shall be in full force and effect as valid, enforceable first priority
Liens (or as otherwise expressly provided hereunder or under the USMX
Credit Agreement) on the Collateral, except for Permitted Liens with the
priority expressly contemplated by this Agreement;
(vi) no event shall have occurred or condition exist
which would have a Material Adverse Effect on Borrower;
(vii) Lender shall have approved the Development
Plan, in its sole discretion reasonably exercised;
<PAGE>
(viii) the Proceeds Account shall have been
established and the related escrow agreement (as contemplated by
Section 3.14 hereof) shall have been entered into by Borrower and escrow
agent and approved by Lender;
(ix) The entire proceeds of the $2,500,000 USMX Secured
Loan shall be deposited in the Proceeds Account;
(x) Lender shall have received evidence satisfactory
to Lender in its sole judgment reasonably exercised that Borrower or USMX
or both in aggregate have expended $3,400,000 or more on construction of
the Project pursuant to and in accordance with the Development Plan;
(xi) USMX shall have paid to NPMC all sums due under
the NPMC Agreement and shall have duly issued and delivered to NPMC
registered, freely tradeable common stock of USMX in full payment for the
real property and other interests to be conveyed thereunder as contemplated
by the NPMC Agreement, the Mining Properties shall be owned by Borrower
free and clear of all Liens other than Permitted Liens, and no defaults
shall exist or have been asserted by NPMC to exist under the NPMC Agreement
or the NPMC Mortgage; and
(xii) the Independent Consultant shall have
completed and submitted to Lender, and Lender shall have approved in its
sole discretion reasonably exercised, the Project Review Report.
6.2 Conditions Precedent to all Advances. The obligation of
Lender to make each Advance (including the Initial Advance), shall be
subject to the further conditions precedent that:
(a) Borrower shall have performed and complied with all
agreements and conditions herein required to be performed and complied with
on or prior to the date of such Advance and USMX shall have complied with
all agreements and covenants contained in the USMX Credit Agreement;
(b) Lender shall receive evidence satisfactory to Lender of
aggregate Price Fixing Commitments which comply with the requirements of
Section 8.12;
(c) Lender shall have received a Request for Advance, duly
executed by Borrower;
(d) on the date of such Advance, Lender shall have received
such other approvals, opinions or documents as Lender may reasonably
request;
(e) on the date of such Advance, Lender shall have
satisfied itself of the absence of any Material Adverse Effect with respect
to Borrower;
<PAGE>
(f) such Advance shall not cause the aggregate Principal
Amount of the Loans to exceed the Maximum Credit Amounts;
(g) there shall exist no Default hereunder or under the
USMX Credit Agreement; and
(h) all representations and warranties made by Borrower
herein and made by USMX in the USMX Credit Agreement and the Guaranty shall
be true and correct on the date of the Advance, except for such changes
therein as shall be acceptable to Lender.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties of Borrower. Borrower
represents and warrants as follows:
(a) Organization, Qualification and Subsidiaries. Borrower
is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Alaska and has all requisite corporate power
and authority to enter into this Agreement and the Loan Documents to which
it is a party and to carry out the transactions contemplated hereby and
thereby. USMX is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
corporate power and authority to enter into the USMX Credit Agreement, the
Loan Documents to which it is a party and to carry out the transactions
contemplated thereby. Borrower has no subsidiaries.
(b) Authorization; No Conflict. The execution, delivery
and performance by Borrower of this Agreement and of the other Loan
Documents to which it is a party have been duly authorized by all necessary
corporate action on the part of Borrower and do not and will not
(i) require any consent or approval of the stockholder of Borrower that has
not been obtained; (ii) contravene Borrower's articles of incorporation,
charter or bylaws; (iii) violate any provision of any law, rule, regulation
(including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to Borrower; (iv) result in a breach of or constitute a
default under or require the consent of any party pursuant to any indenture
or loan or credit agreement or any other agreement, lease or instrument to
which Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
Lien (other than Liens arising under the Security Documents) upon or with
respect to any of the properties now owned by Borrower; and, to the best
knowledge of Borrower, Borrower is not in breach or default in any material
respect under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture,
agreement, lease or instrument, except as otherwise disclosed to Lender in
writing prior to the date hereof. The execution, delivery and performance
by USMX of the USMX Credit Agreement and Loan Documents to which it is a
Party has been duly authorized by all necessary corporate action and does
not and will not contravene USMX's articles of incorporation, charter or
bylaws.
(c) Governmental Consents; Project Permits and Authoriza
<PAGE>
tions. No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority is required (i) for the due
execution and delivery of, and due performance of the financial obligations
of Borrower under, this Agreement, any other Loan Document to which
Borrower is a party or for the due execution, delivery and performance by
the USMX of the Loan Documents to which the USMX is a party or (ii) for the
due performance of all other obligations of Borrower or USMX under this
Agreement or any other Loan Document to which Borrower or USMX is a party
(other than registrations or filings to perfect the liens created by the
Security Documents) except such authorizations, approvals or other actions
as have been obtained or notices or filings as have been made. All
material Project Permits are identified in Schedule 7.1(c). All Project
Permits have been duly issued to or are held by Borrower, are valid and in
good standing and free of any violation thereof by Borrower, and Borrower
has not received any notice of an asserted violation or proposed
revocation, withdrawal or material modification thereof.
(d) Binding Obligations. This Agreement is, and the Loan
Documents when delivered hereunder will be, the legal, valid and binding
obligations of Borrower and USMX, respectively, enforceable against
Borrower and USMX, respectively, in accordance with their respective terms
(except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws or equitable principles affecting enforcement
of creditors' rights generally at the time in effect).
(e) Litigation. Except as indicated on Schedule 7.1(e),
there is no action, proceeding or investigation pending or threatened in
writing against or involving Borrower which alleges the violation of any
laws, including Environmental Laws, or which questions the validity of this
Agreement or any of the Loan Documents, or any action taken or to be taken
pursuant to this Agreement or any of the Loan Documents, or which questions
the nature or extent of Borrower's record or equitable title to the Mining
Properties or which might result, either in any case or in the aggregate,
in any Material Adverse Effect on the business, operations, condition
(financial or otherwise), aggregate properties or aggregate assets of
Borrower or in any material liability on the part of Borrower.
(f) Financial Statements; No Material Adverse Change. The
audited consolidated balance sheet of USMX (including Borrower) as of
December 31, 1995, and the related consolidated statements of income, cash
flow and stockholders' equity of USMX (including Borrower) for the period
then ended, audited by KPMG Peat Marwick LLP and the unaudited
consolidating balance sheets of USMX (including Borrower) as of March 31,
1996, and the related unaudited consolidating statements of income, cash
flow and stockholders' equity of USMX (including Borrower) for the period
then ended certified by officers of USMX and Borrower, copies of which have
been furnished to Lender, fairly present the financial condition of
Borrower and USMX as at such dates and the results of the operations of
such Persons for the periods ended on such dates, all in accordance with
GAAP consistently applied. Neither Borrower nor USMX has on the date
hereof any material Contingent Liability or liability for taxes, long-term
leases or unusual forward or long-term commitments which are not reflected
in such financial statements or listed in Schedule 7.1(f). Since such
date, except as previously disclosed in writing to Lender, neither the
business, operations or prospects of Borrower or USMX, nor any of their
respective properties or assets, have been affected by any occurrence or
development (whether or not insured against) which would result, either in
any case or in the aggregate, in a Material Adverse Effect on any such
Person.
<PAGE>
(g) Other Agreements. Except for Material Agreements,
Borrower is not a party to any indenture, loan or credit agreement or any
lease or other agreement or instrument or subject to any charter or other
corporate restriction which would, upon a default thereunder or otherwise,
result in a Material Adverse Effect on Borrower, or materially impair the
ability of Borrower to carry out its Obligations under this Agreement, or
any of the Loan Documents.
(h) Information Accurate. Except as disclosed to Lender on
Schedule 7.1(h) hereto, none of the information delivered to Lender by
Borrower or USMX in connection with the transactions contemplated by this
Agreement or the USMX Credit Agreement, including any representation or
warranty, contains any material misstatement of fact or omits to state a
material fact, and all projections contained in any such information,
exhibits or reports, including in particular the Feasibility Study and
Development Plan, were based on information which when delivered was, to
the best knowledge of Borrower, true and correct, and to the best knowledge
of Borrower all calculations contained in such projections were accurate,
and such projections presented Borrower's then-current estimate of its
future business, operations and affairs and, since the date of the delivery
of such projections, to the best knowledge of Borrower, there has been no
material change in the assumptions underlying such projections, or the
basis therefor or the accuracy thereof.
(i) Employee Benefit Plans. Except as disclosed on
Schedule 7.1(i), Borrower has not established, does not maintain and has
made no contributions to, nor has any liability with respect to, any Plan.
(j) Title to Properties; Liens.
(i) With respect to those properties owned in fee
simple by Borrower which are subject to any of the Security Documents,
Borrower is in exclusive possession of and owns such properties free and
clear of all material defects of title, burdens on production or Liens
except Liens disclosed in Schedule 7.1(j) and specifically identified in
the Security Opinion delivered pursuant hereto.
(ii) With respect to those properties held under leases
or other contracts which are subject to any of the Security Documents:
(A) Borrower is in exclusive possession of such properties other than the
airstrip located on those properties and any navigable waters; (B) Borrower
has not received any notice of, and has no knowledge of any facts or
circumstances that, with the passage of time or notice, or both, could
result in any default of any of the terms or provisions of such leases or
contracts; (C) under such leases and contracts Borrower has the authority
to perform fully, and no provision thereof prohibits or would be breached
by Borrower's performance of, its obligations under this Agreement and the
other Loan Documents; (D) to the best of Borrower's knowledge and belief,
such leases and contracts are valid and are in good standing; and (E) to
the best of Borrower's knowledge and belief, the properties covered thereby
are free and clear of all defects of title or Liens, except for those
specifically identified in the Security Opinion or disclosed in
Schedule 7.1(j) [or in such leases or contracts.] Borrower has delivered
or will make available to Lender all information concerning title to the
properties in Borrower's possession or control, or to which Borrower has
access, which Lender requests.
<PAGE>
(iii) With respect to mining claims, leases and
other property interests (for purposes of this Section 7.1(j)(iii),
"Claims") which are subject to any of the Security Documents, except as
provided in the Security Opinion: (A) the Claims are free of Liens, except
as disclosed in Schedule 7.1(j); (B) to the best of Borrower's knowledge,
(w) the Claims were properly located and monumented; (x) all required
location and validation work was properly performed; (y) location notices
and certificates were properly recorded and filed with appropriate
Governmental Authority; and (z) all assessment work or fees, or both,
required to hold the Claims has been performed in a manner consistent with
generally accepted standards of major companies in the mining industry
through the assessment year ending August 31, 1996]; (C) all maintenance
fees or rental payments have been duly and timely made in order to maintain
the Claims through the rental year ending August 31, 1996; (D) all
affidavits of assessment work and other filings required to maintain the
Claims in good standing have been timely recorded or filed with appropriate
Governmental Authority; and (E) Borrower has no knowledge of conflicting
claims or leases, except overlaps to avoid gaps or to maintain parallel end
lines, or inadvertent overstakings which do not materially impair
Borrower's property position.
(iv) Except as disclosed on Schedule 7.1(j), no
approval or consent of any Governmental Authority or any other party is
necessary to authorize the execution and delivery of the Mortgage, the
Second Mortgage, the Fourth Mortgage or of any other written Instrument
constituting or evidencing the Obligations.
(k) Securities Activities. The proceeds of the Loan
hereunder will not be used to acquire any security in any transaction which
is subject to Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended. Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation X of the Federal Reserve Board) or carrying any margin stock.
(l) Solvency. Borrower is not entering into the
arrangements contemplated by this Agreement or any of the other Loan
Documents with actual intent to hinder, delay or defraud either present or
future creditors. On and as of the date hereof, and thereafter on and as
of the date of the undertaking of any actions contemplated by this
Agreement, including, without limitation, the Advance of Loans, the
execution of the Hedging Agreement, after giving effect to the Loan, and
all such Instruments, and to any fees and expenses in connection with such
undertaking, (i) Borrower's property at a fair valuation, is, and will be,
greater than the sum of its Indebtedness (including its Contingent
Liabilities); (ii) the present fair salable value of Borrower's assets
exceeds, and will exceed, the probable liability of Borrower on its
Indebtedness (including its Contingent Liabilities) as they become absolute
and mature; (iii) Borrower has not, and will not have, incurred, and does
not intend to, or believe that it will, incur debts (including its
Contingent Liabilities) beyond its ability to pay such debts as such debts
mature (taking into account the timing and amounts of cash to be received
by Borrower from any source, and of amounts to be payable on or in respect
of its debts), and the cash available to Borrower after taking into account
all other anticipated uses of the cash, is, and is anticipated to be,
sufficient to pay all such amounts on or in respect of such debts
(including its Contingent Liabilities), when such amounts are required to
be paid; and (iv) subject to receipt of the Loan, Borrower has sufficient
capital with which to conduct its business and Borrower's capital does not
constitute unreasonably small capital with which to conduct its business.
As used in clauses (i) through (iv) above, the terms therein shall have the
meanings as used in Section 548 of the United States Bankruptcy Code, the
<PAGE>
Uniform Fraudulent Conveyance Act and any applicable state law concerning
fraudulent conveyances as such may from time to time have been amended or
developed by judicial interpretation to the date the representations herein
are made.
(m) Warranties of Borrower With Respect to Gold. Borrower
warrants that Gold delivered by Borrower to Lender hereunder will conform
to the description of the Gold herein and shall be free of Liens or rights
or claims of interest by third Persons. THERE ARE NO EXPRESS WARRANTIES
WITH RESPECT TO SUCH GOLD OTHER THAN THOSE SPECIFIED HEREIN. NO WARRANTY
OF MERCHANTABILITY, OR ANY WARRANTY OF ANY OTHER NATURE, SHALL BE IMPLIED.
(n) Capital Structure of Borrower and USMX. Borrower is a
wholly-owned subsidiary of USMX. Borrower has no outstanding obligations
to issue additional shares or other equity interests, including any stock
or securities convertible into or exercisable or exchangeable for any
shares of its capital stock or any rights or options to purchase any of the
foregoing, or to convert any existing Indebtedness to equity interests in
Borrower.
(o) Hedging Contract Obligations. Except as set forth in
Schedule 7.1(o), Borrower has no Hedging Contracts currently in effect for
Gold except Price Fixing Commitments as contemplated by the Development
Plan.
(p) Material Agreements; Absence of Default. All of
Borrower's Material Agreements are identified in Schedule 7.1(p). No event
has occurred that, with notice or the passage of time, or both, would
constitute or give rise to an event of default or a default, or any
equivalent occurrence, by Borrower under any of the Material Agreements,
and Borrower has not received any notice of an asserted default thereunder
from any other Person that is a party to any such agreement.
(q) Taxes and Other Payments. Borrower has filed all tax
returns (including all property tax returns and other similar tax returns
applicable to the Mining Properties) and reports required by law to have
been filed by it and has paid all taxes and governmental charges thereby
shown to be owing and due and all claims for sums due for labor, material,
supplies, personal property and services of every kind and character
provided with respect to, or used in connection with the Mining Properties
and no claim for the same exists except as permitted hereunder, except any
such taxes, charges or amounts which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside on the books of Borrower.
