SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 26, 1998
Dakota Mining Corporation
(Exact Name of Registrant as Specified in its Charter)
Canada 0-17583 84-1094683
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1560 Broadway, Suite 880
Denver, Colorado 80202
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 573-0221
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events
The severe liquidity issues as disclosed and discussed in Dakota Mining
Corporation ("Dakota") September 30, 1997 10-Q continue and the
liquidity has continued to deteriorate. Although final financial
statements for 1997 are not yet available, Dakota estimates it will
still have negative working capital at December 31, 1997. Trade
accounts payable for December 31, 1997 are estimated at $8.9 million,
of which approximately $8.2 million is past due. Included in these
numbers is approximately $5.8 million to D.H. Blattner and Sons, all of
which is past due. Additionally, the Forest Service has withdrawn its
Record of Decision on the Environment Impact Statement ("EIS") for the
Anchor Hill deposit in South Dakota. Dakota cannot, at this time,
assess what impact this may have on the timing of the issuance of final
production permits.
In an effort to secure funds to be able to continue to operate, on
February 18, 1998, Dakota through its subsidiary, USMX of Alaska Inc.
replaced its Credit Agreement with NM Rothschild & Sons with a Demand
Note for $10.0 million and completed a Bridge Loan Agreement for up to
$1.1 million. Both transactions are effective February 11, 1998 and are
described within the attached agreements. The purpose of these
transactions is to provide funds to Dakota for its current operating
costs for approximately 90 days so that Dakota will have additional
time to seek to sell certain assets, endeavor to find a merger partner
or secure alternative financing. No assurances can be given that Dakota
will be successful in these efforts.
This document contains forward-looking information, which involves a
degree of risk and uncertainty due to various factors affecting
Dakota's business, including, but not limited to, gold price
volatility, ore grade and recovery rates, exploration results, mining
and processing conditions and costs, and compliance with regulatory and
permitting requirements.
Item 7.
(c) Exhibits
A. Amended and Restated Credit Agreement.
B. Bridge Loan Agreement, Promissory Note and Security Agreement.
C. Ratification, Confirmation and Agreement
D. Second Amendment to Deed of Trust, Assignment, Security
Agreement and Financing Statement (Minerals).
E. Intercreditor Agreement between NM Rothschild & Sons and D.H.
Blattner & Sons, Inc. and acknowledge by USMX of Alaska and Dakota
Mining Corporation.
F. Intercreditor Agreement between NM Rothschild & Sons and Gerald
Metals, Inc. and acknowledged by USMX of Alaska and Dakota Mining
Corporation.
G. Promissory Note between Dakota Mining Corporation and USMX of
Alaska, Inc.
H. Forbearance Agreement between Gerald Metals, Inc. and Dakota
Mining Corporation
I. Guarantee between Dakota Mining Corporation and D.H. Blattner
& Sons, Inc.
<PAGE>
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 hereunto duly authorized.
DAKOTA MINING CORPORATION
Date: February 27, 1998
By: c/s Alan R. Bell
----------------------
Alan R. Bell, President and Chief Executive officer
8k2-25-98.DOC
<PAGE>
EXHIBIT A.
AMENDED AND RESTATED CREDIT AGREEMENT
Between
USMX OF ALASKA, INC.
as Borrower
and
N M ROTHSCHILD & SONS LIMITED
as Lender
Dated as of February 11, 1998
<PAGE>
-v-
CREDIT AGREEMENT
Table of Contents
ARTICLE 1 CERTAIN DEFINITIONS AND ACCOUNTING PRINCIPLES.....................2
1.1 Certain Defined Terms..................................2
1.2 Accounting Principles.................................18
ARTICLE 2 CONTINUATION; USE OF PROCEEDS....................................18
2.1 Continuation..........................................18
2.2 Use of Proceeds.......................................18
ARTICLE 3 PROCEDURE AND PAYMENT............................................18
3.1 Principal Amount of the Loans.........................18
3.2 Note..................................................18
3.3 Principal and Interest Payments Generally.............19
3.4 Interest..............................................19
3.5 Repayment of the Loan.................................19
3.6 Priority of Demand Payments...........................20
3.7 Force Majeure.........................................20
3.8 Increased Costs and Reduction in Return...............20
3.9 Payments and Computations.............................21
3.10 Payment on Non-Business Days..........................21
3.11 Taxes.................................................21
3.12 Proceeds Account......................................23
ARTICLE 4 HEDGING FACILITY.................................................25
4.1 Establishment of Hedging Facility.....................25
ARTICLE 5 COLLATERAL SECURITY..............................................25
5.1 Security Documents....................................25
5.2 No Limitation on Application of Security Interests....25
5.3 Recordings and Filings of Security Documents..........25
5.4 Protection of Security Document Liens.................25
5.5 Right of Set-off......................................25
5.6 Additional Collateral.................................26
5.7 Positive Hedging Agreement Values as Collateral.......26
ARTICLE 6 CONDITIONS PRECEDENT.............................................26
6.1 Conditions Precedent to Amendment and Restatement.....26
<PAGE>
ARTICLE 7 REPRESENTATIONS AND WARRANTIES...................................28
7.1 Representations and Warranties of Borrower............28
ARTICLE 8 AFFIRMATIVE COVENANTS OF BORROWER................................35
8.1 Compliance with Laws, Etc.............................35
8.2 Reporting Requirements................................36
8.3 Inspection............................................37
8.4 Maintenance of Insurance..............................37
8.5 Maintenance of Equipment, Etc.........................38
8.6 Keeping of Records and Books of Account...............38
8.7 Preservation of Existence, Etc........................38
8.8 Conduct of Business...................................38
8.9 Notice of Default.....................................38
8.10 Defense of Title......................................38
8.11 Operation of the Project; Completion..................38
8.12 Hedging Requirements..................................38
8.13 Maintenance of the Mining Properties..................39
8.14 Project Monitoring....................................39
8.15 Release of Liens......................................39
8.15 Delivery of Interim Operating Budget..................39
ARTICLE 9 NEGATIVE COVENANTS OF BORROWER...................................40
9.1 Indebtedness..........................................40
9.2 Liens, Etc............................................40
9.3 Assumptions, Guarantees, Etc. of Indebtedness of
Other Persons.........................................42
9.4 Investments in Other Persons..........................42
9.5 Mergers, Changes in Capital Structure, Etc............42
9.6 Borrower's Financial Covenants........................42
9.7 Project Reserves......................................43
9.8 Restriction on Dividends, Redemptions and other
Distributions and Payments to Certain Persons.........43
9.9 Limitations on Hedging Contracts......................43
9.10 Sale of Project Assets................................43