(r) Development Plan. The Development Plan has been
prepared in accordance with prudent mining practices and after diligent
inquiry by Borrower, and Borrower is not aware of any facts or state of
affairs which would materially hinder or prevent Borrower from operating
the Mining Properties in accordance with the Development Plan and
achieving, after allowance for existing royalty burdens, the net Gold
production provided for therein.
(s) Compliance With Laws. Borrower is in compliance with
all laws, regulations and rules of federal, state and local Governmental
Authorities
<PAGE>
(t) Environmental Laws. Except as set forth in
Schedule 7.1(t):
(i) All facilities and property (including underlying
groundwater) comprising the Mining Properties have been, and continue to
be, owned, operated, leased or utilized by Borrower in material compliance
with all Environmental Laws.
(ii) With respect to the Mining Properties, there have
been no past, and there are no pending or threatened claims, complaints,
notices or requests for information received by Borrower with respect to
any alleged violation of any Environmental Law.
(iii) There have been no Releases of Hazardous
Materials at, on or under any property presently or formerly owned or
operated by Borrower that singly, or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect on Borrower.
(iv) No property now or previously owned, operated or
leased by Borrower is listed or proposed for listing (with respect to owned
property only) on the National Priorities List pursuant to CERCLA, on the
CERCLIS or any similar state list of sites requiring investigation or clean-
up.
(v) There are no underground or above-ground storage
tanks, active or abandoned, including petroleum storage tanks, at, on or
under any property now or previously owned, operated or leased by Borrower
that singly or in the aggregate, have, or may reasonably be expected to
have, a Material Adverse Effect on Borrower.
(vi) Borrower has not directly transported or directly
arranged for the transportation of any Hazardous Material to any location
which is listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list or which is
the subject of federal, state or local enforcement actions or other
investigations which may lead to material claims against Borrower for any
remedial work, damage to natural resources or personal injury, including
claims under CERCLA.
(vii) There are no polychlorinated biphenyls or
friable asbestos present at any property now or previously owned, operated
or leased by Borrower that, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect with respect to
Borrower.
(viii) No conditions exist at, on or under any
property now or previously owned, operated or leased by Borrower which,
with the passage of time, or the giving of notice or both, would give rise
to liability under any Environmental Law that, individually or in the
aggregate, have, or may reasonably be expected to have, a Material Adverse
Effect with respect to Borrower.
(u) Borrowers' Indebtedness. Except as disclosed on
Schedule 7.1(u) or specifically identified in the financial statements of
Borrower identified in Section 7.1(f), Borrower has no existing
Indebtedness (a) which is not in the ordinary course of business and
(b) which involves an obligation of $100,000 or greater.
<PAGE>
(v) Insurance. Borrower maintains in effect the insurance
identified in Schedule 8.4, and such insurance is with responsible and
reputable insurance companies or associations in such amounts and covering
such risks as is prudent and consistent with good operating practices.
ARTICLE 8
AFFIRMATIVE COVENANTS OF BORROWER
So long as the Loans or the Notes shall remain unpaid, or any
other Obligation of Borrower hereunder, or obligations of USMX hereunder or
under the USMX Credit Agreement or under Agreements and Instruments entered
into pursuant to either of them, shall not have been fully performed or
waived by Lender (including obligations of Borrower under the Hedging
Agreement), Borrower shall, unless Lender otherwise consents in writing
(which consent Lender may grant or withhold in its sole discretion),
perform all covenants in this Article 8.
8.1 Compliance with Laws, Etc. Borrower shall comply in all
material respects with all applicable laws (including without limitation
Environmental Laws), rules, regulations and orders, such compliance to
include, without limitation, paying before the same become delinquent all
taxes, assessments, and governmental charges imposed upon its property,
except to the extent contested in good faith and adequately reserved for in
accordance with GAAP.
8.2 Reporting Requirements. Borrower shall deliver, or cause
USMX to deliver to Lender the reports, information and certificates set
forth below:
(a) Quarterly Financial Information. As soon as available
and in any event within 60 days after the end of each of the first three
quarters of each year, a consolidating balance sheet of USMX (including
Borrower), as of the end of such quarter and consolidating statements of
income, cash flow and retained earnings of USMX (including Borrower)
prepared in accordance with GAAP for such quarter and for the period
commencing at the end of the previous year and ending with the end of such
quarter, certified in a manner acceptable to Lender by the chief financial
officer of Borrower, and, in the case of each quarter ending June 30,
confirmation (showing calculations) of compliance by Borrower with the
financial covenants of Sections 9.6 and 9.8 certified by the chief
financial officer of Borrower. As soon as available and in any event no
later than 60 days after the end of each quarter, Borrower shall deliver to
Lender a certificate by the chief financial officer of Borrower, showing
for such quarter actual expenditures contrasted with projected expenditures
as shown in the Development Plan.
(b) Annual Financial Information. As soon as available and
in any event within 105 days after the end of each year, a consolidating
balance sheet of USMX (including Borrower), as of the end of such year and
consolidating statements of income, cash flow and retained earnings of USMX
(including Borrower) for such year and for the quarter prepared in
accordance with GAAP, and audited by KPMG Peat Marwick LLP or other
certified public accountants acceptable to Lender, together with a
confirmation (showing calculations) of compliance by Borrower with the
<PAGE>
financial covenants of Section 9.6, 9.7 and 9.8, all of which shall be
certified in a manner acceptable to Lender by the chief financial officer
of Borrower.
(c) Statement of Project Reserves. Concurrently herewith,
and not later than each March 31 thereafter, commencing March 31, 1997,
Borrower shall submit to Lender a certificate, certified by the presidents
of each Borrower and USMX, indicating the calculations of the Project
Proven and Probable Reserves as at December 31, 1995 (in the case of the
certificate submitted concurrently herewith) and as at the preceding
December 31 (in the case of the certificates submitted by each March 31),
with each such certificate referred to as a "Statement of Reserves."
(d) ERISA Information. Promptly after the filing or
receiving thereof (if any), copies of all material reports and notices
under ERISA which Borrower files with or receives from the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S. Department of
Labor.
(e) Environmental Matters. Promptly after the filing or
receiving thereof, copies of all notices which Borrower receives from any
Governmental Authority alleging its noncompliance with Environmental Laws
and any replies of Borrower filed in response thereto.
(f) Projected Variations in the Development Plan.
Concurrently herewith and on or before each quarter, Borrower shall submit
to Lender a report which shall show any projected variations from the
Development Plan in Gold production from the Project and in operating
costs, capital expenditures and exploration expenditures of achieving such
production (i) on a monthly basis, for the remainder of the then-current
calendar year and (ii) on an annual basis thereafter for the life of the
Project.
(g) Litigation. Promptly after initiation thereof, notice
of any litigation by or against Borrower, USMX, or the Mining Properties,
or litigation against Borrower's or USMX's other properties which could
have a Material Adverse Effect on Borrower or USMX.
(h) Monthly Project Reports. No later than the 15th day of
each month, Borrower shall submit to Lender a report concerning production
and operations of the Project during the preceding month, and showing
metallurgical balances, production and cost information and statistics, to
include actual expenditures contrasted with projected expenditures as
budgeted in the Feasibility Study and Development Plan, in form and
substance reasonably acceptable to Lender.
(i) Quarterly Hedging Contract Reports. Not later than the
date of the Initial Advance, and not later than 60 days after the end of
each quarter thereafter, a report of all Hedging Contracts of Borrower as
of the close of the preceding quarter, unless such Hedging Contracts have
been entered into with Lender.
(j) Other Information. Such other information respecting
the condition or operations, financial or otherwise, of Borrower as Lender
may from time to time reasonably request.
8.3 Inspection. At any reasonable time during normal business
hours and from time to time, on reasonable notice, Borrower shall permit
Lender or its agents or representatives to examine and make copies of and
<PAGE>
abstracts from the records and books of account of, and visit the
properties of, Borrower and to discuss the affairs, finances and accounts
of Borrower with any of its officers, directors, employees or agents.
Borrower will not be responsible for injuries to or damages suffered by
agents or representatives of Lender while visiting the properties of
Borrower unless such injuries or damage are caused or contributed to by the
negligence or willful misconduct of Borrower or its employees or agents.
8.4 Maintenance of Insurance. Borrower shall maintain with
respect to the Mining Properties, the Project and Borrower's other assets
and business generally, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
prudent and consistent with good operating practices, with such insurance
listed in Schedule 8.4. All such insurance shall name Lender as an
additional insured or as loss payee, as the case may be, and shall contain
an endorsement providing that such insurance cannot be terminated without
at least ten days' prior notice to Lender.
8.5 Maintenance of Equipment, Etc. Borrower shall maintain and
preserve all equipment and other personal property which is material to the
proper conduct of the Project in good working order and condition, ordinary
wear and tear excepted, in accordance with maintenance requirements
specified in connection with manufacturer's warranties therefor.
8.6 Keeping of Records and Books of Account. Borrower shall
keep adequate records and books of account, in which complete entries shall
be made in accordance with GAAP consistently applied, reflecting all
financial transactions of Borrower.
8.7 Preservation of Existence, Etc. Borrower shall preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and will qualify and remain qualified as
a foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the
ownership of its properties.
8.8 Conduct of Business. Borrower shall engage solely in the
business of exploring for and mining gold and by-product metals at the
Mining Properties and vicinity, and in activities incident thereto, in
accordance with generally accepted industry practices and the Development
Plan.
8.9 Notice of Default. Borrower shall furnish to Lender as soon
as possible and in any event within five Business Days after the occurrence
of each Event of Default or each event or condition which with the giving
of notice or lapse of time, or both, would constitute an Event of Default,
continuing on the date of such statement, a statement of the president or
chief financial officer of Borrower setting forth the details of such Event
of Default or event or condition, and the action which Borrower proposes to
take with respect thereto.
8.10 Defense of Title. Borrower shall defend, at its expense,
title to the Mining Properties, as such title is represented and warranted
in Section 7.1(j), and the Liens in favor of Lender under the Security
Documents and maintain and preserve such Liens as first Liens upon the
properties and interests subject to the Security Documents, subject only to
Permitted Liens.
<PAGE>
8.11 Operation of the Project; Completion; Assignment of
Contracts. Borrower agrees to use all commercially reasonable efforts to
maintain, develop and operate the Mining Properties and the Project in
accordance with the Development Plan and prudent mining industry practices.
Mechanical Completion shall be achieved no later than July 31, 1997 and
Completion shall be achieved no later than November 30, 1997.
8.12 Hedging Requirements. Concurrently with the Initial
Advance, and at all times thereafter while any Loans hereunder remain
outstanding or Lender has any obligation to make further Advances, either
pursuant to the Hedging Agreement, or pursuant to other Price Fixing
Commitments fixing the prices at which Gold produced from the Project
(produced in accordance with the Development Plan) is sold, Borrower will
have entered into Price Fixing Commitments for 80% of the Gold to be
produced from the Project prior to six (6) months after the Scheduled
Maturity Date, which hedging shall be maintained on a three-year, forward-
rolling basis and ending no sooner than six (6) months after the Scheduled
Maturity Date.
8.13 Maintenance of the Mining Properties. Borrower agrees to
maintain its property rights and interests in the Mining Properties in full
force and effect, and to do all acts reasonably determined by Borrower to
be necessary to preserve such rights and interests, including, by way of
example and not limitation: (i) payment and performance of all terms of
leases pertaining to such rights and interests, (ii) timely performance of
work reasonably intended to satisfy any annual assessment work requirements
for unpatented mining or millsite claims included in such properties or
timely payment of appropriate sums in lieu of performance of assessment
work, (iii) timely filing of federal, provincial and state notices with
respect thereto, and (iv) payment under Section 6.1 of the NPMC Agreement
of any Advance Minimum Royalty (as defined in the NPMC Agreement) as they
come due, if Commercial Production (as defined in the NPMC Agreement) has
not been achieved; provided, however, that Borrower may, in the ordinary
course of business, abandon unpatented mining or millsite claims and/or
leased properties which Borrower reasonably believes do not warrant further
maintenance expenditures.
ARTICLE 9
NEGATIVE COVENANTS OF BORROWER
So long as the Loan and the Note shall remain unpaid, or any
other Obligation of Borrower hereunder or USMX under the USMX Credit
Agreement or the Guaranty shall not have been fully performed by Borrower
or USMX, as the case may be, or waived by Lender (including obligations of
Borrower under the Hedging Agreement), Borrower shall, unless Lender
otherwise consents in writing (which consent Lender may grant or withhold
in its sole discretion), perform all covenants in this Article 9.
9.1 Indebtedness. Except as contemplated by the Development
Plan, Borrower shall not directly or indirectly, create, incur, assume or
suffer to exist any Indebtedness except (a) Indebtedness hereunder and
under the Note; (b) Indebtedness secured by Liens permitted by Section 9.2;
(c) Indebtedness existing on the date hereof disclosed to Lender;
(d) unsecured trade payables; (e) Indebtedness incurred in the ordinary
course of business; (f) Indebtedness consisting of purchase or leasehold
<PAGE>
obligations associated with the Project contemplated by the Development
Plan; and (g) Indebtedness incurred by Borrower for purposes of developing
the Illinois Creek Gold Property in accordance with the Development Plan
which has been approved by Lender, such approval not to be unreasonably
withheld by Lender.
9.2 Liens, Etc. Borrower shall not, directly or indirectly,
create, incur, assume or suffer to exist, any Lien, upon or with respect to
any portion of the Mining Properties, now owned or hereafter acquired, or
assign or otherwise convey any right to receive the production, proceeds or
income therefrom, except:
(a) Liens for taxes, assessments or governmental charges or
levies if the same shall not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good faith and by
appropriate proceedings;
(b) Liens imposed by law, such as carriers, warehousemen
and mechanics' liens and other similar liens arising in the ordinary course
of business associated with amounts not yet due and payable, or which are
being disputed in good faith by Borrower;
(c) Liens of purchase money mortgages and other security
interests on equipment acquired, leased or held by Borrower or USMX
(including equipment held by Borrower or USMX as lessee under leveraged
leases) in the ordinary course of business related to the Project to secure
the purchase price of or rental payments with respect to such equipment or
to secure indebtedness incurred solely for the purpose of financing the
acquisition (including acquisition as lessee under leveraged leases),
construction or improvement of any such equipment to be subject to such
mortgages or security interests, or mortgages or other security interests
existing on any such equipment at the time of such acquisition, or
extensions, renewals or replacements of any of the foregoing for the same
or a lesser amount, provided that no such mortgage or other security
interest shall extend to or cover any equipment other than the equipment
being acquired, constructed or improved, and no such extension, renewal or
replacement shall extend to or cover any property not theretofore subject
to the mortgage or security interest being extended, renewed or replaced,
and provided further, that any such Indebtedness shall not otherwise be
prohibited by the terms of this Agreement;
(d) Liens outstanding on the date hereof and described in
Schedule 7.1(j) hereto;
(e) Liens securing subordinated Indebtedness permitted by
Section 9.1(e);
(f) Liens arising under the Security Documents and under
this Agreement;
(g) the Lien or any right of distress reserved in or
exercisable under any lease for rent and for compliance with the terms of
such lease, provided there is no rent in arrears under such lease;
(h) cash labor or governmental obligations deposited in the
ordinary course of business in connection with contracts, bids, tenders or
<PAGE>
to secure workmen's compensation, unemployment insurance, surety or appeal
bonds, costs of litigation, when required by law, public and statutory
obligations, Liens or claims incidental to current construction,
mechanics', warehousemen's, carriers' and other similar Liens;
(i) Liens given in the ordinary course of business to a
public utility or any municipality or governmental or other public
authority when required by such utility or municipality or governmental or
other authority in connection with the operations of Borrower;
(j) easements, rights-of-way and servitudes which in the
opinion of Lender (in its sole discretion, reasonably exercised) will not
in the aggregate materially impair the use of the Illinois Creek Gold
Property by Borrower for the Project;
(k) title defects or irregularities which in the opinion of
Lender (in its sole discretion, reasonably exercised) are of a minor nature
and in the aggregate will not materially impair the use of the Illinois
Creek Gold Property for the Project or materially affect the security
created hereby; and
(l) all rights reserved to or vested in any governmental
body by the terms of any lease, license, franchise, grant or permit held by
Borrower or by any statutory provision to terminate any such lease,
license, franchise, grant or permit or to require annual or other periodic
payments as a condition of the continuance thereof or to distrain against
or to obtain a lien on any property or assets of Borrower in the event of
failure to make such annual or other periodic payments.
9.3 Assumptions, Guarantees, Etc. of Indebtedness of Other
Persons. Without the written permission of Lender, which may be withheld
in Lender's sole discretion reasonably exercised, Borrower shall not,
directly or indirectly, assume, guarantee, endorse or otherwise become
directly or contingently liable (including, without limitation, liable by
way of agreement, contingent or otherwise, to purchase, to provide funds
for payment, to supply funds to or otherwise invest in the debtor or
otherwise to assure the creditor against loss) in connection with any
Indebtedness of any other Person, except guarantees by endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business, or in respect of provision of labor or
materials for the Project or in connection with bonds, letters of credit or
other security posted by Borrower in the ordinary course of business in
connection with the Project.
9.4 Investments in Other Persons. Borrower shall not directly
or indirectly, make any loan or advance to any Person utilizing loan
proceeds or exceeding at any one time outstanding an aggregate of $50,000.
Borrower shall not, without the written approval of Lender, purchase or
otherwise acquire the capital stock, assets, or obligations of, or any
interest in, any Person (other than readily marketable direct obligations
of the United States of America and certificates of time deposit issued by
Lender or commercial banks of recognized standing operating in the United
States of America or other investment grade instruments reasonably approved
by Lender).
9.5 Mergers, Changes in Capital Structure, Etc. Borrower shall
not, directly or indirectly, merge or consolidate with any Person, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
<PAGE>
owned or hereafter acquired) to any Person, or acquire (whether in one
transaction or in any series of transactions) all or substantially all of
the assets of any Person, without the prior written consent of Lender.
Borrower will not establish, or enter into agreements or other arrangements
which obligate Borrower to establish any capital structure which consists
of equity interests in Borrower other than the common stock of Borrower
currently issued and outstanding.
9.6 Borrower's Financial Covenants. Borrower will not permit:
(a) the Loan Life Ratio, calculated on July 1st and
January 1st of each year (commencing January 1, 1997), to be, on each
July 1st and January 1st as shall occur on or after the date of calculation
through the Scheduled Maturity Date, less than or equal to 1.6:1.0; or
(b) the Project Life Ratio, calculated on July 1st and
January 1st of each year (commencing January 1, 1997), to be, on each
July 1st and January 1st as shall occur on or after the date of calculation
through the Scheduled Maturity Date, less than or equal to 2.0:1.0; or
(c) the Debt Service Ratio, calculated on the date of
Completion and July 1st and January 1st of each year (commencing January 1,
1997) thereafter, to be, on each January 1st and July 1st as shall occur on
or after the date of calculation through the Scheduled Maturity Date, less
than 1.35:1.0.
9.7 Project Reserves. Borrower will not permit the value of the
aggregate Proven and Probable Reserves of the Illinois Creek Gold Property
to be less than 400% of the aggregate Principal Amount of the Loans
outstanding at any time.
9.8 Minimum Reserves. Borrower will not permit any Obligations
to remain outstanding if the Proven and Probable Reserves of the Illinois
Creek Gold Property included in the Project are reduced to 30% or less of
Proven and Probable Reserves of such Mining Properties on the date of the
Initial Advance, or if projections based on the Development Plan, as
modified from time to time with the consent of Lender, indicate that less
than 30% of the Proven and Probable Reserves on the date of the Initial
Advance shall be remaining at the Scheduled Maturity Date.
9.9 Restriction on Dividends and Redemptions. Other than as
provided in Section 3.14(a), Borrower shall not declare, order, pay or make
any dividend or other distribution, directly or indirectly, in respect of
any shares of any class of stock of Borrower, now or hereafter outstanding.
9.10 Limitations on Hedging Contracts. Subject to the
requirements of Section 9.12, Borrower shall not, directly or indirectly,
enter into or be a party to (a) any contract or arrangement (including
forward sales agreements, futures and option contracts but not put options
where delivery is at the option of the holder thereof) which requires or
may, upon the occurrence of certain events, require Borrower to deliver
Precious Metals during a certain year, if at such time 80% of the Proven
and Probable Reserves for the Project for such year (as set forth in the
Development Plan) shall already be committed for delivery under this
Agreement and under other similar contracts or arrangements, or (b) any
production payments (other than normal and customary royalties on
production of the Project).
<PAGE>
9.11 Sale of Project Assets. Borrower shall not, directly or
indirectly, sell, transfer, assign or otherwise dispose of any of its
assets or properties related to the Project, except for sales of Precious
Metals, other mineral production and other properties and assets related to
the Project except as provided by Section 8.13 and except for disposition
of equipment that is replaced by equipment of equal or higher capacity or
value.
9.12 Restrictions on Capital Expenditures, Etc. Borrower shall
not, directly or indirectly, incur expenditures for capital improvements or
exploration expense at the Project or on other properties of Borrower other
than as set out in the then-current Borrower's Development Plan or in the
ordinary course of business.
9.13 Arm's Length and Take or Pay Contracts. Borrower will not,
directly or indirectly, enter into or be a party to any arrangement for the
purchase of materials, supplies, other property or services if such arrange
ment (a) is on terms less favorable than are available for similar property
or services between or among unrelated third parties in an arm's length
transaction, or (b) by its express terms requires that payment be made by
Borrower regardless of whether or not such materials, supplies, other
property or services are delivered or furnished to it; provided that
nothing in this Section 9.14 shall prohibit Borrower from entering into any
Price Fixing Commitments as contemplated by Section 8.12.
9.14 Restrictive and Inconsistent Agreements; Modification of
Material Contracts. Borrower will not enter into any agreement or
undertaking or incur or suffer any obligation prohibiting or inconsistent
with the performance by Borrower of the Obligations. Borrower shall not
agree to any material amendments or modifications to any Material
Agreements without the written consent of Lender.
ARTICLE 10
EVENTS OF DEFAULT
10.1 Event of Default. Each of the following events shall be an
"Event of Default" hereunder:
(a) Nonpayment. Borrower shall fail to pay any principal
when due hereunder (whether at stated maturity or by prepayment or
otherwise), or shall fail to pay interest hereunder or on the Note when
due.
(b) Other Defaults. Borrower or USMX shall fail to observe
or perform any of their covenants, undertakings or agreements contained in
this Agreement or any other Loan Document, other than the covenants
referred to in paragraph (a) above, and Borrower or USMX has not remedied
such default within ten days after notice of default has been given by
Lender to Borrower or USMX, as the case may be.
(c) Failure to Achieve Completion. Borrower has failed to
achieve Mechanical Completion by July 31, 1997 or Completion by
November 30, 1997.
<PAGE>
(d) Representation or Warranty. Any representation or
warranty made by Borrower or USMX (or any of their officers) under or in
connection with this Agreement, the USMX Credit Agreement or the other Loan
Documents shall prove to have been incorrect in any material respect when
made.
(e) Cross-Default. A default shall occur under the USMX
Credit Agreement, any of the other Loan Documents, or Borrower or USMX
shall fail to pay any Indebtedness in excess of $100,000 in principal
amount (but excluding Indebtedness evidenced by the Note), or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure to pay is
not being contested by USMX or Borrower, as appropriate, in good faith; or
any other default under any agreement or instrument relating to any such
Indebtedness or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument,
if the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness, unless such default or
event shall be waived by the holders or trustees for such Indebtedness; or
any such Indebtedness shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof.
(f) Insolvency. Either Borrower or USMX 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 Borrower or USMX seeking to adjudicate it a bankrupt or insolvent,
or seeking a 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 any order for relief or the appointment of
a receiver, trustee, or other similar official for it or for any
substantial part of its property and, if instituted against Borrower or
USMX, shall remain undismissed for a period of 60 days; or Borrower or USMX
shall take any corporate action to authorize any of the actions set forth
in this paragraph (f).
(g) Judgments. A final judgment or order for the payment
of money in excess of $100,000 shall be rendered against Borrower or USMX
and either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect for any period of ten consecutive days.
(h) Security Interest. Any of the Security Documents after
delivery thereof shall for any reason, except to the extent permitted by
the terms thereof, cease to create a valid and perfected first priority
security interest in any of the Collateral purported to be covered thereby
except pursuant to Section 5.7, or Borrower or USMX shall so state in
writing.
(i) Guaranty. The Guaranty shall cease to be effective and
enforceable in accordance with its terms, or Borrower or USMX shall so
state in writing.
(j) Condemnation. Any of the property or assets of
Borrower or USMX in the Mining Properties is taken by power of
expropriation or eminent domain or sold under threat of such taking, or
<PAGE>
possession of any material portion of the lands necessary for the operation
of the Project is taken through exercise of such power.
(k) Regulatory Action. Any Governmental Authority shall
take any action with respect to Borrower, USMX, the Project or the Project
Permits or any other Collateral subject to the Mortgage which would have a
Material Adverse Effect on Borrower, USMX, operations on the Project or
Borrower's ability to repay the Loan unless such action is set aside,
dismissed or withdrawn within 90 days of its institution or such action is
being contested in good faith and its effect is stayed during such contest.
(l) Adverse Project Developments. If any of the following
occurs:
(i) The Project is abandoned or terminated, or the
Board of Directors of Borrower or USMX elects not to proceed with the
Project for whatever reason;
(ii) Borrower or USMX either (a) sells or otherwise
transfers any interest in the Illinois Creek Gold Property to any other
Person other than the Borrower, except to the extent expressly permitted
hereunder or under the USMX Credit Agreement, or (b) enters into a joint
venture agreement, partnership, operating agreement or any other similar
kind of agreement with any other Person pursuant to which such other Person
has a direct or indirect interest in any portion of the Illinois Creek Gold
Property or in the production therefrom or the proceeds thereof, and
Borrower or USMX and such other Person have agreed to the shared,
cooperative or joint maintenance, exploration, development or exploitation
of such portion of the Illinois Creek Gold Property;
(iii) USMX breaches any agreement, covenant or
undertaking under the NPMC Agreement, including without limitation, its
obligation to register (as provided by the NPMC Agreement) the shares of
USMX common stock issued to NPMC pursuant to such agreement;
(iv) A material adverse change occurs with respect to
the Project Permits.
(m) Default Under Hedging Contract. Any condition or event
or combination thereof exists under a Hedging Contract which, of itself,
or, with notice or the passage of time, will constitute a default by
Borrower or USMX under such contract or give rise to remedies of the other
party of acceleration of time of performance by Borrower or USMX of its
obligations thereunder.
10.2 Remedies Upon Event of Default.
(a) Upon the occurrence of an Event of Default specified in
Section 10.1(f) of this Agreement or, in the case of any other Event of
Default, upon notice by Lender to Borrower of Lender's election to declare
Borrower in default, the obligations of Lender hereunder including, without
limitation, Lender's obligation to Advance the Loan, shall terminate. The
date on which such notice is sent or, in the case of an Event of Default
specified in Section 10.1(f) of this Agreement, the date of such Event of
Default, shall be the "Date of Default."
<PAGE>
(b) Upon the Date of Default, in addition to any other
remedies that Lender may have hereunder, Lender shall have the right to
elect, upon notice to Borrower, to exercise its rights under the assignment
of production in the Mortgage.
(c) Upon the Date of Default, upon notice thereof from
Lender to Borrower with a copy to NPMC in all cases other than the
occurrence of an Event of Default as specified in Section 10.1(f), the
Loans, all interest thereon, Breakage Costs and all other amounts owed by
Borrower hereunder shall be immediately due and payable in full. In the
case of an Event of Default specified in Section 10.1(f), no notice from
Lender shall be required, and all amounts owed by Borrower hereunder shall
be immediately due and payable on the Date of Default, without notice from
Lender.
(d) Upon the occurrence of an Event of Default, all of the
remedies provided to Lender in all of the Security Documents shall
immediately become available to Lender.
(e) Except as expressly provided above in this
Section 10.2, presentment, demand, protest and all other notices of any
kind are hereby expressly waived. From and after the Date of Default,
interest shall accrue at the Default Rate provided in Section 3.5(c) and
shall be payable on demand.
10.3 Conversion upon Acceleration. Upon a Date of Default Lender
may, at its option and notwithstanding clause (ii) of Section 3.3(a),
convert any Gold Loan then outstanding into a Dollar Loan. For the purpose
of computing the Principal Amount of any Loan outstanding after any
conversion pursuant to the foregoing sentence, any such Gold Loan shall be
converted into a Dollar Loan having a Principal Amount equal to the Dollar
Value (calculated at the date of conversion) of the Principal Amount of
such Gold Loan. In addition, and upon any such Date of Default, Lender
may, at its option, elect that interest on the Principal Amount of the Gold
Loan converted as aforesaid which would otherwise be payable in Gold shall
instead be payable in Dollars at the Dollar Value thereof. In addition, if
upon any such Date of Default, or for purposes of obtaining a judgment in
any court for any purpose hereunder (including a proceeding under Title XI
of the United States Bankruptcy Code), it becomes necessary to determine
the Dollar Value of any payment obligation hereunder (whether with respect
to a Principal Amount or interest) which is payable in Gold (a "Gold
Obligation"), such determination shall be made at the time (or from time to
time) and to the extent payment (in whole or in part) has actually been
made by Borrower or USMX or a judgment has been rendered. If the amount of
Gold that could be purchased at the time and with the proceeds of any such
payment or judgment is not sufficient to satisfy in full the relevant Gold
Obligation, the Borrower hereby indemnifies and holds harmless Lender:
(a) with respect to such deficiency; and
(b) from all costs and expenses incurred in the event that,
as a result of any default by Borrower or USMX hereunder or under any other
Loan Document, such Lender, at its own expense, must, at any time or from
time to time purchase Gold in an open exchange market to satisfy its
obligations to any funding source which has provided Gold to Lender to
make, in whole or in part, the Gold Loan.
<PAGE>
Such indemnity obligations of the Borrower:
(c) shall be payable in Dollars;
(d) shall be determined in accordance with (and at times
provided pursuant to) this Section; and
(e) shall be enforceable, insofar as clause (a) is
concerned, as a separate or additional cause of action, and such
enforceability shall not be affected by any prior judgment being obtained
for any other sums due under this Agreement or any other Loan Document.
ARTICLE 11
MISCELLANEOUS
11.1 Amendments, Etc. Except as otherwise expressly provided in
this Agreement, no amendment or waiver of any provision of this Agreement
or of the Note, nor consent to any departure by Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Lender, and, in the case of any amendment, by Borrower, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
11.2 Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telex, telegraphic and
facsimile communication) and mailed, transmitted, telegraphed, sent by
facsimile, or delivered,
if to Borrower,
USMX OF ALASKA, INC.