9.11 Restrictions on Capital Expenditures, Etc.............43
9.12 Arm's Length and Take or Pay Contracts................44
9.13 Restrictive and Inconsistent Agreements...............44
ARTICLE 10 EVENTS OF DEFAULT................................................44
10.1 Event of Default......................................44
10.2 Remedies Upon Event of Default........................47
10.3 Conversion upon Acceleration..........................47
ARTICLE 11 MISCELLANEOUS....................................................48
11.1 Amendments, Etc.......................................48
11.2 Notices, Etc..........................................48
11.3 No Waiver; Remedies...................................49
11.4 Costs, Expenses and Taxes.............................49
11.5 Binding Effect; Assignment............................50
11.6 GOVERNING LAW.........................................50
11.7 VENUE; SUBMISSION TO JURISDICTION.....................50
11.8 WAIVER OF JURY TRIAL..................................51
11.9 Execution in Counterparts.............................51
11.10 Inconsistent Provisions...............................51
11.11 Survival of Representations and Warranties............51
11.12 Concerning the Security Documents.....................51
11.13 No Third Party Beneficiary............................51
11.14 Severability..........................................51
11.15 Acknowledgments.......................................52
11.16 Confidentiality.......................................52
11.17 Entire Agreement; Merger..............................52
<PAGE>
SCHEDULES
Schedule 1.1(a) Mining Properties
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(n) Hedging Contracts
Schedule 7.1(o) Material Agreements
Schedule 7.1(s) Compliance with Environmental Laws
Schedule 7.1(t) Borrower's Indebtedness
Schedule 8.4 Insurance Policies
EXHIBITS
Exhibit A Form of Restated Promissory Note
Exhibit B Proceeds Account Disbursement Request
Exhibit C-1 [ deleted ]
Exhibit C-2 [ deleted ]
Exhibit C-3 [ deleted ]
Exhibit C-4 [ deleted ]
Exhibit C-5 [ deleted ]
Exhibit D [ deleted ]
Exhibit E-1 [ deleted ]
Exhibit E-2 [ deleted ]
Exhibit E-3 [ deleted ]
Exhibit F [ deleted ]
Exhibit G-1 Form of Borrower's Omnibus Certificate
Exhibit G-2 Form of USMX's Omnibus Certificate
Exhibit G-3 Form of Dakota's Omnibus Certificate
Exhibit H-1 Form of Opinion of Borrower's and Guarantors
Counsel
Exhibit H-2 [ deleted ]
Exhibit H-3 [ deleted ]
<PAGE>
Exhibit I [ deleted ]
Exhibit J [ deleted ]
Exhibit K [ deleted ]
Exhibit L [ deleted ]
Exhibit M Form of Ratification, Confirmation and
Agreement
Exhibit N Form of Second Amendment to Deed of Trust
Exhibit O Monthly Payment Calculation Form
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT dated as of
February 11, 1998, 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 Amended and Restated Credit Agreement, the Lender
and the Borrower desire to set forth the terms of their agreement to amend,
restate and replace the Credit Agreement, dated as of July 11, 1996, which was
amended by a First Amendment, dated as of November 15, 1996, a Second Amendment,
dated as of July 28, 1997 and a Third Amendment, dated as of September 19, 1997
(collectively, the "Original Credit Agreement"). It is the intention of the
parties hereto that the outstanding Principal Amount of the Loans made by Lender
to Borrower under the Original Credit Agreement shall not be repaid or
discharged on the effective date hereof but shall remain outstanding subject to
the terms hereof. All amounts due hereunder shall be payable on demand. The
proceeds of the Loan shall continue to be used by the Borrower to partially fund
development of the Illinois Creek Gold Property in Alaska.
B. Borrower, USMX, Inc. ("USMX"), of which Borrower is a
wholly-owned subsidiary, and Dakota Mining Corporation ("Dakota"), the parent
corporation of USMX and Borrower, are experiencing cash flow shortfalls. As a
result of these shortfalls, Dakota is exploring the sale of Borrower and the
Illinois Creek Gold Property. Due to these shortfalls, the Borrower was no
longer able to perform all of its covenants or obligations under the Original
Credit Agreement. The continued existence of the Loan and the conversion of the
Loan to a demand basis hereunder is intended to facilitate the imminent sale of
Borrower and/or the Illinois Creek Gold Property.
C. Pursuant to a Bridge Loan Agreement, Promissory Note and
Security Agreement of even date herewith between Borrower and Lender (the
"Bridge Loan Agreement"), Lender has agreed to loan additional funds to
Borrower, on a secured, demand loan basis, for use by the Borrower exclusively
to make loans to Dakota on an unsecured, unsubordinated basis, to assist Dakota
in meeting certain cash flow shortfalls.
D. Due and punctual payment of the Loan provided for herein
and performance by the Borrower of its obligations hereunder and under the other
Loan Documents is guaranteed by (i) Dakota pursuant to a Guaranty, dated as of
July 28, 1997 (as amended, the "Dakota Guaranty") and (ii) USMX, pursuant to a
Guaranty dated July 11, 1996, as amended by an Agreement dated as of July 28,
1997 (as amended, the "USMX Guaranty," with the Dakota Guaranty and the USMX
Guaranty sometimes referred to as the "Guaranties"). The obligations of Dakota
under the Dakota Guaranty are secured by a Pledge and Security Agreement
executed by Dakota, dated as of July 28, 1997 (as amended, the "Dakota Pledge
<PAGE>
Agreement"). The obligations of USMX under the USMX Guaranty are secured by a
Pledge and Security Agreement dated as of July 11, 1996 and by certain
Collateral Assignments of Deeds of Trust, dated as of July 11, 1996, as such
Pledge and Security Agreement and Collateral Assignments of Deeds of Trust were
modified by the Agreement dated as of July 28, 1997. Dakota and USMX have agreed
to and shall ratify and confirm the Guaranties and the security therefor and
confirm that such Guaranties and the security therefor remain in full force and
effect in accordance with their terms and apply to all obligations of the
Borrower under this Amended and Restated Credit Agreement and Dakota and USMX
shall extend their respective Guaranties to cover amounts due under the Bridge
Loan Agreement.
E. It is the intention of the parties hereto that all the Loan
Documents, as amended, modified or restated, shall remain in full force and
effect until repayment of all principal and interest and the satisfaction of all
obligations hereunder and under the Bridge Loan Agreement.
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:
Advance means an advance of Loans by Lender to Borrower.
"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, restated 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.
<PAGE>
"Assignment Agreement" means the agreement dated as of July
11, 1997 pursuant to which USMX assigned the Second Mortgage and the Fourth
Mortgage to Lender.
"Blattner Intercreditor Agreement" means the Intercreditor
Agreement dated as of February 11, 1998 between Lender and D.H. Blattner & Sons.
"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.
"Bridge Loan Agreement" means that Bridge Loan Agreement,
Promissory Note and Security Agreement of even date herewith between Borrower
and Lender, as the same may be amended, modified or restated.
"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 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
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.
"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,
<PAGE>
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.