141 Union Blvd., Suite 100
Lakewood, Colorado 80228
Attention: President
Telephone: (303)-985-4665
Facsimile: (303)-980-1363
with a copy to:
USMX, INC.
141 Union Blvd., Suite 100
Lakewood, Colorado 80228
Attention: Chief Financial Officer
Telephone: (303)-985-4665
Facsimile: (303)-980-1363;
<PAGE>
and if to Lender,
N M Rothschild & Sons Limited
New Court, St. Swithin's Lane
London EC4P 4DU
Attention: Nick Wood
Telephone: 011 44-171-280-5000
Facsimile: 011 44-171-280-5139;
with a copy to
Rothschild Denver Inc.
3020 Republic Plaza
370 Seventeenth Street
Denver, Colorado 80202
Attention: Mark Williamson
Telephone: (303) 607-9890
Facsimile: (303) 607-0998
as to each party, at such other address or number as shall be designated by
such party in a written notice to the other parties. All such notices and
communications shall be effective (a) when received, if mailed by
registered or certified mail or physically delivered; (b) five days after
being sent by mail, if sent by ordinary mail; and (c) upon confirmation of
transmission, if sent by telex or facsimile on a Business Day, addressed in
each case as aforesaid, except that notices to Lender under Articles 2 or 3
shall not be effective until received by Lender.
11.3 No Waiver; Remedies. No failure on the part of Lender to
exercise, and no delay in exercising, any right hereunder or under the Note
shall operate as a waiver thereof; nor shall any single or partial exercise
of any right hereunder or under the Note 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.
11.4 Costs, Expenses and Taxes. Borrower agrees to pay on demand
all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration of this Agreement, the Loan
Documents, and the other documents to be delivered hereunder, including,
without limitation, the reasonable fees and expenses of legal counsel and
any independent consultants to Lender and all other out-of-pocket expenses
of Lender, and all costs and expenses, if any, in connection with the
enforcement of this Agreement, the Loan Documents, and the other documents
to be delivered hereunder. All such expenses will be itemized in
reasonable detail. In addition, Borrower shall pay any and all stamp,
mortgage recording and other taxes, filing fees or charges payable or
determined to be payable in connection with the execution and delivery of
this Agreement, the Loan Documents, and the other documents to be delivered
hereunder, and agrees to save 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, filing fees or charges.
11.5 Binding Effect; Assignment. This Agreement shall be binding
<PAGE>
upon and inure to the benefit of Borrower, Lender and their respective
successors and assigns; provided that Borrower shall not have the right to
assign any of its rights or obligations hereunder or any interest herein
without the prior written consent of Lender. Lender may assign to its
successors and affiliates, or may grant participations to one or more banks
or other Persons in or to all or any part of, and may assign to one or more
banks or other Persons all or any part of, this Agreement, the Loan
Documents and the Loan, and, to the extent of such assignment, such
assignee shall have the same obligations, rights and benefits with respect
to Borrower as it would have had if it were Lender hereunder.
11.6 GOVERNING LAW. THIS AGREEMENT AND THE NOTE AND THE OTHER
LOAN DOCUMENTS, EXCEPT THE SECURITY DOCUMENTS, SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, INCLUDING
THE CONFLICTS OF LAW PROVISIONS THEREOF. THE SECURITY DOCUMENTS SHALL BE
GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED THEREIN, OR IF NONE IS
SPECIFIED, BY THE LAWS OF THE JURISDICTION IN WHICH THE COLLATERAL SUBJECT
THERETO IS PRINCIPALLY LOCATED.
11.7 VENUE; SUBMISSION TO JURISDICTION. FOR THE PURPOSE OF
ASSURING THAT LENDER MAY ENFORCE ITS RIGHTS UNDER THIS AGREEMENT, BORROWER,
FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY (A) AGREES
THAT ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING AGAINST BORROWER, OR
BY BORROWER AGAINST LENDER, ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE
SUBJECT MATTER OF ANY OF THE FOREGOING SHALL BE INSTITUTED ONLY IN STATE
AND FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF DENVER, COLORADO OR,
IN THE CASE OF THE SECURITY DOCUMENTS, IN THE VENUES SPECIFIED THEREIN;
(B) WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO SUCH VENUE
OF ANY SUCH ACTION, SUIT OR PROCEEDING OR ANY CLAIM OF FORUM NON
CONVENIENS; (C) SUBMITS ITSELF TO THE NONEXCLUSIVE JURISDICTION OF ANY SUCH
STATE OR FEDERAL COURT FOR PURPOSES OF ANY SUCH ACTION, SUIT OR PROCEEDING;
AND (D) WAIVES ANY IMMUNITY FROM JURISDICTION TO WHICH IT MIGHT OTHERWISE
BE ENTITLED IN ANY SUCH ACTION, SUIT OR PROCEEDING WHICH MAY BE INSTITUTED
IN ANY SUCH STATE OR FEDERAL COURT, AND WAIVES ANY IMMUNITY FROM THE
MAINTAINING OF AN ACTION AGAINST IT TO ENFORCE IN ANY SUCH STATE OR FEDERAL
COURT OR ELSEWHERE, ANY JUDGMENT FOR MONEY OBTAINED IN ANY SUCH ACTION,
SUIT OR PROCEEDING AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
IMMUNITY FROM EXECUTION. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OF THE
AFORESAID COURTS BY THE MAILING OF COPIES OF SUCH PROCESS TO THE BORROWER,
BY CERTIFIED OR REGISTERED MAIL, AT THE ADDRESS SPECIFIED FOR BORROWER IN
SECTION 11.2.
11.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE
ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE
SUBJECT MATTER OF ANY OF THE FOREGOING.
<PAGE>
11.9 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.
11.10 Inconsistent Provisions. In the event of any conflict
between this Agreement and any of the Security Documents, the provisions of
this Agreements shall govern and be controlling.
11.11 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement.
11.12 Concerning the Security Documents. In the event that
any amount payable by USMX under any Security Document is not paid in
accordance with the terms thereof, Borrower agrees to pay such amount to
the extent not so paid.
11.13 No Third Party Beneficiary. Nothing herein contained
shall be construed to confer upon any other party, other than Lender, the
rights of a third party beneficiary. No reference to Liens on
Schedule 7.1(j) or other Permitted Liens shall be deemed to constitute a
recognition or acceptance by Borrower or Lender for the benefit of the
holders of such Liens, as to the validity, subsistence or priority of such
Liens.
11.14 Severability. The invalidity of any one or more
covenants, phrases, clauses, sentences or paragraphs of this Agreement
shall not affect the remaining portions of this Agreement or any part
hereof, and in case of any such invalidity, this Agreement shall be
construed as if such invalid covenants, phrases, clauses, sentences or
paragraphs had not been inserted.
11.15 Acknowledgments. Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) Lender does not have any fiduciary duty or relationship
to or with Borrower; and
(c) no joint venture exists between Borrower and Lender.
11.16 Confidentiality. Lender agrees that it will keep
confidential and not disclose or divulge any confidential, proprietary, or
secret information that Lender may obtain from USMX or Borrower pursuant to
financial reports and other material submitted by USMX or Borrower to
Lender pursuant to this Agreement, or pursuant to visitation or inspection
rights granted hereunder, unless such information is known, or until such
information becomes known, to the public; provided, however, that Lender
may disclose such information to its attorneys, accountants, consultants
and other professionals in connection with the provision of professional
services to the Lender.
<PAGE>
11.17 Entire Agreement; Merger. This Agreement and the other
Loan Documents represent the final agreement among the parties hereto and
may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties hereto. There are no unwritten
oral agreements among the parties hereto, and there are no promises,
undertakings, representations or warranties by Lender relative to the
subject matter hereof not expressly set forth or referred to herein.
[balance of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of
the date first above written.
USMX OF ALASKA, INC.
By:
Name:
Title:
By:
Name:
Title:
PER PRO
N M ROTHSCHILD & SONS LIMITED
GUARANTY
This GUARANTY (the "Guaranty"), dated as of July 11,
1996, is made by USMX, INC., a Delaware corporation
("Guarantor"), in favor of and for the benefit of N M ROTHSCHILD
& SONS LIMITED, a company organized and existing under the laws
of England ("Lender").
RECITALS
A. Pursuant to a certain Credit Agreement dated as of
July 11, 1996 by and between USMX OF ALASKA, INC., an Alaska
corporation and wholly-owned subsidiary of Guarantor
("Borrower"), and Lender (as amended, modified, supplemented or
extended, the "Credit Agreement"), Lender has agreed to make
certain loans in Gold or in Dollars to Borrower (the "Loans"), to
be used by Borrower for purposes of funding expenditures and
working capital at the Project (having the meaning set forth in
the Credit Agreement) and for general corporate purposes.
B. Lender's obligation to make Loans under the Credit
Agreement is conditioned on Guarantor having executed and
delivered this Guaranty, and this Guaranty being in full force
and effect.
C. This Guaranty is given by Guarantor in favor of
Lender to guaranty the Obligations of Borrower in accordance with
the terms of the Credit Agreement and this Guaranty.
AGREEMENT
NOW, THEREFORE, (i) in order to set forth Guarantor's
guaranty of the Loans made pursuant to the Credit Agreement,
(ii) to comply with the terms and conditions of the Credit
Agreement, (iii) to induce Lender to make the Loans to Borrower
pursuant to the terms of the Credit Agreement, (iv) at the
special insistence and request of Lender, and (v) for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Guarantor hereby covenants and agrees to
and with Lender as follows:
1. Defined Terms. Unless otherwise defined herein,
capitalized terms used in this Guaranty have the meanings
assigned to such terms in the Credit Agreement.
2. Guaranty.
(a) Guarantor hereby guarantees, absolutely and
unconditionally, the prompt and complete payment and performance
of the Obligations when due (whether at the stated maturity, by
acceleration or otherwise) and at all times thereafter, provided
<PAGE>
that, on or after Completion of the Project, if no Default or
Event of Default is outstanding, Lender's sole recourse under
this Guaranty shall be to the Pledged Collateral (defined in the
Pledge and Security Agreement of even date herewith between
Guarantor and Lender (the "Pledge Agreement") and the collateral
subject to the Assignment Agreement, of even date herewith,
between Guarantor and Lender (the "Assignment Agreement"), other
than for Obligations of Borrower which arise under a breach of
the representation in Section 7.1(t) of the Credit Agreement or
the covenants in Section 8.1 of the Credit Agreement insofar as
Environmental Laws are concerned, the guarantee of which
hereunder shall remain unchanged and unaffected by Completion,
and shall remain the full recourse obligation of the Guarantor.
Guarantor also agrees to pay:
(i) any and all expenses (including attorneys'
fees and disbursements) related to any failure of
Borrower to pay or perform any Obligation of the
Project guaranteed hereunder, which may be paid or
incurred by Lender in enforcing any rights with respect
to, or collecting, any or all of the Obligations of
Borrower guaranteed hereunder; and
(ii) any and all expenses (including attorneys'
fees and disbursements) related to or arising from
Lender's enforcement of this Guaranty and collecting
against Guarantor under this Guaranty
The guarantees and obligations of this Section 2(a) are
collectively the "Guaranteed Obligations".
(b) Guarantor agrees that this Guaranty
constitutes a guaranty of payment and not of collection, and
Lender shall not be obligated to initiate, pursue or exhaust any
form of recourse or obtain any judgment against Borrower or
others (including other guarantors) or to realize upon or exhaust
any collateral security held by or available to Lender before
being entitled to payment from the undersigned hereunder. The
liability of Guarantor shall not be limited, diminished or
affected by (i) any condition of Borrower or Guarantor (including
bankruptcy, liquidation or dissolution) or failure by Lender to
file or enforce any claim against the estate (in administration,
bankruptcy, dissolution or otherwise) of Borrower, Guarantor or
others, (ii) the fact that recovery from Borrower or any other
person is barred by any statute of limitations, invalidity,
illegality, unenforceability or for any other reason or that
Borrower or Guarantor have valid defenses, claims or offsets
(whether at law, in equity or by agreement), (iii) any amendment,
modification or change of any kind or nature to the Credit
Agreement, the Loan Document, the Notes or this Guaranty, or any
Instrument or understanding executed or entered into pursuant to
the Credit Agreement, (iv) any adjustment, indulgence,
forbearance or compromise granted by Lender to Borrower or
Guarantor, or (v) any other circumstance which might otherwise
constitute a legal or equitable discharge of a guarantor.
Guarantor renounces all benefits of discussion and division and
waives diligence, presentment, protest, notice of dishonor,
protest or default, demand for payment upon Borrower or the
undersigned, notice of acceptance of this Guaranty, notice of any
addition to or increase or decrease in the Obligations, and all
other notices and demands whatsoever.
(c) This Guaranty is a continuing guaranty, and
<PAGE>
it will not be discharged until payment in full of all of the
Guaranteed Obligations and cancellation of this Guaranty by
Lender ("Termination") and will remain in full force and effect
notwithstanding any interruption in the business relations
between Borrower and Lender or any increase or decrease from time
to time in the amount of the Obligations.
(d) Guarantor hereby acknowledges and agrees that
subject to the limitations set forth in Section 2(a): (i) it is
personally obligated and fully liable for the amount due under
this Guaranty (i.e., for all Guaranteed Obligations hereunder);
and (ii) the Lender has the right to sue on this Guaranty and
obtain a personal judgment against Guarantor for satisfaction of
the amount due under this Guaranty either before or after a
judicial foreclosure of the Deed of Trust under Alaska Statute
09.45.170 - 09.45.220.
3. Guaranty Secured. Payment and performance under
this Guaranty is secured by pledges, encumbrances and security
interests in certain collateral pursuant to the Pledge Agreement
and the Assignment Agreement. Reference is hereby made to the
Pledge Agreement and the Assignment Agreement for a definition
and description of such collateral so encumbered to secure all
the obligations of Guarantor hereunder.
4. Lender's Rights. Guarantor authorizes Lender,
without notice or demand and without affecting Guarantor's
liability hereunder, to take and hold security for the payment of
this Guaranty and/or any of the Guaranteed Obligations, and
exchange, enforce, waive and release any such security; and to
apply such security and direct the order or manner of sale
thereof as Lender, in its discretion, may determine; and to
obtain a guaranty of the Guaranteed Obligations from any one or
more Persons and at any time or times to enforce, waive,
rearrange, modify, limit or release any of such other Persons
from their obligations under such guaranties. Guarantor hereby
acknowledges and agrees that the obligations of all Persons to
pay and satisfy the Guaranteed Obligations pursuant to their
respective agreements or guaranties (including Guarantor's
obligations hereunder) shall be joint and several.
5. Effectiveness; Reinstatement. This Guaranty shall
continue to be effective, or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any of the
Guaranteed Obligations is rescinded or must otherwise be restored
or returned by Lender upon the insolvency, bankruptcy, dissolu
tion, liquidation or reorganization of Borrower, or upon or as a
result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, Borrower or
any substantial part of its property, or otherwise, all as though
such payments had not been made. Borrower and Lender may modify,
rearrange, extend for any period and/or renew from time to time
the Guaranteed Obligations without notice to Guarantor, and in
such event the obligations of Guarantor with respect to the
Guaranteed Obligations shall not be released, discharged or
reduced and Guarantor will remain fully bound hereunder on such
Guaranteed Obligations. This Guaranty may be enforced by Lender
and any subsequent holder of the Guaranteed Obligations and shall
not be discharged by the assignment or negotiation of all or a
part of the Guaranteed Obligations.
6. Default. If Borrower has failed to pay or perform
when due the Guaranteed Obligations or there is an event with
respect to Guarantor that would require or permit the accelera
<PAGE>
tion pursuant to the Credit Agreement of any outstanding loan,
then all of the Guaranteed Obligations shall be immediately due
and payable by Guarantor, regardless of whether the payment of
the Guaranteed Obligations has been accelerated or Borrower is in
default with respect to the Guaranteed Obligations.
7. Merger. This Guaranty shall not be affected by
any change in the name of Borrower, or by the acquisition of
Borrower's business by any person, firm or corporation, or by any
change whatsoever in the objects, capital structure or consti
tution of Borrower, or by any merger, amalgamation or consolida
tion of Borrower with any corporation, or by any dissolution or
liquidation of Borrower, but shall, notwithstanding the happening
of any such event, continue to apply to all the Obligations
whether theretofore or thereafter incurred, and in this instru
ment the word "Borrower" shall include every such person, firm,
partner and corporation and all successors of the customer.
Guarantor shall promptly notify Lender of any change or event
described in this Section 7.
8. No Waiver. Lender shall not be obligated to
exercise any right, power or privilege hereunder, and no failure
to exercise and no delay in exercising, on the part of Lender,
any such right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. No notice to or demand on
Guarantor shall be deemed to be a waiver of the right of Lender
to take further action without notice or demand as provided
herein. No waiver shall be applicable except in the specific
instance for which given, nor in any event shall any modification
or waiver of any provision of this Guaranty be effective unless
in writing and signed on behalf of Lender.
9. Representations and Warranties.
(a) In order to induce Lender to make the Loans
to Borrower pursuant to the Credit Agreement, Guarantor
represents and warrants to Lender (which representations and
warranties will survive the creation of the Guaranteed
Obligations and any extension of credit under the Credit
Agreement) that:
(i) Benefit to Guarantor: Guarantor's
guaranty pursuant to this Guaranty reasonably may be
expected to benefit, directly or indirectly, Guarantor;
(ii) Familiarity and Reliance: Guarantor is
familiar with, and has independently reviewed the books
and records regarding, the financial condition of
Borrower and is familiar with the value of any and all
collateral intended to be created as security for the
Notes and Guaranteed Obligations. Notwithstanding the
foregoing, Guarantor is not relying on such financial
condition or the collateral as an inducement to enter
into this Guaranty;
(iii) No Representation: Neither Lender nor
any other person, corporation or entity has made any
representation, warranty or statement to Guarantor with
regard to Borrower or its financial condition in order
<PAGE>
to induce Guarantor to execute this Guaranty; and
(iv) Guarantor's Financial Condition: As of
the date hereof and after giving effect to this
Guaranty and the contingent liability evidenced hereby,
Guarantor is and will be solvent, and has assets which,
fairly valued, exceed its obligations, liabilities and
debts.
(b) Additional Representations. Guarantor hereby
adopts and makes the representations, warranties and covenants
concerning Guarantor as set forth in Sections 7.1(a), (b), (c),
(d), (f) and (h) of the Credit Agreement.
10. Covenants. Guarantor hereby covenants and
agrees with Lender to make an equity contribution to Borrower of
one million five hundred thousand dollars ($1,500,000.00) after
the Initial Advance but no later than September 30, 1996 in order
to assist Borrower to comply with certain financial covenants of
Borrower contained in the Credit Agreement. Guarantor also
hereby covenants and agrees with Lender to cause Borrower to
perform all of the Guaranteed Obligations under the Credit
Agreement or to perform itself the Guaranteed Obligations of
Borrower under the Credit Agreement and to execute and deliver to
Lender each Security Document to which it is a party, including
amendments or assignments thereof and notices to third Persons as
Lender may require in connection with the perfection of its
security interests in the property and interests subject to the
Security Documents to which it is a party. In particular,
Guarantor covenants and agrees:
(a) to insure the timely delivery of all
financial information required by the Credit Agreement, whether
concerning Borrower or Guarantor, including the financial
information required by Section 8.2 of the Credit Agreement;
(b) to preserve and maintain its, and to cause
Borrower to maintain its, corporate existence, rights, franchises
and privileges in the jurisdiction of their respective
incorporation, and to qualify and remain qualified as foreign
corporations in each jurisdiction in which such qualification is
necessary or desirable in view of Guarantor or Borrower's (as the
case may be) business and operations or the ownership of their
respective properties;
(c) to comply with all of its obligations,
agreements and covenants under that certain credit agreement
dated the date hereof by and between Guarantor and Lender (the
"USMX Credit Agreement") and documents and other Instruments
entered into by Guarantor pursuant thereto and hereto, and to
cause Borrower to engage solely in the business of exploring for
and mining gold and by-product metals at the Illinois Creek Gold
Property and vicinity, and in activities incident thereto, in
accordance with generally accepted industry practices and the
Development Plan;
(d) that, except as contemplated by the
Development Plan, Guarantor shall not permit Borrower to (and
prior to Completion Guarantor shall not), directly or indirectly,
create, incur, assume or suffer to exist, any Indebtedness except
(i) Indebtedness hereunder, under the Credit Agreement and under
the USMX Credit Agreement; (ii) Indebtedness secured by Liens
<PAGE>
permitted by Section 9.2 of the Credit Agreement and Section 8.2
of the USMX Credit Agreement; (iii) Indebtedness existing on the
date hereof disclosed to Lender pursuant to the Credit Agreement
and the USMX Credit Agreement; (iv) unsecured trade payables;
(v) Indebtedness incurred in the ordinary course of business;
(vi) Indebtedness consisting of purchase or leasehold obligations
associated with the Project contemplated by the Development Plan;
and (vii) Indebtedness incurred by Borrower for purposes of
developing the Illinois Creek Gold Property in accordance with
the Development Plan which has been approved by Lender, such
approval not to be unreasonably withheld by Lender.
(e) Guarantor shall not permit Borrower to, and
prior to Completion Guarantor shall not, directly or indirectly,
create, incur, assume or suffer to exist, any Lien, upon or with
respect to any portion of the Mining Properties, now owned or
hereafter acquired, or assign or otherwise convey any right to
receive the production, proceeds or income therefrom, except:
(i) Liens for taxes, assessments or
governmental charges or levies if the same shall not at
the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith
and by appropriate proceedings;
(ii) Liens imposed by law, such as carriers,
warehousemen and mechanics' liens and other similar
liens arising in the ordinary course of business
associated with amounts not yet due and payable, or
which are being disputed in good faith by Borrower;
(iii) Liens of purchase money mortgages
and other security interests on equipment acquired,
leased or held by Borrower or Guarantor (including
equipment held by Borrower or Guarantor as lessee under
leveraged leases) in the ordinary course of business
related to the Project to secure the purchase price of
or rental payments with respect to such equipment or to
secure indebtedness incurred solely for the purpose of
financing the acquisition (including acquisition as
lessee under leveraged leases), construction or
improvement of any such equipment to be subject to such
mortgages or security interests, or mortgages or other
security interests existing on any such equipment at
the time of such acquisition, or extensions, renewals
or replacements of any of the foregoing for the same or
a lesser amount, provided that no such mortgage or
other security interest shall extend to or cover any
equipment other than the equipment being acquired,
constructed or improved, and no such extension, renewal
or replacement shall extend to or cover any property
not theretofore subject to the mortgage or security
interest being extended, renewed or replaced, and
provided further, that any such Indebtedness shall not
otherwise be prohibited by the terms of the Credit
Agreement or the USMX Credit Agreement;
(iv) Liens outstanding on the date hereof and
<PAGE>
described in Schedule 7.1(j) of the Credit Agreement;
(v) Liens securing subordinated Indebtedness
permitted by Section 9.1(e) of the Credit Agreement or
securing Indebtedness (as that term is defined in the
USMX Credit Agreement) permitted by Section 8.1;
(vi) Liens arising under the Security
Documents, the Credit Agreement and the NPMC Agreement
(as contemplated by the Loan Documents);
(vii) the Lien or any right of distress
reserved in or exercisable under any lease for rent and
for compliance with the terms of such lease, provided
there is no rent in arrears under such lease;
(viii) cash labor or governmental
obligations deposited in the ordinary course of
business in connection with contracts, bids, tenders or
to secure workmen's compensation, unemployment
insurance, surety or appeal bonds, costs of litigation,
when required by law, public and statutory obligations,
Liens or claims incidental to current construction,
mechanics', warehousemen's, carriers' and other similar
Liens;
(ix) Liens given in the ordinary course of
business to a public utility or any municipality or
governmental or other public authority when required by
such utility or municipality or governmental or other
authority in connection with the operations of
Borrower;
(x) easements, rights-of-way and servitudes
which in the opinion of Lender (in its sole discretion,
reasonably exercised) will not in the aggregate
materially impair the use of the Illinois Creek Gold
Property by Borrower for the Project;
(xi) title defects or irregularities which in
the opinion of Lender (in its sole discretion,
reasonably exercised) are of a minor nature and in the
aggregate will not materially impair the use of the
Illinois Creek Gold Property for the Project or
materially affect the security created hereby; and
(xii) all rights reserved to or vested in
any governmental body by the terms of any lease,
license, franchise, grant or permit held by Borrower or
by any statutory provision to terminate any such lease,
license, franchise, grant or permit or to require
annual or other periodic payments as a condition of the
continuance thereof or to distrain against or to obtain
a lien on any property or assets of Borrower in the
event of failure to make such annual or other periodic
payments.
(f) Without the written permission of Lender,
which may be withheld in Lender's sole discretion reasonably
exercised, Guarantor shall not permit Borrower to, and prior to
<PAGE>
Completion Guarantor shall not, directly or indirectly, assume,
guarantee, endorse or otherwise become directly or contingently
liable (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds
for payment, to supply funds to or otherwise invest in the debtor
or otherwise to assure the creditor against loss) in connection
with any Indebtedness of any other Person, except guarantees by
endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business, or in
respect of provision of labor or materials for the Project or in
connection with bonds, letters of credit or other security posted
by Borrower or Guarantor in the ordinary course of business in
connection with the Project or hereunder.
(g) Guarantor shall not permit Borrower to (and
prior to Completion, other than to Borrower, Guarantor shall not)
directly or indirectly, make any loan or advance to any Person
utilizing loan proceeds or exceeding at any one time outstanding
an aggregate of $50,000. Guarantor shall not permit Borrower to
(and prior to Completion Guarantor shall not), without the
written approval of Lender, purchase or otherwise acquire the
capital stock, assets, or obligations of, or any interest in, any
Person, other than readily marketable direct obligations of the
United States of America and certificates of time deposit issued
by Lender or commercial banks of recognized standing operating in
the United States of America or other investment grade
instruments reasonably approved by Lender, and provided that
Guarantor may form and hold the shares of wholly-owned
subsidiaries.
11. Financial Tests. Guarantor shall not permit its:
(a) Current Ratio to be less than 2.0 to 1.0;
(b) Consolidated Tangible Stockholders' Equity to
be less than $17,500,000; and
(c) Total Consolidated Liabilities to exceed one
hundred seventy-five percent (175%) of its Consolidated Tangible
Stockholders' Equity.
12. Notices. All notices, demands, instructions or
other communications required or permitted to be given or made to
Guarantor or Lender shall be given in accordance with the
provisions of the Credit Agreement and at the addresses set forth
therein.
13. Amendments. No amendment or waiver of any
provision of this Guaranty, nor consent to any departure by
Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by Lender, and, in the case
of any amendment, by Guarantor, and then such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given.
14. Successor and Assigns. This Guaranty shall
extend to and inure to the benefit of Lender and its successors
and assigns, and every reference herein to Guarantor is a
reference to, and shall be construed as including, Guarantor and
the successors and assigns of Guarantor, to and upon all of whom
this Guaranty and agreement shall extend and be binding.
<PAGE>
15. Further Assurances. Guarantor agrees to execute
and deliver to Lender all such documents and to take all such
other action as may be reasonably requested by Lender to more
fully vest in and assure Lender of all of the rights, powers,
privileges and remedies herein intended to be granted to or
conferred upon Lender.
16. Financial Statements. Guarantor covenants and
agrees that so long as any part of any Guaranteed Obligations
remain outstanding, Guarantor shall furnish to Lender the
financial and other information required by Section 7.2 of the
USMX Credit Agreement.
17. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
COLORADO, INCLUDING THE CONFLICTS OF LAW PROVISIONS THEREOF.
18. VENUE; SUBMISSION TO JURISDICTION. FOR THE
PURPOSE OF ASSURING THAT LENDER MAY ENFORCE ITS RIGHTS UNDER THIS
GUARANTY, GUARANTOR, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS,
HEREBY IRREVOCABLY (A) AGREES THAT ANY LEGAL OR EQUITABLE ACTION,
SUIT OR PROCEEDING AGAINST GUARANTOR, OR BY GUARANTOR AGAINST
LENDER, ARISING OUT OF OR RELATING TO THIS GUARANTY, OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT MATTER
OF ANY OF THE FOREGOING SHALL BE INSTITUTED ONLY IN STATE AND
FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF DENVER,
COLORADO; (B) WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO SUCH VENUE OF ANY SUCH ACTION, SUIT OR PROCEEDING OR ANY
CLAIM OF FORUM NON CONVENIENS; (C) SUBMITS ITSELF TO THE
NONEXCLUSIVE JURISDICTION OF ANY SUCH STATE OR FEDERAL COURT FOR
PURPOSES OF ANY SUCH ACTION, SUIT OR PROCEEDING; AND (D) WAIVES
ANY IMMUNITY FROM JURISDICTION TO WHICH IT MIGHT OTHERWISE BE
ENTITLED IN ANY SUCH ACTION, SUIT OR PROCEEDING WHICH MAY BE
INSTITUTED IN ANY SUCH STATE OR FEDERAL COURT, AND WAIVES ANY
IMMUNITY FROM THE MAINTAINING OF AN ACTION AGAINST IT TO ENFORCE
IN ANY SUCH STATE OR FEDERAL COURT OR ELSEWHERE, ANY JUDGMENT FOR
MONEY OBTAINED IN ANY SUCH ACTION, SUIT OR PROCEEDING AND, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ANY IMMUNITY FROM EXECUTION.
GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OF THE AFORESAID
COURTS BY THE MAILING OF COPIES OF SUCH PROCESS TO THE BORROWER,
BY CERTIFIED OR REGISTERED MAIL, AT THE ADDRESS SPECIFIED IN
SECTION 12 HEREOF.
19. WAIVER OF JURY TRIAL. GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LEGAL OR
EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY OR THE
SUBJECT MATTER OF ANY OF THE FOREGOING.
<PAGE>
20. ENTIRE AGREEMENT. THIS WRITTEN GUARANTY
REPRESENTS THE FINAL AGREEMENT BETWEEN LENDER AND GUARANTOR WITH
RESPECT TO THE MATTERS SET FORTH HEREIN AND MAY NOT BE CONTRA
DICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF LENDER AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN LENDER AND GUARANTOR RELATING TO THIS GUARANTY
OR THE MATTERS SET FORTH HEREIN.
IN WITNESS WHEREOF, the undersigned has caused this
Guaranty to be duly executed and delivered by its duly authorized
officer this 11th day of July, 1996.
USMX, INC.
By:
Name:
Title:
By:
Name:
Title:
N M Rothschild & Sons Limited
New Court, St. Swithin's Lane
London, EC4P 4DU
Registered Number 925279
July 11, 1996
USMX OF ALASKA, INC.