"Dakota" means Dakota Mining Corporation, a corporation
continued under the Canada Business Corporation Act, of which USMX is a wholly
owned subsidiary.
"Dakota Guaranty" shall have the meaning given thereto in
Recital C.
"Dakota Loan Agreement" means the Loan Agreement between
Dakota and Borrower dated as of February 11, 1998, pertaining to loans by
Borrower to Dakota of proceeds of loans under the Bridge Loan Agreement.
"Dakota Project Direct Costs" means out of pocket expenditures
by Dakota on or after the date hereof, to Persons other than shareholders,
officers, directors or employees of Dakota, of which reasonable evidence is
provided to Lender, for insurance payments, real or personal property tax
payments, bonding or other surety expenses due after the date hereof, and other
expenses approved by Lender in its sole discretion, directly relating to the
Project, which have been paid by Dakota rather than Borrower for administrative
convenience.
"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 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
Interest Rate plus four percent (4%).
"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.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" has the meaning set forth in Section 10.1.
<PAGE>
"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.
"Fiscal Year" means the 12-month period commencing January 1
and terminating December 31.
"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, securing the $3,400,000 USMX Secured Loan and
subordinate to the Mortgage, the Second Mortgage and the NPMC Mortgage.
"GAAP" means generally accepted accounting principles in the
United States of America, consistently applied.
"Gerald Metals Agreement" means the Amended and Restated Loan
Agreement dated as of March 20, 1997 between Dakota and Gerald Metals, Inc.
"Gerald Metals Intercreditor Agreement" means the
Intercreditor Agreement dated as of February 11, 1998 between Lender and Gerald
Metals, Inc.
"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.
"Governmental Acts" has the meaning set forth in Section 3.8.
"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.
"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,
<PAGE>
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.
"Guaranties" means the Dakota Guaranty and the USMX Guaranty,
collectively.
"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 dated as of July 11,
1996 between Borrower and Lender, as amended, modified, restated or replaced.
"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).
"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:
<PAGE>
(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.
"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.
"Intercreditor Agreement" means the Intercreditor Agreement
dated as of March 11, 1997, by and among Dakota, Lender and Gerald Metals, Inc.
"Interest Period" shall have the meaning given thereto in
Section 3.4(b).
"Interim Operating Budget" means the budget for the operation
of the Illinois Creek Gold Property for the one hundred twenty-day period
commencing January 1, 1998 and ending April 30, 1998 as delivered by Borrower to
and approved by Lender in its sole discretion reasonably exercised.
<PAGE>
"Interest Rate" means 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.
"LIBOR" means 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 Loan 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 the Dollars loaned by Lender to
Borrower pursuant to this Agreement.
"Loan Documents" means this Agreement, the Note, the Bridge
Loan Agreement, the Guaranties, the Interest Period Notices, the Security
Documents, the Hedging Agreement, and each other Instrument executed by
Borrower, Dakota or USMX and delivered to Lender in connection with the Original
Credit Agreement, this Agreement or the Bridge Loan Agreement or any of the
foregoing Instruments, as any of the same may be amended, modified, replaced or
restated, whether or not specifically identified in this paragraph.
"Material Adverse Effect" means, with respect to Borrower,
Dakota, 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
<PAGE>
(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.
"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).
"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.
"month" means a calendar month.
"Monthly Calculation Form" shall have the meaning given
thereto in Section 3.5(b).
"Mortgage" means the Mortgage, Deed of Trust, Assignment,
Security Agreement and Financing Statement, dated as of July 11, 1996, as
amended by the First Amendment to Deed of Trust, Assignment, Security Agreement
and Financing Statement dated as of July 28, 1997 and the Second Amendment to
Deed of Trust, Assignment, Security Agreement and Financing Statement of even
date herewith, as the same may be amended, modified or restated, 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.
"Note" means the restated demand promissory note made by
Borrower in favor of Lender in the principal amount of Ten Million Sixty
Thousand Three Hundred Nine Dollars and Seventy-Five Cents ($10,060,309.75),
which promissory note evidences the Loan hereunder and constitutes an extension,
renewal and continuation of that certain Promissory Note made by the Borrower
dated July 11, 1996, as modified, renewed and replaced by the Promissory Note
dated July 28, 1997, which restated promissory note is in the form of Exhibit A
hereto.
"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, 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.
<PAGE>
"NPMC Subordination Agreement" means the agreement dated as of
July 11, 1996 between NPMC and Lender pursuant to which NPMC subordinated the
NPMC Mortgage to the Mortgage and Second Mortgage.
"Obligations" means all obligations of Borrower (monetary or
otherwise) arising under or in connection with this Agreement, the Bridge Loan
Agreement and each other Loan Document.
"Omnibus Certificates" means the certificates from Borrower,
USMX and Dakota, respectively, substantially in the form of Exhibits G-1, G-2
and G-3 hereto.
"Opinion of Borrower's and Guarantor's Counsel" means the
legal opinion of Bearman, Talesnick & Clowdus, counsel to Borrower, Dakota and
USMX substantially in the form of Exhibit H-1 hereto.
"Original Credit Agreement" shall have the meaning given
thereto in Recital A.
"Original Development Plan" means the Development Plan for the
development and operation of the Illinois Creek Gold Property through the life
of the mine as delivered by Borrower to Lender on July 11, 1996 in connection
with the execution of the Original Credit Agreement, as the same has been
revised and amended with the approval of Lender.
"Other Taxes" shall have the meaning specified in Section
3.11(b).
"Payable Aging Report" means a report, in form reasonably
acceptable to Lender, which identifies all accounts payable or other pending
payment obligations of Borrower with respect to the Project or otherwise, with
the aging of such accounts payable or other payment obligations specified in
such report.
"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.
"Price Fixing Commitments" means the net forward sale
<PAGE>
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.
"Principal Amount" means, as of any date, the aggregate
principal amount in Dollars of the Loan outstanding at such date.
"Proceeds Account"shall have the meaning specified in Section
3.12.
"Proceeds Account Agreement" means the Proceeds Account
Agreement dated as of July 11, 1996 between Borrower and Lender.
"Proceeds Account Agreement Amendment" means the Amendment to
Proceeds Account Agreement and Escrow Agreement dated as of February 11, 1998
among Borrower, Lender and Norwest Bank Colorado, National Association.
"Proceeds Account Disbursement Request" means the request from
Borrower to Lender for disbursements from the Proceeds Account, in the form set
forth in Exhibit B hereto, signed by an authorized officer of Borrower.
"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 Original
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 Loan used for the Project.
"Project Capital Costs" means the aggregate of all Capital
Expenditures scheduled to be paid in accordance with the Interim Operating
Budget by Borrower during such period in respect of the operation of the Project
and approved by Lender in its sole discretion reasonably exercised based on
prudent mining practices.
"Project Costs" means, for any period, the Project Operating
Costs and the Project Capital Costs scheduled to be paid during such period.