141 Union Blvd., Suite 100
Lakewood, Colorado 80228
USA
Dear Sirs:
Further to our recent discussions, we write to advise USMX OF
ALASKA, INC., the wholly-owned subsidiary of USMX, INC. (with
USMX of Alaska, Inc. referred to herein as "USMX" or "you") that
in principle, as contemplated by the Credit Agreement dated as of
July 11, 1996 (the "Credit Agreement") by and between USMX OF
ALASKA, INC. and NM Rothschild & Sons Limited ("NMR"), we are
prepared to deal with you on an uncommitted basis in spot and
forward gold and silver transactions and in gold and silver
options subject to the terms and conditions of this letter.
1. Effective Date
The arrangements in this letter will be effective on:
(a) your acceptance of such arrangements in
accordance with the terms of this letter; and
(b) receipt by us of all the documents listed in
the Schedule to this letter in form and substance
satisfactory to us.
Our entry into any transaction under this letter is also
conditional upon you being in compliance at the relevant
time with the terms and conditions of, and there being no
breach of or default under (including any conditions which
with the passing of time or the giving of notice or the
occurrence of any other event, might constitute such a
<PAGE>
breach or default) this letter.
2. Single Agreement
Each party acknowledges that this letter, any confirmation
in writing (a "Confirmation"), including any telex or
facsimile communication from either party to the other,
evidencing and setting out the principal terms of a Spot,
Option or Forward (as each such transaction is defined
below) agreed between the parties and all Spots, Options and
Forwards entered into at any time pursuant to this letter,
shall constitute a single agreement between the parties, it
being understood that the parties would not otherwise enter
into any such Spot, Option or Forward.
3. Maturity
Notwithstanding any other provision of this letter, no
Option shall expire and no Forward shall mature after
December 31, 1999.
4. Options
A. Granting of Options
(i) Subject always to our mutual agreement as to
terms, either party (the "Writer") may from time to
time grant the other (the "Buyer") an option (an
"Option") entitling, but not obliging, the Buyer to
purchase from (a "Call Option") or sell to (a "Put
Option") the Writer a specified quantity of Metal
(the "Metal Quantity") at a stated or defined price
per unit of Metal according to market practice (the
"Strike Price"), no later than a specified time (the
"Expiration Time") on a specified day (the "Expiry
Date").
(ii) In this letter "Option" means a Put Option or
a Call Option and "Options" means Put Options and/or
Call Options.
B. Option Premium
In consideration of the Writer granting an Option to the
Buyer, the Buyer will pay to the Writer an option premium
agreed at the time the Option is granted no later than two
Business Days after the date on which the Option is granted.
<PAGE>
C. Exercise of Options
(i) Exercise Date
Unless otherwise agreed, an Option under this
letter may be exercised only on its Expiry Date.
However, the parties may from time to time agree to
enter into other types of Options on terms to be
agreed between us.
(ii) Automatic Exercise
If the Writer has not received notice of
exercise (where such exercise is possible under the
terms of the Option) prior to the Expiration Time of
an Option having positive Option Value for the
Buyer, the Writer will immediately (and
automatically) exercise such Option on the Buyer's
behalf in accordance with paragraph 4.C.(iii)
without further reference to the Buyer ("Automatic
Exercise").
(iii) Settlement
Subject to paragraph 4.C.(iv), immediately
upon Automatic Exercise an Option will be
automatically converted into a sale by the Writer to
the Buyer (in the case of a Call Option) or a
purchase by the Writer from the Buyer (in the case
of a Put Option) at the Transaction Value for
Settlement (as defined below) two Business Days (the
"Settlement Date") after such exercise.
(iv) Cash Settlement
Where the Option so requires or where the
parties so agree at the time the Option is entered
into, settlement by the parties shall be by delivery
or receipt of the positive Option Value of such
Option on the Settlement Date.
(v) Alternative Settlement
As an alternative to Settlement of an
exercised Option you may settle by requesting us to
convert the relevant maturing spot transaction into
a Forward.
<PAGE>
(vi) Default Settlement
If you do not specify which method of
settlement available to you under this paragraph 4
you wish to adopt before 10:00 a.m. London time on
the day falling two Business Days prior to the
Settlement Date, we shall settle such transaction in
accordance with Clause 4.C.(iv).
(vii) In this letter,-
(a) "Option Value" at any time means,
in the case of a Call Option, Market Value
minus Transaction Value and, in the case of a
Put Option, Transaction Value minus Market
Value; and
(b) "Market Value" in relation to
Options means the product of (x) the Metal
Quantity and (y) the then prevailing market
bid (in the case of a Call Option) or offered
(in the case of a Put Option) price for the
Metal for settlement on the Settlement Date.
(c) "Transaction Value" means the
amount equal to the product of the Metal
Quantity and the Strike Price.
D. Expiry/Cancellation
Subject to Automatic Exercise an Option shall expire on its
stated Expiry Date without value if not exercised by such
date.
5. Forward and Spot Transactions
A. Purchase and Sale
(i) Spot Transactions
We may purchase from you and/or sell to you
Metal for Settlement two Business Days thereafter at
a price (the "Spot Price") which you may choose to
be:
i) our loco London spot price
prevailing at the time you wish to deal; or
<PAGE>
ii) in the case of gold, the morning or
afternoon US Dollar London Gold Market Fixing
Price; or
iii) in the case of silver, the spot US
Dollar London Silver Market Fixing Price,
in each case on the day of entering into the
transaction (each such transaction a "Spot").
(ii) Forward Transactions
We may purchase from you and/or sell to you
Metal for settlement on a specified future date (the
"Maturity Date") on the basis of a price (the
"Forward Price") determined in accordance with the
provisions of this letter (each such transaction a
"Forward").
(iii) Fixed or Floating Forwards
Each Forward shall have a Forward Price
comprising the Spot Price on the day of entering
into the Forward and a forward premium determined in
accordance with the terms of this letter on a fixed
rate basis (a "Fixed Rate Forward") or on a Floating
rate basis ("Floating Rate Forward").
B. Fixed Rate Forwards
(i) Premium
Unless the parties agree otherwise and
subject to paragraph 5.D., the forward premium for a
Fixed Rate Forward will be determined by reference
to the then prevailing market interest rates for the
period of the Forward applied to the Spot Price.
The forward premium will be calculated on an annual
basis based on a 360-day year.
(ii) Settlement
You may settle any Fixed Rate Forward on its
Maturity Date on giving us not less than two
Business Days' prior written notice or by closing
out such Forward by either:
(a) entering into a matching Forward at
any time in the same quantity and for the
same Maturity Date as the original Forward,
<PAGE>
with the matching Forward Price being
determined in accordance with the terms of
this letter. The difference between the
original Forward Price and the matching
Forward Price multiplied by the Metal
Quantity will be paid on the Maturity Date;
or
(b) entering into a matching Spot on
the Maturity Date of the original Forward at
a price based, at your election, on:
(1) our prevailing spot price
by reference to the market prices quoted
two Business Days before the Maturity
Date; or
(2) the morning London Gold
Market US Dollar Fixing Price two
Business Days before the Maturity Date;
or
(3) in the case of silver,
the London Silver Market spot US Dollar
Fixing price two Business Days before
the Maturity Date; and
cash payment of the amount equal to
the product of the Metal Quantity and the
difference between the original Forward Price
and the matching spot price will be made on
the Maturity Date.
(i) New Forward
At the time you close out a Fixed Rate
Forward under this letter you may elect to enter
into a new Forward in the same Metal Quantity with a
Maturity Date and Forward Price determined in
accordance with the terms of this letter.
(ii) Conversion
As an alternative to closing out a Fixed Rate
Forward you may elect on not less than two Business
Days' prior notice to settle such Forward by
requesting us to convert it into a Floating Rate
Forward.
C. Floating Rate Forwards
(i) Premium
<PAGE>
(a) Unless the parties agree otherwise,
and subject to the remainder of paragraph
5.C., the forward premium for a Floating Rate
Forward will be determined by us by reference
to market interest rates for gold and Dollars
for successive floating rate periods (each a
"Floating Rate Period") over the term of the
Forward.
(b) In calculating the gold or silver
floating rate of interest, the purchaser may
elect for one or more tranches of the gold or
silver (as the case may be) purchased
pursuant to a Forward to be subject to our
quoted rate for an interest period agreed by
the parties which does not exceed thirty-six
months, PROVIDED that each such tranche
comprises at least 5,000 fine ounces of gold
or (as the case may be) 50,000 ounces of
silver.
(c) If a Forward is not settled on the
last day of a Floating Rate Period, the
accrued forward premium will be aggregated
with the Spot Price for such Forward, such
aggregate being the new Spot Price for the
succeeding floating rate period. The forward
premium for the succeeding floating rate
period will be calculated by reference to and
will apply to such new Spot Price. Forward
premiums shall be aggregated in such manner
to each successive floating rate period until
settlement.
(d) If you elect to settle a Floating
Rate Forward prior to the Rollover Date (as
defined below), the accrued forward premium
will be calculated by discounting to present
value the forward premium for said floating
rate period from the date of settlement to
the last day of such period at the rate
determined by us by reference to the market
for the unexpired portion of such period.
(e) The forward premium will be
calculated on an annual basis based on a 360-
day year.
(ii) Floating Rate Periods
You may select the duration of each Floating
Rate Period provided that:
<PAGE>
(a) you notify us no later than two
Business Days before the beginning of the
relevant Floating Rate Period of such
duration; and
(b) the first Floating Rate Period will
commence two Business Days after the date on
which we enter into the relevant Floating
Rate Period; and
(c) no Floating Rate Period shall
extend beyond the Maturity Date.
(iii) Rollover
On the last day of each Floating Rate Period
(the "Rollover Date" and the last Rollover Date
shall fall on the Maturity Date) you may on
notifying us no later than two Business Days before
such Rollover Date:
(a) Settle; or
(b) close out the Forward in accordance
with paragraph 5.C.(iv)(b)(2), except that
(1) if the Floating Rate Period ends on the
Maturity Date, the appropriate Spot Price
will be the relevant quotes two Business Days
before the Maturity Date and (2) the Forward
Price will not be discounted to present
value; or
(c) except where the Rollover Date is
the Maturity Date, elect that the relevant
Forward continues as a Floating Rate Forward
with a new Floating Rate Period and in the
same Metal Quantity, with the new Forward
Price determined in accordance with the terms
of this letter,
provided that if by 10:00 a.m. on the
Rollover Date we have not received such notification
we shall settle the Forward in such manner as we may
in our discretion consider appropriate.
(iv) Settlement
On any date prior to the Maturity Date of a
Floating Rate Forward you may:
<PAGE>
(a) on notifying us no later than two
Business Days before the proposed settlement
date Settle; or
(b) except on Rollover Dates or the
Maturity Date close out such Forward by:
1) entering (except on
Rollover Dates or the Maturity Date)
into a matching Forward in the same
Metal Quantity and for the Rollover Date
for the relevant Floating Rate Period,
with the matching Forward Price being
determined in accordance with the terms
of this letter. The difference between
the original Forward Price and the
matching Forward Price multiplied by the
Metal Quantity will be paid on the
Rollover Date. In this subparagraph,
the Maturity Date shall be deemed to be
the Rollover Date if the Floating Rate
Period ends on the Maturity Date; or
2) entering (subject to
paragraph 5.C.(iii)(b)) into a Spot in
the same Metal Quantity at a Spot Price
determined in accordance with the terms
of this letter. The difference between
the Forward Price (discounted to present
value) and the Spot Price multiplied by
the Metal Quantity will be paid two
Business Days after the date of the Spot
is entered into.
D. Fixing Commission
(i) In respect of your sales of Metal to us based
on a London Fixing Price we will until further
notice allow you a return commission of $0.05 per
fine ounce (in the case of gold) and one-sixteenth
of one percent of the price per ounce (in the case
of silver). In respect of your purchases of Metal
from us based on a London Fixing Price we shall
until further notice charge you Fixing commission at
the rate of $0.15 per fine ounce (in the case of
gold) and three-sixteenths of one percent of the
price per ounce (in the case of silver).
(ii) If you use the London Fixing Price as a base
price for a Forward, the forward premium will be
calculated on such Fixing Price (excluding Fixing
commission) and the relevant Fixing commission
specified above will then be added to the Forward
Price.
<PAGE>
6. Open Position Limit
A. Open Position Limit
The maximum Open Position Limit that we are currently
prepared to have outstanding with you at any time will
(subject to paragraph 6.C.) be 150,000 ounces of gold.
B. Utilization of Limit
Utilization of the Open Position Limit will be deemed to be
the difference between:
(a) your outstanding Forward Sales of
Metal to us;
(b) outstanding Call Options sold by us
to you; and
(c) outstanding Put Options sold by us
to you and the Open Position Limit.
C. Variation
We hereby reserve the right to vary the Open Position Limit
at any time by notice to you in writing.
7. Exposure Limit and Margin
A. Exposure Limit
(i) Without prejudice to paragraphs 6.A. and
7.C., your Exposure Limit under the terms of this
letter is US$7,500,000.00 (Seven Million Five
Hundred Thousand United States Dollars).
(ii) Your Exposure Limit will comprise the aggregate of:
(a) the notional cost to us of
replacing in the market any Options sold by
you to us; and
(b) the amount by which the Market
Value of your outstanding Forward sales to us
under the terms of this letter is in excess
of their Contractual Values; and
<PAGE>
(c) the amount by which the Contractual
Value of your outstanding Forward purchases
from us under the terms of this letter is in
excess of their Market Value,
less the aggregate of
(d) the notional cost to you of
replacing in the market any Options sold by
us to you; and
(e) the amount by which the Market
Value of your outstanding Forward sales to us
under the terms of this letter is less than
their Contractual Value; and
(f) the amount by which the Contractual
Value of your outstanding Forward purchases
from us under the terms of this letter is
less than their Market Value; and
(iii) In this letter, Market Value means in relation
to a Forward, the product of(x) the Metal Quantity and
(y) the Market Price Portion of the Forward Price determined
by reference to the latest available London Market Price for
the Metal adjusted by a forward premium determined by us
by reference to market prices.
B. Margin
(i) In the event that the Exposure Limit is
exceeded, you will, within two Business Days after
demand by us in writing at any time, provide us with
an acceptable margin ("Margin") at least equal to
such excess but in any event equal in value to not
less than US$250,000.00 (Two Hundred Fifty Thousand
United States Dollars).
(ii) Subject to the following provisions of
paragraph 7.B., to the extent that at any time you
have provided us with any Margin in excess of the
amount required by clause (i) above or otherwise
required by this Agreement, we shall release to you
such excess Margin within our possession five
Business Days after your request therefor, provided
always that we shall not be obligated to release any
Margin within seven Business Days of your having
lodged the same with us.
(iii) Margin may be provided by you in the form of
any combination of the following:
<PAGE>
(a) deposits placed with us on which we
will pay to you the relevant London Interbank
Bid Rate for the period concerned as mutually
agreed at the time of deposit.
(b) Metal (conforming to the good
delivery specifications of the London Bullion
Market Association and being for loco London
delivery unless agreed otherwise by us in
writing) which may be deposited with us
either by way of physical delivery or by way
of book transfer in a manner acceptable to
us.
(iv) When releasing physical Metal placed with us
by way of Margin we shall not be obliged to release
the identical Metal placed with us but rather Metal
of an equivalent quantity, type and assay.