"Project Operating Costs" means the aggregate of all payments
scheduled to be paid in accordance with the Interim Operating Budget by
Borrower, including:
(a) costs scheduled to be paid in accordance
with the Interim Operating Budget during such period in connection with the
operation of the Project in order to mine, leach, mill, refine and deliver
Project 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;
<PAGE>
(b) costs of scheduled principal and interest
payments hereunder and in connection with all Indebtedness of Borrower;
(c) all royalties, overrides and other burdens
on production; and
(d) Dakota Project Direct Costs.
"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 Original
Development Plan. Project Permits are listed in Schedule 7.1(c).
"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
Original 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.
"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.
"Ratification, Confirmation and Agreement" means the
Ratification, Confirmation and Agreement of even date herewith from Dakota and
USMX to Lender in substantially the form of Exhibit M hereto.
"Release" means a release, as such term is defined in CERCLA.
"Second Amendment to Deed of Trust" means the Second Amendment
to Deed of Trust, Assignment, Security Agreement and Financing Statement
(Minerals) dated as of February 11, 1998 from Borrower to Fairbanks Title
Agency, Inc., as trustee, for the benefit of Lender, substantially in the form
of Exhibit N hereto.
<PAGE>
"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, 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 Guaranties and
related Assignment Agreement and the Ratification, Confirmation and Agreement,
as any of the foregoing are amended, modified or restated, 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. dated July 17, 1996 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.
"Start-up" means the annual resumption of mining at and
production of gold from the Illinois Creek Gold Property after the cessation of
such operations during the winter season.
"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.
"Taxes" shall have the meaning specified in Section 3.11.
"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 Guaranty" shall have the meaning given thereto in
Recital C.
"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.
"year" means a calendar year.
1.2 ACCOUNTING PRINCIPLES. All accounting terms not
otherwise defined herein shall be construed, all financial computations required
<PAGE>
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
CONTINUATION; USE OF PROCEEDS
-----------------------------
2.1 CONTINUATION. The outstanding Principal Amount of
the Loans under the Original Credit Agreement in the amount of $10,060,309.75
remains outstanding, is subject to the terms and conditions hereof and is
evidenced by the Note. As of the date hereof, the Lender shall have no
obligation to make any additional Advances of Loans to Borrower.
2.2 USE OF PROCEEDS. As of the date hereof, Lender has
Advanced the entirety of the Loan to Borrower. Borrower will utilize the
proceeds of the Loan solely to fund costs and expenses associated with
developing the Illinois Creek Gold Property, substantially in accordance with
the Original Development Plan, including costs associated with the Hedging
Agreement.
ARTICLE 3
PROCEDURE AND PAYMENT
---------------------
3.1 PRINCIPAL AMOUNT OF THE LOANS. The Principal Amount of
Loans outstanding under the Original Credit Agreement was converted from a
Dollar Loan to a Gold Loan on December 31, 1997. On February 11, 1997 the
Principal Amount of Loans was converted from a Gold Loan to a Dollar Loan. The
Principal Amount of the Loan outstanding as of the date hereof is Ten Million
Sixty Thousand Three Hundred Nine Dollars and Seventy-Five Cents
($10,060,309.75). The Borrower shall have no rights to convert the Loan to a
Gold Loan.
3.2 NOTE. The Loan shall be evidenced by the Note.
3.3 PRINCIPAL AND INTEREST PAYMENTS GENERALLY. All principal
and interest payments of the Loan shall be made in Dollars.
3.4 INTEREST
(a) General. Borrower shall pay interest on the
outstanding Principal Amount of the Loan calculated on a 360-day year basis, at
the Interest Rate or at the Default Rate, as applicable. Interest payable shall
be calculated daily. Interest calculated at the Interest Rate shall be payable
<PAGE>
on demand, but in any event, interest shall be payable monthly in arrears on the
fifth day of each month with respect to the preceding month. Interest calculated
at the Default Rate shall be payable on demand.
(b) Interest Period. The interest period
("Interest Period") shall be thirty (30) days, calculated on a 360 day year
basis.
(c) Default Interest. Interest on the Loan
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 not paid by Borrower after demand
therefor has been made by Lender. 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 Loan. 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.
3.5 REPAYMENT OF THE LOAN
(a) Principal Repayment Generally. Borrower
agrees to repay the Loan on demand.Loan amounts repaid may not be reborrowed.
(b) Loan Payments. Payments received shall be
applied first to costs and expenses payable by Borrower hereunder, then to
accrued and unpaid interest on the Loan and then to the Principal Amount. The
Borrower shall prepare and submit to Lender by the fifth day of each calendar
month a Monthly Payment Calculation form, in the form as set forth in Exhibit O
attached hereto (the "Monthly Calculation Form") and in content satisfactory to
Lender, together with the payment due for such month.
(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 the Interest Period, One Million Dollars
($1,000,000) or larger portion of the Principal Amount of the Loan. 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 Loan shall be
applied to the outstanding Principal Amount, and shall be applied to the
scheduled principal payments of the Loan in inverse order of maturity.
(d) Mandatory Payment Upon Demand. Borrower
will repay the Principal Amount of the Loan in full, together with accrued
interest thereon, Breakage Costs and fees, upon demand.
<PAGE>
3.6 PRIORITY OF DEMAND PAYMENTS. All Loan payments made
by Borrower on demand shall be accompanied by payment of Lender's Breakage
Costs, if any, and shall be applied first to accrued and unpaid interest on the
Loan 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.
3.7 FORCE MAJEURE. 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, force
majeure or other contingency, circumstance or event of any nature beyond the
control of Lender.
3.8 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.
3.9 PAYMENTS AND COMPUTATIONS. Borrower shall make each
payment due 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
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).
<PAGE>
3.10 PAYMENT ON NON-BUSINESS DAYS. Whenever any payments 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 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.
3.11 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 3.11) 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 3.11) 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
<PAGE>
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 received by Lender pursuant to
this Agreement, the Loan and Note 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 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 3.11 shall survive the payment in full of the Loan and interest
hereunder.
3.12 PROCEEDS ACCOUNT
(a) Borrower has established and will maintain
an account with a national banking institution, satisfactory to Lender in its
sole discretion reasonably exercised, in accordance with the Proceeds Account
Agreement and the Proceeds Account Agreement Amendment (the "Proceeds Account").
Borrower has entered into and will maintain an escrow agreement with such
banking institution in form acceptable to Lender. Borrower will promptly deposit
in the Proceeds Account all gross revenues of, and all other payments received
in relation to, the Project, including, without limitation, the net proceeds of
any equity or debt offering by Borrower to any Person, including Dakota, USMX or
a Subsidiary of Dakota, all funds received from Dakota or 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 during the first five days following the end of each calendar month (or at
other times as may be approved by Lender in its sole discretion) with the
consent of Lender and only upon receipt of a completed Monthly Calculation Form
in form and content satisfactory to Lender and pursuant to a Proceeds Account
Disbursement Request, which indicates the manner in which such disbursement will
be applied in accordance with the following provisions of this Section 3.12;
provided, however, that Borrower, with the consent of Lender and pursuant to a
Proceeds Account Disbursement Request detailing the use of funds in accordance
with this Section 3.12 to the satisfaction of Lender, may make disbursements or
withdrawals from the Proceeds Account other than within the first five days of
any month, but no more than once a week during any month, solely for the payment
of (i) the payroll for those Persons employed by the Borrower for the operation
of the Project, (ii) disbursements to holders of a royalty interest in the
Mining Properties and to those third Person vendors requiring the disbursement
of immediately available funds for the provision of goods or services to the
<PAGE>
Project, as approved by Lender in its sole discretion, reasonably exercised and
(iii) such other expenditures as approved by Lender in its sole discretion,
reasonably exercised.
Credit balances in the Proceeds Account shall be applied as
follows:
First, to payment of Project Operating Costs incurred by
Borrower in the preceding month in accordance with the Interim
Operating Budget;
Second, to payment of Project Capital Costs incurred by
Borrower in the preceding month in accordance with the Interim
Operating Budget;
Third, to payment of account payables of Borrower not included
in current Project Operating Costs and Project Capital Costs
in accordance with the Interim Operating Budget; and
Fourth, to the payment of the Principal Amount of the Loan,
interest thereon, and fees or other amounts due Lender
hereunder or under any of the Loan Documents.
(b) 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.
(c) In the event that, with the prior consent of
Lender (which may be given or
withheld in Lender's sole discretion), Borrower sells any royalty or other
interest in or to the Mining Properties or assets related thereto or production
of valuable minerals therefrom, Borrower shall deposit in the Proceeds Account
the proceeds from such sale or sales immediately upon their receipt.
ARTICLE 4
<PAGE>
HEDGING FACILITY
4.1 ESTABLISHMENT OF HEDGING FACILITY. Lender has
established and will maintain the Hedging Agreement in accordance with its
terms.
ARTICLE 5
COLLATERAL SECURITY
5.1 SECURITY DOCUMENTS. As security for the due repayment
of the Loan hereunder, for the payment of all moneys due hereunder, for the
performance of all Obligations of Borrower, Dakota and USMX hereunder and under
the other Loan Documents (expressly including the Bridge Loan Agreement),
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, ratifications, confirmations 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.
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, under the
Bridge Loan Agreement 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, Dakota 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
<PAGE>
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. 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 POSITIVE HEDGING AGREEMENT VALUES AS COLLATERAL.
Borrower and Lender agree that if Hedging Contracts, including Price Fixing
Commitments, are marked to market from time to time and have positive
liquidation values, such positive values constitute a portion of the Collateral,
are subject to the Security Documents, and may not be realized by Borrower
(without the express prior written consent of Lender) except by physical
delivery of Gold produced from the Project in accordance with the terms thereof.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO AMENDMENT AND RESTATEMENT. The
obligations of Lender under this Agreement shall be subject to satisfaction, or
waiver by Lender in its sole discretion, of the following conditions precedent:
(a) Lender or its counsel shall have received
the following on or before the date hereof, 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 Note, duly executed by Borrower;
(iii) the Bridge Loan Agreement, duly
executed by Borrower;
<PAGE>
(iv) the Ratification, Confirmation and
Agreement, duly executed by Dakota and USMX;
(v) the Second Amendment to Deed of
Trust;
(vi) the Proceeds Account Agreement
Amendment duly executed by Borrower and Norwest Bank Colorado, National
Association;
(vii) an Omnibus Certificate for Borrower,
duly executed by an officer
thereof;
(viii) an Omnibus Certificate for USMX,
duly executed by an officer thereof;
(ix) an Omnibus Certificate for Dakota,
duly executed by an officer thereof;
(x) the Dakota Loan Agreement, duly
executed by Borrower and Dakota;
(xi) the Gerald Metals Intercreditor
Agreement, executed by Gerald Metals;
(xii) the Blattner Intercreditor Agreement
, duly executed by Blattner;
(xiii) 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;
(xiv) the Opinion of Borrower's and
Guarantors' Counsel;
(xv) certificates of issuing insurance
companies, confirming compliance byBorrower with the insurance requirements set
forth in Section 8.4;
(xvi) accurate and complete copies of the
financial statements referred to in Section 7.1(f); and
(xvii) such other approvals, opinions or
documents as Lender may reasonably request.
(b) The following shall be correct as of the date
hereof:
(i) each of the Loan Documents, as
<PAGE>
amended, supplemented, modified or restated, remains in full force and effect in
accordance with its terms and applies to all obligations of the Borrower
hereunder;
(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, Dakota, 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, Dakota, 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, Dakota 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 Original 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) 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) the Proceeds Account shall have been
established and the related escrow agreement (as contemplated by Section 3.12
hereof) shall have been entered into by Borrower and escrow agent and approved
by Lender.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower
represents and warrants as follows:ower
(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, the Dakota Loan Agreement, the
Bridge Loan Agreement and the other Loan Documents to which it is a party and to
carry out the transactions contemplated hereby and thereby. USMX is a
<PAGE>
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 Loan Documents to which it is a party and to carry
out the transactions contemplated thereby. Dakota 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 Loan Documents to which it is a party and the Dakota Loan Agreement 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, the Bridge Loan
Agreement, the other Loan Documents to which it is a party, the Proceeds Account
Agreement Amendment and the Dakota Loan Agreement, 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 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. The execution, delivery and
performance by Dakota of the Loan Documents to which it is a party and the
Dakota Loan Agreement has been duly authorized by all necessary corporate action
and does not and will not contravene Dakota's articles of incorporation, charter
or bylaws.