(v) You shall not pledge, mortgage, charge or
create any other form of encumbrance over Margin, or
your rights in respect thereof, delivered (or to be
delivered) to us (except liens in favor of
N M Rothschild & Sons Limited), and such rights
shall not be capable of being transferred, assigned,
mortgaged, charged or otherwise dealt with in any
way without our prior written consent. At all times
(whether before or after the occurrence of an Event
of Default) your rights in respect of Margin
provided hereunder shall constitute contractual
rights for the delivery, subject to the provisions
hereof, of identical amounts of gold (to the intent
that you shall not retain any proprietary right to
or entitlement in gold delivered as Margin to us and
we shall be entitled in our absolute discretion to
lend, lease, dispose of or otherwise deal with the
same as the beneficial owner thereof).
C. Variation
We hereby reserve the right to vary your Exposure Limit at
any time by notice to you in writing.
8. Termination
A. Termination Date
Subject to paragraph 8.B., the facilities in this letter are
available to you until December 31, 1999 (the "Termination
Date").
<PAGE>
B. Termination by Notice
(i) We may at any time, by notice to you in
writing, immediately terminate the arrangements set
out herein by giving you written notice of
termination, provided that such termination shall be
without prejudice to transactions entered into
between us hereunder then outstanding, subject
always to paragraph 11.
(ii) After giving you notice of termination, we
will be prepared to enter into matching transactions
with you to close out existing transactions between
us.
9. Representations
You represent to us, on the date of your acceptance of this
letter and on each date that any transaction under this
letter is outstanding (with reference to the facts and
circumstances then existing) as follows:
A. USMX is a corporation duly organized under the laws of
Delaware with the necessary power and authority to enter
into the transactions and arrangements referred to in this
letter; and your obligations under this letter are legal and
valid obligations binding on you in accordance with its
terms;
B. your entry into and/or performance of or observance of your
obligations under this letter does not and will not violate
or breach any law, regulation, agreement, deed, license,
order, obligation or document which is applicable to you;
C. you will not be required to make any deduction or withhold
ing from any payment you may make pursuant to this letter;
D. our claims made in respect of, or pursuant to, this letter
will rank at least pari passu with the claims of all your
other secured creditors (save those preferred solely by any
bankruptcy, insolvency, liquidation or other similar laws of
general application);
E. in any proceedings taken in your jurisdiction of incorpora
tion in relation to this letter, you will not be entitled to
claim for yourself or any of your assets immunity from suit,
execution, attachment or other legal process;
F. all acts, conditions and things required to be done,
fulfilled and performed in order (a) to enable you lawfully
to enter into, exercise your rights under and perform and
<PAGE>
comply with the obligations under this letter, (b) to ensure
that your obligations under this letter are and shall be
legal, valid and binding, and (c) to make this letter
admissible in evidence in your jurisdiction of
incorporation, have been done, fulfilled and performed;
G. under the laws of your jurisdiction of incorporation, it is
not necessary that this letter or any document issued
pursuant hereto be filed, recorded or enrolled with any
court or other authority in such jurisdiction or that any
stamp, registration or similar tax be paid on or in relation
to this letter or any such document;
H. no Event of Default (as defined below) has occurred;
I. no action or administrative proceeding of or before any
court or agency which might have a material adverse effect
on your business or financial condition has been started or
threatened;
J. you are a producer, processor or commercial user of, or a
merchant handling, Metal or Metal products or by-products;
and in entering into the transactions and arrangements
referred to in this letter are doing so solely for the
purpose related to your business as such;
K. you are acting as principal in connection with each Spot,
Forward and Option under this letter and not as agent;
L. you have carefully reviewed this letter and the transactions
contemplated under it and have determined that you can bear
the risks involved in such transactions; and
M. you are an eligible swap participant as defined in
applicable commodity futures trading laws.
10. Covenants
You shall:
A. not enter into contracts or options hereunder or otherwise
hedge pursuant to other hedging arrangements more than
eighty percent (80%) of its annual Metals production;
B. from time to time on our request, furnish us with such
information about your business and financial condition as
we may reasonably require;
<PAGE>
C. obtain, comply with the terms of and do all that is
necessary to maintain in full force and effect all
authorizations, approvals, licenses and consents required in
or by the laws and regulations of your jurisdiction of
incorporation to enable you lawfully to enter into and
perform your obligations arising under or pursuant to this
letter or to ensure the legality, validity, enforceability
or admissibility in evidence in your jurisdiction of
incorporation of this letter and/or any agreements or
documents made or issued pursuant to it;
D. promptly inform us of the occurrence of any event which is
or may become (with the passage of time, the giving of
notice, the making of any determination hereunder, or any
combination thereof) an Event of Default and, upon receipt
of a written request to that effect from us confirm to us
that, save as previously notified to us or as notified in
such confirmation, no such event has occurred.
11. Events of Default and Close-Out
A. Events of Default
Any of the following shall constitute an Event of Default:
(i) you fail to make any payment or delivery
(including the supply of Margin) when due under this
letter or any Option and/or Forward and/or Spot or
breach any other term of this letter;
(ii) any steps are taken, petition presented,
application made, resolution proposed, meeting
summoned to consider a resolution, or request made for
your liquidation, bankruptcy, administration,
voluntary arrangement, dissolution or any other
insolvency proceedings whatsoever are taken in respect
of you or for the appointment of a receiver,
administrative receiver, liquidator, administrator or
other insolvency representative whatsoever in respect
of you;
(iii) you convene a meeting for the purpose of
making, or propose entering into, any agreement or
composition for the benefit of your creditors or any
class of them;
(iv) you cease or threaten to cease to carry on your
business, or dispose or threaten to dispose of your
undertaking or assets or become unable to pay or stop
or suspend payment of your debts as they fall due;
(v) any of your indebtedness or obligations for the
<PAGE>
repayment of any borrowed moneys becomes due and
payable, or capable of being declared due and payable,
prior to the specified maturity date thereof due to
any default thereunder or is not paid when due;
(vi) an encumbrancer takes possession or a receiver,
administrative receiver, liquidator, administrator or
other similar officer is appointed in respect of you
or any part of your undertaking or assets or a
distress, execution or other process is levied or
enforced upon or against any of your property and is
not removed, discharged or paid out within seven days;
(vii) any security created by any mortgage or charge
or other security interest created by you becomes
enforceable;
(viii) any event occurs or proceeding is taken with
respect to you in any jurisdiction to which you are
subject which has an effect equivalent or similar to
any of the events mentioned in paragraphs (ii), (iii),
(iv) and (vi) above;
(ix) any representation made pursuant to paragraph
9. proves to have been materially incorrect or
misleading when made;
(x) at any time it becomes unlawful for you to
perform or comply with any or all of your obligations
arising under this letter or under any Option or
Forward or such obligations cease to be legal, valid
and binding;
(xi) if any circumstances arise which in our opinion
have or may have a material adverse effect on your
ability to perform your obligations under this letter;
(xii) an Event of Default (as therein defined) occurs
under the Credit Agreement.
B. Rights on Default
(i) If an Event of Default occurs and is not
corrected within one Business Day in respect of a late
payment under paragraph 11.A.(i), or within five
Business Days in respect of any other Event of
Default, we shall have the absolute discretion at any
time (without prior notice to you) to immediately
(a) determine the replacement cost to
either party of outstanding Options and
exercise any Option having positive Option
<PAGE>
Value for either party and to close out the
resultant open position by entering into a
matching transaction with you; and/or
(b) to close out all outstanding Forwards
by entering into matching transactions for the
relevant Metal Quantity in the market; and/or
(c) terminate our obligations under
this letter by written notice to you; and/or
(d) restrict the maximum duration of
future Forwards; and/or
(e) change the Termination Date; and/or
(f) amend any other provision of this
letter,
provided always that upon the occurrence of
any Event of Default arising under any one or more
of paragraphs 11.A(ii), (iii), (iv), (vi), (vii) and
(viii), then we shall be deemed automatically and
immediately to have exercised our rights set out in
11.B(i)(a) and (b) above so as to reduce outstanding
obligations between us to the payment of a single
cash sum payable by either party to the other.
(ii) If an Event of Default occurs and is corrected within the
time periods stated in paragraph 11.B., we shall have the absolute
right in our sole discretion to exercise any one or more of our
rights under paragraph 11.B.(i)(d),e) and (f) without prejudice
to existing options or contracts established pursuant to
paragraphs 4 and 5 hereof.
C. Default Netting
Having exercised our rights in accordance with
paragraph 11.B.(i)(a) and (b) we shall:
(i) net the transaction amounts and quantities in
the manner described in paragraph 12.A. and adjust
any resulting amount to present value from the value
date of the forward transaction and matching
transaction to the close-out date by discounting
such amount at the appropriate Eurodollar rate for
the period concerned (as determined by us at our
absolute discretion) assuming a 360-day year.
(ii) liquidate any of your property in our
<PAGE>
possession by sale or other commercially reasonable
means; and
(iii) convert any such amounts resulting from
paragraph 11.C.(i) and (ii) above into US Dollars in
such manner and at such rates as we may in our
reasonable discretion determine.
The net resulting amount shall be paid by us to you or by you to
us (as the case may be) forthwith in Dollars upon notice to you
of the amount so determined and shall be in full and final
settlement and discharge of all payment and delivery obligations
between you and us under this letter.
D. Performance on Default
Without prejudice to the foregoing provisions of paragraph
11, upon the occurrence of an Event of Default, we shall not
be required to deliver US Dollars or Metal hereunder or
under any transaction entered into pursuant to this letter
unless and until you first satisfy all your obligations to
us.
12. Netting and Payments
A. Netting
If on any date in respect of Spots or maturing Forwards or
Options any amounts are payable by both parties in the same
currency or any amounts of Metal having the same assay and
delivery location are transferable by both parties, then:
(i) the amounts so payable or transferable by
each party respectively in that currency or metal
type shall be aggregated; and
(ii) if the aggregate amount payable by one party
hereto ("the first party") exceeds the aggregate
amount payable or transferable by the other party
hereto, the respective obligations of the parties to
pay or transfer such aggregate amounts shall be
deemed to be satisfied and discharged and replaced
by an obligation on the part of the first party to
pay to the other party an amount equal to such
excess; and
(iii) if the aggregate amounts payable by each
party hereto are equal, such amounts shall be deemed
to be satisfied and discharged and no payment or
transfer shall be made by either party in respect
thereof.
<PAGE>
B. Payment Instructions
(i) All payments due to us hereunder shall be
remitted by telegraphic transfer in same day funds
to our Account Number 001-1-948262, with The Chase
Manhattan Bank N.A., 1 Chase Manhattan Plaza, New
York, NY 10081.
(ii) All payments due to you hereunder will be
remitted by telegraphic transfer in same day funds
in accordance with your written instructions.
C. Non-Business Day
Any amount due for payment hereunder which falls due on a
day which is not a Business Day shall be payable on the next
succeeding Business Day and the amount due will be adjusted
accordingly by an appropriate rate of interest to be agreed
between us.
D. Settlement Limit
Notwithstanding the foregoing provisions of paragraph 12,
the maximum sum or value of Metal that we shall be obliged
to pay or deliver to you or to your order, as the case may
be, without our first having received confirmation that the
Metal or funds (as the case may be) due to be delivered or
paid to us by you, respectively, have actually been received
by us at our nominated correspondent, shall not exceed
US$25,000,000.00 (Twenty-Five Million United States
Dollars).
E. Gross-Up
If you are required at any time to make any deduction or
withholding for or on account of tax in respect of any
payment due from you hereunder or under any transaction,
then you shall increase the amount of such payment to the
extent necessary to ensure that the amount we receive is not
less than the amount we would have received had no such
deduction or withholding been required.
13. Confirmations, Statements and Notices
A. Confirmations
Upon entering into any Option, Spot or Forward transaction
with you under the terms of this letter we will promptly
<PAGE>
send you by telex or facsimile a confirmation setting out
the principal terms of the transaction.
B. Statements
We will also send you monthly statements of your accounts
maintained with us.
C. Notices
Unless the contrary is stated, any notice or communication
to be given by either party hereunder shall be sent to the
facsimile or telex numbers set out below and shall be deemed
received upon despatch by the relevant party, provided that
such party shall have received the appropriate answer back.
To: N M Rothschild & Sons Limited
Fax: 071-280-5139
Telex: 888031
To: USMX OF ALASKA, INC.
Fax: 303-980-1363
14. Fixing Business
To the extent that you wish to execute business based on a
London Market Fixing Price you will place your purchase or
sale order with us no later than 10:15 a.m. London time on
the day in question (in the case of the morning London Gold
Market Fixing Price), no later than 2:45 p.m. London time on
the day in question (in the case of the afternoon US Dollar
London Gold Market Fixing Price) and no later than 11:30
a.m. (in the case of the US Dollar London Silver Market
Fixing Price).
15. Expenses
You agrees to indemnify us in full and on demand for all
reasonable fees (including legal fees), costs and expenses
incurred in connection with the protection and enforcement
of our rights hereunder.
16. Law and Jurisdiction
The terms of this letter will be governed by, and construed
in accordance with, the laws of England. For our exclusive
benefit you hereby agree to submit to the jurisdiction of
the English courts to settle any disputes which may arise
out of or in connection with this letter. Nothing in this
paragraph limits our right to bring proceedings against you
<PAGE>
in connection with this letter in any other court of
competent jurisdiction, nor shall the taking of proceedings
in one or more jurisdictions preclude the taking of
proceedings in any other jurisdiction whether concurrently
or not, to the extent permitted by the law of such other
jurisdiction.
17. General Provisions
A. Assignment
Your rights arising under any transaction entered into
pursuant hereto shall not be capable of assignment by you.
B. Severability
Each of the provisions of this letter and any transaction
made pursuant to it shall be severable and distinct from one
another and if at any time any one or more of such
provisions is or becomes invalid, illegal or unenforceable,
the validity, legality and enforceability of each of the
remaining provisions of this letter or any such transaction
shall not in any way be affected, prejudiced or impaired
thereby.
C. Cumulative Rights
The rights, powers and remedies provided by this letter are
cumulative and are not, nor are they to be construed as,
exclusive of any right of set-off or other rights, powers
and remedies provided by law or by any other agreement
between the parties. No failure on our part to exercise, or
delay in exercising, any of the rights, powers and remedies
provided by this letter, law or any other such agreement
shall operate as a waiver thereof, nor shall any single or
partial waiver of any such right, power or remedy preclude
any further or other exercise thereof.
D. Reliance
Each Spot, Forward or Option shall be deemed to have been
entered into by you in reliance only upon your own judgment
and deliberations and we do not hold ourselves out, or any
of our employees or agents having our authority, to advise
you on the terms thereof or on any other matters connected
with Metal transactions under this letter, and neither we
nor any of our employees or agents shall have any
responsibility or liability whatsoever in respect of any
such advice given to you, whether or not such advice was
requested by you.
<PAGE>
E. Set-Off
Without prejudice to our rights under paragraph 11.C. we may
without notice to you set off any matured obligation owed by
you to us under this letter against any obligation (whether
or not matured) owed by us to you, regardless of payment,
booking branch, currency or Metal of such obligations. This
paragraph is intended to give rise to rights in contract
only and is not intended to constitute, create or give rise
to a security interest of any kind over any of your assets.
18. Acceptance
Please arrange for an authorized signatory of your Company
to sign and return to us the attached copy of this letter,
thereby signifying your agreement to the terms set out
herein. In the event that you have not so signed and
returned the attached copy of this letter by close of
business on July 13, 1996 (or such later date as we may
agree), the uncommitted facility offered by this letter
shall lapse.
19. Definitions
"Business Day" means a day on which Banks in London, New
York, Denver and Johannesburg are open for a full day's
business.