(c) Governmental Consents; Project Permits and
Authorizations. 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, the Bridge Loan Agreement, any other Loan
Document to which Borrower is a party, the Proceeds Account Agreement Amendment
or the Dakota Loan Agreement, or for the due execution, delivery and performance
by Dakota or USMX of the Loan Documents or the Dakota Loan Agreement to which
either Dakota or USMX is a party or (ii) for the due performance of all other
obligations of Borrower, Dakota or USMX under this Agreement, the Bridge Loan
Agreement, any other Loan Document to which Borrower, Dakota or USMX is a party,
the Proceeds Account Agreement Amendment or the Dakota Loan Agreement (other
than registrations or filings to perfect the liens created by the Security
Documents) except such authorizations, approvals or other actions as have been
<PAGE>
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. Each of this Agreement,
the Bridge Loan Agreement, the other Loan Documents, the Proceeds Account
Agreement and the Dakota Loan Agreement, as any of the same may be amended,
modified or restated, is, the legal, valid and binding obligation of Borrower,
enforceable against Borrower 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). Each of the Loan Documents to which Dakota is
a party and the Dakota Loan Agreement, as any of the same may be amended,
modified or restated, is, the legal, valid and binding obligation of Dakota,
enforceable against Dakota 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). Each of the Loan Documents to which USMX is a
party, as any of the same may be amended, modified or restated, is, the legal,
valid and binding obligation of USMX, enforceable against USMX 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,
the Bridge Loan Agreement, any of the other Loan Documents, the Proceeds Account
Agreement Amendment or the Dakota Loan Agreement, or any action taken or to be
taken pursuant to this Agreement, the Bridge Loan Agreement, any of the other
Loan Documents, the Proceeds Account Agreement Amendment or the Dakota Loan
Agreement 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 Dakota (including USMX and
Borrower) as of December 31, 1996, and the related consolidated statements of
income, cash flow and stockholders' equity of Dakota (including USMX and
Borrower) for the period then ended, audited by KPMG Peat Marwick LLP and the
unaudited consolidating balance sheets of Dakota (including USMX and Borrower)
as of September 30, 1997, and the related unaudited consolidating statements of
income, cash flow and stockholders' equity of Dakota (including USMX and
Borrower) for the period then ended certified by officers of Dakota, USMX and
Borrower, copies of which have been furnished to Lender, fairly present the
financial condition of Borrower, Dakota and USMX as at such dates and the
<PAGE>
results of the operations of such Persons for the periods ended on such dates,
all in accordance with GAAP consistently applied. None of Borrower, Dakota or
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, Dakota 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.
(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, Dakota or USMX in connection with the transactions contemplated by
this Agreement or the Bridge Loan 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 Original
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, except as disclosed on Schedule 7.1(h).
(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.
(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
<PAGE>
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.
(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, 1997; (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, 1997; (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 any amendments thereto 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, the Bridge Loan Agreement, any
of the other Loan Documents, the Proceeds Account Agreement Amendment or the
Dakota Loan Agreement 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,
after giving effect to the Loan, and all such Instruments, and to any fees and
<PAGE>
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 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) Capital Structure of Borrower and USMX.
Borrower is a wholly-owned subsidiary of USMX. USMX is a wholly-owned subsidiary
of Dakota. 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.
(n) Hedging Contract Obligations. Except as
set forth in Schedule 7.1(n), Borrower has no Hedging Contracts currently in
effect for Gold.
(o) Material Agreements; Absence of Default.
All of Borrower's Material Agreements are identified in Schedule 7.1(o). 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.
(p) 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.
<PAGE>
(q) Original Development Plan. The Original
Development Plan was 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 Original Development Plan
and achieving, after allowance for existing royalty burdens, the net Gold
production provided for therein.
(r) Compliance With Laws. Borrower is in
compliance with all laws, regulations and rules of federal, state and local
Governmental Authorities
(s) Environmental Laws. Except as set forth in
Schedule 7.1(s):
(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
<PAGE>
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.
(t) Borrowers' Indebtedness. Except as
disclosed on Schedule 7.1(t) 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.
(u) 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.
(v) NPMC Agreement and Lien. The Project has
achieved "Commercial Production" as defined in the NPMC Agreement. As a result
of achieving "Commercial Production" under the NPMC Agreement, NPMC is no longer
entitled to a security interest in the real or personal property constituting
the Project.
ARTICLE 8
AFFIRMATIVE COVENANTS OF BORROWER
So long as the Loan, the Note or amounts Advanced to Borrower
under the Bridge Loan Agreement shall remain unpaid, or any other Obligation of
Borrower, or obligations of Dakota or USMX hereunder or under Agreements and
Instruments entered into pursuant hereto, 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 to
<PAGE>
Lender the reports, information and certificates set forth below:
(a) Monthly Financial Information. As soon as
available and in any event within 15 days after the end of each month, a
consolidating balance sheet of Borrower, as of the end of such month and
consolidating statements of income, cash flow and retained earnings of Borrower
prepared in accordance with GAAP for such month and for the period commencing at
the end of the previous year and ending with the end of such month, certified in
a manner acceptable to Lender by the chief financial officer of Borrower.
(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 Dakota Mining Corporation (including USMX and
Borrower), as of the end of such year and consolidating statements of income,
cash flow and retained earnings of Dakota Mining Corporation (including USMX and
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.
(c) Statement of Project Reserves. Not later
than March 31, 1998, Borrower shall submit to Lender a certificate, certified by
the presidents of each of Borrower and USMX, indicating the calculations of the
Project Proven and Probable Reserves as at December 31, 1997, with 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) 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.
(g) 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 Interim Operating Budget, in form and substance reasonably acceptable to
Lender. In addition, not later than the fifth day of each month, or at any other
time as reasonably requested by Lender, Borrower shall submit to Lender a
Payable Aging Report.
(h) Annual Development Plan Update. Not later
than March 31, 1998, deliver to Lender for review and approval a revised and
<PAGE>
updated Original Development Plan, which will include estimated working capital
requirements of the Project through Start-up.
(i) Quarterly Hedging Contract Reports. 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
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
<PAGE>
Mining Properties and vicinity, and in activities incident thereto, in
accordance with generally accepted industry practices and the Interim Operating
Budget.
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.
8.11 OPERATION OF THE PROJECT; COMPLETION; ASSIGNMENT OF
CONTRACTS. 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 prudent mining industry practices.
8.12 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.
8.13 PROJECT MONITORING. In addition to any reporting and
other obligations of Borrower pursuant to this Article VIII, Borrower shall
consult with Lender and its agents regarding management of the Project through
Completion, with such consultations to include:
(a) Review and approval of and, to the extent
deemed necessary or desirable by Lender and its agents in Lenders sole judgment,
modification of, the Project Capital Costs and of the mining, construction and
other working plans related to the Project, and any budgets associated
therewith, approval of which Lender may withhold in its sole discretion
reasonably exercised based on prudent mining practices; and
(b) Review and approval of the final decision
<PAGE>
regarding the commitment of funds necessary for Start-up in Fiscal Year 1998,
approval of which Lender may withhold in its sole discretion reasonably
exercised based on prudent mining practices.
8.14 RELEASE OF LIENS. Borrower shall cause the
termination and release of the security interest granted to NPMC in any or all
of the real or personal property constituting the Project and all Liens granted
to NPMC thereby no later than March 15, 1998.
8.15 DELIVERY OF PROJECT PRODUCTION TO HANDY & HARMAN.
Borrower shall deliver or cause to be delivered all production of gold and other
Precious Metals, including dore, from the Project solely to Handy & Harman in
Attleboro, Massachusetts for refining.
8.16 DELIVERY OF INTERIM OPERATING BUDGET. Borrower shall
deliver to Lender the Interim Operating Budget no later than February 18, 1998.
ARTICLE 9
NEGATIVE COVENANTS OF BORROWER
So long as the Loan, the Note or amounts Advanced to Borrower
under the Bridge Loan Agreement shall remain unpaid, or any other Obligation of
Borrower, or obligations of Dakota or USMX hereunder or under Agreements and
Instruments entered into pursuant hereto, shall not have been fully performed by
Borrower, Dakota 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.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 under the Bridge
Loan Agreement; (c) Indebtedness secured by Liens permitted by Section 9.2; (d)
Indebtedness existing on the date hereof disclosed to Lender; (e) unsecured
trade payables; (f) Indebtedness incurred in the ordinary course of business;
(g) Indebtedness consisting of purchase or leasehold obligations associated with
the Project contemplated by the Original Development Plan; and (h) Indebtedness
incurred by Borrower for purposes of developing the Illinois Creek Gold Property
in accordance with the Original 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
<PAGE>
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 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;
<PAGE>
(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
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.
<PAGE>
9.6 RESTRICTION ON DIVIDENDS, REDEMPTIONS AND OTHER
DISTRIBUTIONS AND PAYMENTS TO CERTAIN PERSONS. Other than as provided in
Section 3.11(a), Borrower shall not declare, order, pay or make any dividend or
other distribution or payment, directly or indirectly, in respect of any shares
of any class of stock of Borrower, now or hereafter outstanding, or with respect
to any Indebtedness or other obligation of Borrower to USMX or Dakota, now
existing or hereafter arising.
9.7 LIMITATIONS ON HEDGING CONTRACTS. Borrower shall not,
directly or indirectly, enter into or be a party to any (a) Hedging Contracts,
(b) Price Fixing Commitments or (c) any production payments (other than
currently existing royalties on production of the Project) without the prior
written consent of Lender, in its sole discretion.
9.8 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 8.12 and except for disposition of equipment that
is replaced by equipment of equal or higher capacity or value.
9.9 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 approved by Lender in its sole discretion reasonably exercised based on
prudent mining practices.
9.10 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 arrangement
(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.
9.11 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
<PAGE>
be an "Event of Default" hereunder and under the Bridge Loan Agreement, however,
the Lender's right to exercise it's right of demand, at any time, for repayment
hereunder is not conditioned on the occurrence or existence of a Default or
Event of Default:
(a) Nonpayment. Borrower shall fail to pay any
principal when due hereunder (whether at scheduled payment dates or on demand or
otherwise) or shall fail to pay interest hereunder or on the Note when due, or
shall fail to pay any principal or interest when due under the Bridge Loan
Agreement.
(b) Other Defaults. Borrower, Dakota or USMX
shall fail to observe or perform any of their covenants, undertakings or
agreements contained in this Agreement, the Bridge Loan Agreement or any other
Loan Document.
(c) Representation or Warranty. Any
representation or warranty made by Borrower, Dakota or USMX (or any of their
officers) under or in connection with this Agreement 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
Bridge Loan Agreement or 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
to any Indebtedness of Dakota 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 or Indebtedness of Dakota 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. Any of Borrower, Dakota 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, Dakota 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, Dakota or USMX, shall remain
undismissed for a period of 60 days; or Borrower, Dakota or USMX shall take any
corporate action to authorize any of the actions set forth in this paragraph(e).
<PAGE>
(f) Judgments. A final judgment or order for
the payment of money in excess of $100,000 shall be rendered against Borrower,
Dakota 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.
(g) 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 9.2, or Borrower, Dakota or USMX shall so
state in writing.
(h) Guaranties. Either of the Guaranties shall
cease to be effective and enforceable in accordance with its terms, or Borrower,
Dakota or USMX shall so state in writing, or any default shall occur thereunder.
(i) Condemnation. Any of the property or assets
of Borrower, Dakota or USMX in the Mining Properties is taken by power of
expropriation or eminent domain or sold under threat of such taking, or
possession of any material portion of the lands necessary for the operation of
the Project is taken through exercise of such power.
(j) Regulatory Action. Any Governmental
Authority shall take any action with respect to Borrower, Dakota, USMX, the
Project or the Project Permits or any other Collateral subject to the Mortgage
which would have a Material Adverse Effect on Borrower, Dakota, 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.
(k) Adverse Project Developments. If any of the
following occurs:
(i) The Project is abandoned or
terminated, or the Board of Directors of Borrower, Dakota or USMX elects not to
proceed with the Project for whatever reason;
(ii) Borrower, USMX or Dakota either (a)
sells or otherwise transfers any interest in the Illinois Creek Gold Property to
any other Person other than the Borrower, 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, Dakota 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;
<PAGE>
(iv) A material adverse change occurs with
respect to the Project Permits.
(l) 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.
(m) Default Under Other Agreements. Any default
or event of default occurs under any of the following documents and agreements
as any such document may hereafter be modified or supplemented in accordance
with its terms:
(i) the Pledge and Security Agreement,
dated as of July 28, 1997, made by Dakota in favor of Lender;
(ii) the Intercreditor Agreement;
(iii) the Proceeds Account Agreement;
(iv) the Proceeds Account Agreement
Amendment;
(v) the Dakota Loan Agreement; or
(vi) the Gerald Metals Agreement.
10.2 REMEDIES
(a) Payment of the Principal Amount of the Loan,
all accrued and unpaid interest thereon and any other amounts owed to Lender
hereunder is due on demand and in no event does an Event of Default have to
occur for the Lender to demand payment hereunder. The preceding listing of
Events of Default in Section 10.1 is intended to provide a guideline of conduct
by Borrower, including events, the occurrence of which, will cause the Lender to
make demand.
(b) Upon the occurrence of an Event of Default
or the failure of Borrower to make any payments to Lender in accordance with
Lender's demand, 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) In the case of an Event of Default specified
in Section 10.1(f) all amounts owed by Borrower hereunder shall be immediately
due and payable on the date of such event.
<PAGE>
(d) Upon the occurrence of an Event of Default
or the failure of Borrower to make any payments to Lender in accordance with
Lender's demand, 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.
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 or of any other Loan Document, 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.
c/o Dakota Mining Corporation
1560 Broadway, Suite 880
Denver, Colorado 80202
Attention: Chief Financial Officer
Telephone: (303) 573-0221
Facsimile: (303) 573-9712
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.
2150 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 (and any amendment to
this Agreement), the Loan Documents (expressly including the Bridge Loan
Agreement), 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 (and any amendment to this Agreement), the Loan Documents
(expressly including the Bridge Loan Agreement), 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 (and any amendment to this
Agreement), the Loan Documents (expressly including the Bridge Loan Agreement),
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 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
<PAGE>
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
<PAGE>
LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT
MATTER OF ANY OF THE FOREGOING.
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 Dakota or 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
<PAGE>
secret information that Lender may obtain from Dakota, USMX or Borrower pursuant
to financial reports and other material submitted by Dakota, 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.
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
<PAGE>
EXHIBIT B.
BRIDGE LOAN AGREEMENT, PROMISSORY
NOTE AND SECURITY AGREEMENT
This Bridge Loan Agreement, Promissory Note and Security Agreement (the
"Agreement") is made as of February 11, 1998 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. Pursuant to a Credit Agreement dated as of July 11, 1996, as amended
by a First Amendment dated as of November 15, 1996, a Second Amendment dated as
of July 28, 1997 and a Third Amendment dated as of September 19, 1997
(collectively, the "Existing Credit Agreement") Lender has advanced certain
loans to Borrower to partially fund development of the Illinois Creek Gold
Property in Alaska. The terms of the Existing Credit Agreement are being
modified pursuant to an Amended and Restated Credit Agreement dated as of
February 11, 1998 (the "Restated Credit Agreement") pursuant to which the credit
facility is being changed to a demand loan and other modifications set forth in
the Restated Credit Agreement will be implemented.
B. Borrower is the wholly owned subsidiary of USMX, Inc., a Delaware
corporation ("USMX"), which is in turn a wholly owned subsidiary of Dakota
Mining Corporation, a corporation continued under the Canada Business
Corporation Act ("Dakota"). Dakota is currently experiencing a cash flow
shortfall of approximately $450,000 per month and is exploring various potential
arrangements to respond thereto, including the sale of the Illinois Creek Gold
Property or the sale of Borrower, or a merger or consolidation or other
corporate restructuring involving one or more of Dakota, USMX and/or Borrower.
C. Subject to all terms and conditions hereof, Lender is willing to
loan additional funds to Borrower, on a secured, demand loan basis, as more
particularly provided herein, which funds will be used by Borrower exclusively
to make loans to Dakota on an unsecured, unsubordinated basis, to assist Dakota
in meeting such cash flow shortfalls.
<PAGE>
Agreement
NOW, THEREFORE, in consideration of the following mutual covenants and
agreements, Borrower and Lender hereby agree as follows.
1. Defined Terms. All capitalized terms used but not defined herein
shall have the meanings given thereto in the Restated Credit Agreement. Lender
and Borrower further agree that in this Agreement, unless otherwise expressly
indicated, the following terms shall have the meanings indicated below:
"Advance Request" shall be a written request by Borrower, in form
acceptable to Lender in its sole discretion, for an Advance of funds as a loan
hereunder, to be utilized for purposes identified in the Monthly Budget. Such
Advance Request shall specify in detail the uses of the funds which are
requested to be Advanced, and shall be accompanied by supporting invoices or
other documentation as Lender may require in its sole discretion.
"Monthly Budget" shall mean a budget of anticipated expenses to be
incurred by Dakota during a specified calendar month.
"Obligations" means all obligations of Borrower (monetary or otherwise)
arising under or in connection with this Agreement, the Restated Credit
Agreement, each other Loan Document and each other document or instrument
executed by Borrower and delivered to Lender or to any other Person as required
or contemplated by this Agreement.
2. Incorporation of Provisions of Restated Credit Agreement. Borrower
and Lender hereby incorporate by reference and make a part of this Agreement the
following provisions of the Restated Credit Agreement, it being the agreement
and understanding of Borrower and Lender that such provisions (and defined terms
used therein), as applied to the loan and other agreements of Borrower and
Lender under this Agreement, are agreed to have been modified as necessary to
refer to this Agreement, the indebtedness evidenced hereby and to apply to the
transactions contemplated by this Agreement.
Section 1.2 Accounting Principles
Section 3.4 Interest
Section 3.8 Increased Costs and Reduction in Return
Section 3.9 Payments and Computations
Section 3.10 Payment on Non-Business Days
<PAGE>
Section 3.11 Taxes
Section 3.12 Proceeds Account
Article 5 Collateral Security
Article 7 Representations and Warranties
Article 8 Affirmative Covenants of Borrower
Article 9 Negative Covenants of Borrower
Article 10 Events of Default
Article 11 Miscellaneous
3. Loan Commitment, Bridge Note, Use of Proceeds, etc.
a. Loan Commitment. Subject to all terms and conditions
hereof, Lender agrees to Advance as loans to Borrower on a demand basis from
time to time, sums not to exceed the aggregate amount of One Million One Hundred
Thousand Dollars ($1,100,000) (the "Maximum Bridge Loan Amount").
Notwithstanding the foregoing reference to loans to Borrower hereunder not to
exceed the Maximum Bridge Loan Amount, Borrower and Lender expressly agree that
Lender has not committed itself hereby or otherwise to making loans to Borrower
up to such amount and that Lender may at any time, in its sole and absolute
discretion, elect not to make further Advances of loans to Borrower hereunder.
Borrower further acknowledges its understanding and agreement that any loans
which are made by Lender hereunder are demand loans, payable in full upon demand
by Lender, which demand Lender may make at any time in its sole and absolute
discretion. Interest on the loans Advanced to Borrower hereunder shall accrue at
the rates, including the Default Rate if applicable, and shall be payable at the
times and in the manner provided in the Restated Credit Agreement with respect
to the loans contemplated thereby.
b. Bridge Note. This Agreement shall constitute a promissory
note, payable to the order of Lender on demand, in the full amount of the loans
Advanced to Borrower hereunder (the "Bridge Note"). Borrower hereby acknowledges
and agrees that it is personally obligated and fully liable for the amount due
under the Bridge Note (i.e., for all principal, interest and fees hereunder).
The Lender has the right to sue on the Bridge Note and obtain a personal
judgment against Borrower for satisfaction of the amount due under the Bridge
Note either before or after a judicial foreclosure of the collateral hereof
under Alaska Statute 09.45.170 - 09.45.220.
c. Use of Proceeds. The proceeds of the loans Advanced to
Borrower hereunder shall be utilized by Borrower exclusively to make unsecured
demand loans to Dakota, at an annual interest rate at least equal to the
interest rate payable by Borrower hereunder, to be utilized by Dakota
<PAGE>
exclusively for the purposes set forth in the Advance Request giving rise to an
Advance hereunder, all pursuant to a Demand Promissory Note substantially in the
form of Exhibit A hereto (the "Dakota Demand Note"). Borrower shall not agree to
any subordination or postponement of its rights to receive from Dakota repayment
of such loans on demand. Borrower will cause all principal, interest and other
payments by Dakota pursuant to the Dakota Demand Note to be made directly to the
Proceeds Account.
d. Advance Procedures. Not later than the 25th day of each
month which occurs prior to the first to occur of (i) Lender's demand for
payment of amounts due hereunder and (ii) Lender having Advanced to Borrower the
maximum amount contemplated by Paragraph 3.a. hereof, Borrower will deliver to
Lender a Monthly Budget for the following calendar month. Such Monthly Budget
shall be subject to the review and approval of Lender in its sole discretion. If
a Monthly Budget is approved by Lender in writing, on Monday of each week
included in such Monthly