"Dollars" and "$" means the lawful currency of the United
States of America.
"gold" means 995+ gold which would constitute good delivery
on the London Bullion Market.
"Metal" means gold and/or silver.
"Settlement" means:
(a) in respect of a sale of Metal to you,
settlement by your remitting to us on the Settlement
Date or Maturity Date (as appropriate) the
Transaction Value or Spot Price or Forward Price (as
appropriate) against which we will credit your
relevant London Gold Holding Account or, as the case
may be, London Silver Holding Account in our books;
or
(b) in respect of a purchase of Metal from you,
settlement by your arranging physical delivery of
loco London good delivery gold to us or by your
<PAGE>
arranging for another acceptable London Bullion
Market Association member to credit our relevant
London Gold Exchange Account or, as the case may be,
London Silver Exchange Account with such member on
the Settlement Date or Maturity Date (as
appropriate) against which we will remit the
Transaction Value or Spot Price or Forward Price (as
appropriate) to you in accordance with your
instructions; and
"Settle" and "Settled" shall be construed accordingly.
"silver" means 999 silver which would constitute good
delivery on the London Bullion Market.
Unless otherwise stated, any reference herein to a numbered
"paragraph" shall be a reference to such paragraph contained
in this letter. Headings used in this letter shall not
affect the meaning hereof.
Yours very truly,
PER PRO
N M ROTHSCHILD & SONS LIMITED
______________________________
______________________________
Countersigned by way of acceptance the
terms and conditions set out above.
For and on behalf of
USMX OF ALASKA, INC.
__________________________________
Authorized Signatory
Name:_____________________________
Title:____________________________
<PAGE>
SCHEDULE
Condition Precedent Documents
1. A copy, certified a true copy by a duly authorized officer of
USMX OF ALASKA, INC. ("USMX") Board Resolutions of USMX approving
the execution, delivery and performance of this letter and the
terms and conditions hereof and authorizing a named person or
persons to sign this letter and any documents to be delivered by
USMX pursuant hereto.
2. A certificate of a duly authorized officer of USMX setting out
the names and signatures of the persons authorized to sign, on
behalf of USMX, this letter and any documents to be delivered by
USMX pursuant hereto.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is made as of July 11, 1996 by and between USMX, INC., a Delaware
corporation ("USMX"); and N M ROTHSCHILD & SONS LIMITED, a
company organized and existing under the laws of England ("NMR").
RECITALS
A. USMX and NMR are parties to a Credit Agreement
dated as of July 11, 1996 (the "Credit Agreement"), pursuant to
which the loans provided for therein may, at the election either
of USMX or NMR, may be converted into shares of the common stock
of USMX (the "Shares"). In order to induce NMR to consummate the
transactions provided for in the Credit Agreement, USMX has
agreed to enter into this Agreement to provide certain
registration rights with respect to any Shares issued to NMR
pursuant to the Credit Agreement.
B. Certain capitalized terms used herein and not
otherwise defined are defined in Section 7 hereof.
AGREEMENT
The parties hereto agree as follows:
1. Shelf Registration. (a) USMX shall: (i) as
promptly as possible after Conversion file a Shelf Registration
Statement providing for resales of Registrable Securities by NMR
(the "Shelf Registration"); (ii) use its best efforts to cause
such Shelf Registration Statement to be declared effective as
promptly as is possible after filing; and (iii) use its best
efforts to keep the Shelf Registration Statement continuously
effective under the Securities Act with respect to the
Registrable Securities until the third anniversary of the date
hereof, or, if sooner, until the Shares no longer constitute
Registrable Securities. USMX shall supplement or amend the Shelf
Registration Statement as necessary to comply with the Securities
Act and the rules and regulations thereunder, the rules,
regulations or instructions applicable to the registration form
used by USMX, or any other law, rule or regulation applicable
thereto. USMX shall pay all Registration Expenses (as defined in
Section 4) incurred in connection with the Shelf Registration.
(b) In the event that USMX becomes ineligible to
file a Shelf Registration Statement on behalf of NMR, or the
Shelf Registration filed by USMX on NMR's behalf becomes
ineffective as a means of registering the Registrable Securities,
at any time after Conversion and at NMR's request, USMX shall use
its best efforts to register the sale of all or part of the
Registrable Securities. USMX shall be required to file only one
registration statement to effect the foregoing.
<PAGE>
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever on or prior to
the third anniversary of the date hereof USMX proposes to
register any of its securities under the Securities Act to be
issued in an underwritten public offering by USMX (other than
pursuant to the Shelf Registration) and the registration form to
be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), USMX will give prompt
written notice to NMR of its intention to effect such a
registration and will include in such registration all
Registrable Securities requested for inclusion therein by NMR.
(b) Piggyback Expenses. The Registration
Expenses related to the Registrable Securities in any Piggyback
Registration will be paid by USMX.
(c) Priority on Registrations. If the managing
underwriters of a Piggyback Registration advise USMX in writing
that in their sole discretion the number of securities requested
to be included in such offering exceeds the number which can be
sold in such offering such that the offering will be materially
adversely affected, the number of securities to be offered will
be reduced as recommended in writing by the managing
underwriters. USMX will include securities in such registration
according to the following priority: (i) the securities USMX
proposes to sell, and (ii) the Registrable Securities requested
to be included in such registration and other securities
requested to be included in such registration by holders of
Parity Registration Rights, allocated among the holders of
Registrable Securities and such other holders in proportion, as
nearly as practicable, to the respective number of shares of
Common Stock proposed to be sold in such offering by them.
(d) Selection of Underwriters. USMX may select
the investment banker(s) and manager(s) for any offering pursuant
to a Piggyback Registration.
(e) Other Registrations. If USMX has previously
filed a registration statement with respect to Registrable
Securities pursuant to this Section 2, and if such previous
registration has not been withdrawn or abandoned, USMX will not
file or cause to be effected any other registration of any of its
equity securities or securities convertible or exchangeable into
or exercisable for its equity securities under the Securities Act
(except on Form S-4, Form S-8 or any successor form), whether on
its own behalf or at the request of any holder or holders of such
securities, until a period of at least three months has elapsed
from the effective date of such previous registration, unless a
shorter period of time is approved by the holders of a majority
of the Registrable Securities included in such previous
registration.
3. Registration Procedures. In connection with any
registration pursuant to Section 1 hereof, whenever NMR has
requested that any Registrable Securities be registered pursuant
to this Agreement, USMX will use its best efforts to effect the
registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof and
pursuant thereto USMX will as expeditiously as possible:
(a) furnish to each Seller of Registrable
Securities such number of copies of such registration statement,
each amendment and supplement thereto, the prospectus included in
<PAGE>
such registration statement (including each preliminary
prospectus) and such other documents as such Seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by it;
(b) use its best efforts to register or qualify
such Registrable Securities under such other securities or blue
sky laws of such jurisdictions as NMR reasonably requests and do
any and all other acts and things which may be reasonably
necessary or advisable to enable each Seller of Registrable
Securities to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such Seller, provided that
USMX will not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this subsection, (ii) subject itself to taxation
in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction except to the extent required by
applicable law;
(c) notify each Seller of Registrable Securities,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or
omits any material fact necessary to make the statements therein
not misleading, and, at the request of any such Seller, USMX will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary
to make the statements therein not misleading;
(d) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities
issued by USMX are then listed;
(e) provide a transfer agent and registrar for
all such Registrable Securities;
(f) enter into such customary agreements
(including underwriting agreements in customary form) and take
all such other actions as NMR reasonably requests in order to
expedite or facilitate the disposition of such Registrable
Securities;
(g) make available for inspection by any Seller
of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement, and any
attorney, accountant or other agent retained by any such Seller
or underwriter, all financial and other records, pertinent
corporate documents and properties of USMX, and cause USMX's
officers, directors, employees and independent accountants to
supply all information reasonably requested by any such Seller,
underwriter, attorney, accountant or agent in connection with
such registration statement; and
(h) obtain a cold comfort letter from USMX's
independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort
letters (provided that such Registrable Securities constitute at
least 10% of the securities covered by such registration
statement).
NMR agrees that, upon receipt of any notice from USMX
<PAGE>
of the happening of any event of the kind described in
Section 3(c) hereof, NMR will forthwith discontinue disposition
of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until NMR's receipt of
written notice that sales may continue with the existing
prospectus or the supplemented or amended prospectus contemplated
by Section 3(c) hereof. In the event NMR is not able to commence
sales of Shares pursuant to an effective registration statement
not later than 60 days after the date of a notice pursuant to
Section 3(c) (the "Notice Date"), USMX shall pay to NMR an amount
per share equal to the difference (but only if the price in (ii)
is less than the price in (i)), if any, between (i) the actual
sales price subsequently received from any sales by NMR during a
number of days following the date on which such sales become
permissible which is equal to the number of days over 60 during
which such sales were not allowed and (ii) the average of (A) the
closing sales prices on any national securities exchange or the
NASDAQ National Market System on which the Common Stock is listed
or included, or (B) the average of the bid and asked prices on
NASDAQ if not so listed or included for the days in excess of 60
from the Notice Date (such average closing sales prices or
average bid and asked price, as the case may be, being referred
to as the "Deemed Sales Price"), plus interest calculated on the
Deemed Sales Price from the 61st day after the Notice Date to the
date of any actual sale at the rate of 12% per annum.
4. Registration Expenses.
(a) All expenses incident to USMX's performance
of or compliance with this Agreement, including, without
limitation, all registration and filing fees, fees and expenses
of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, and fees and
disbursements of counsel for USMX and all independent certified
public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by USMX (all such
expenses being herein called "Registration Expenses"), will be
borne as provided in this Agreement, except that USMX will, in
any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which
similar securities issued by USMX are then listed.
(b) In connection with each registration of
Registrable Securities, USMX will reimburse NMR for the
reasonable fees and disbursements of one counsel chosen by NMR to
the extent such fees and disbursements exceed $2,500 up to a
maximum of $15,000.
<PAGE>
5. Indemnification.
(a) USMX agrees to indemnify NMR, its officers
and directors and any person who controls NMR within the meaning
of the Securities Act against all losses, claims, damages,
liabilities and expenses (including legal fees and other expenses
incurred in defending any such claim or action) caused by any
untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus
or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading;
provided that USMX shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement,
any such preliminary prospectus, prospectus, amendment or
supplement in reliance upon and in conformity with information
furnished to USMX in writing by NMR specifically for use therein.
If the indemnification provided for in this Section 5 is
unavailable to or insufficient to hold harmless NMR in respect of
any losses, claims, damages, or liabilities (or actions in
respect thereof) referred to therein, then USMX shall contribute
to the amount paid or payable to NMR as a result of such losses,
claims, damages, or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative
fault of USMX and NMR in connection with the statements or
omissions which resulted in such losses, claims, damages, or
liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by USMX or NMR and the parties' relative
intent, knowledge, access to information, and opportunity to
correct or prevent such statement or omission.
(b) NMR agrees to indemnify and hold USMX, its
officers and directors and any person who controls USMX within
the meaning of the Securities Act harmless (in the same manner
and to the same extent as set forth in Section 5(a)) with respect
to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary
prospectus, prospectus, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to USMX by NMR specifically for use
therein.
6. Participation in Registrations. No Person may
participate in any registration hereunder unless such Person:
(a) in the case of a registration which is
underwritten, agrees to sell such Person's Registrable Securities
on the basis provided in any underwriting arrangements approved
by USMX;
(b) as expeditiously as possible, notifies USMX,
at any time when a prospectus relating to such Person's
Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event involving such
Person as a result of which such prospectus contains an untrue
statement of a material fact or omits any fact necessary to make
the statements therein not misleading;
<PAGE>
(c) complies with all reasonable requests made by
USMX or its counsel with respect to the registration of such
Person's Registrable Securities, including, without limitation,
providing access to all relevant books and records; and
(d) completes, executes and delivers all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other usual and customary documents necessary or
appropriate with respect to the offering of such Person's
Registrable Securities, and in the case of a registration which
is underwritten, necessary or appropriate under the terms of such
underwriting arrangements.
7. Definitions.
(a) "Affiliate" shall have the meaning ascribed
to it in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of
the SEC as in effect on the date hereof.
(b) "Common Stock" means collectively, USMX's
common stock, par value $.001 per share.
(c) "Conversion" means the election of NMR or
USMX, on the terms and subject to the conditions set forth in the
Credit Agreement, to convert the "Principal Amount" of the "Loan"
(as those terms are defined in the Credit Agreement) into shares
of Common Stock.
(d) "Parity Registration Rights" means the right
to register securities of USMX which, by the terms of the
agreement or instrument granting such rights, are on a parity
with the rights of NMR under this Agreement.
(e) "Person" shall mean any individual, firm,
corporation, trust, partnership, or other entity and, with
respect to Persons holding Registrable Securities, shall include
any group comprised of any Person and any other Person with whom
such Person or an Affiliate of such Person has any agreement,
arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of any Common
Stock.
(f) "Registrable Securities" means (i) the
Shares, and (ii) any securities issued or issuable with respect
to the Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities will cease to
be Registrable Securities when they may be resold without
registration pursuant to Rule 144 of the Securities Act or have
been transferred pursuant to Rule 144, the Shelf Registration,
the Piggyback Registration or other registration pursuant to this
Agreement. For purposes of this Agreement, a Person will be
deemed to be a holder of Registrable Securities whenever such
Person has the right to acquire such Registrable Securities (by
conversion or otherwise, but disregarding any legal restrictions
upon the exercise of such right), whether or not such acquisition
has actually been effected.
<PAGE>
(g) "Seller" means any Person who owns
Registrable Securities that are included in a Shelf or Piggyback
Registration.
(h) "Shares" means shares of unregistered Common
Stock issued to NMR by USMX upon Conversion.
(i) "Shelf Registration Statement" shall mean a
"shelf" registration statement of USMX pursuant to the provisions
of Section 1 of this Agreement which covers any of the
Registrable Securities, on an appropriate form under Rule 415
under the Securities Act, or any similar rule that may be adopted
by the Commission, and all amendments and supplements to such
registration statement, including post-effective amendments, in
each case including the prospectus contained therein, all
exhibits thereto and all material incorporated by reference
therein.
(j) Unless otherwise stated, other capitalized
terms contained herein have the meanings set forth in the Credit
Agreement.
8. Miscellaneous.
(a) No Inconsistent Agreements. USMX will not
hereafter enter into any agreement with respect to its securities
which is inconsistent with the rights granted to NMR in this
Agreement.
(b) Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such
rights specifically, to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all
other rights granted by law.
(c) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may be amended
and USMX may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if
USMX has obtained the written consent of NMR, for so long as NMR
is a holder of Registrable Securities, and, at any other time, of
the holders of 60% of the Registrable Securities.
(d) Successors and Assigns. All covenants and
agreements in this Agreement by or on behalf of any of the
parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether
so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which
are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Securities.
(e) Incorporation of Credit Agreement Provisions.
Sections 11.2 ("Notices, Etc."), 11.6 ("Governing Law"), 11.15
("Severability"), 11.8 ("Waiver of Jury Trial"), 11.9 ("Execution
in Counterparts"), and 11.17 ("Entire Agreement") of the Credit
Agreement are hereby incorporated in this Agreement by reference
and made a part hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
USMX, INC.
By:_______________________________
Name:
Title:
N M ROTHSCHILD & SONS LIMITED
By:_______________________________
Brian T. Dolan
Attorney in Fact
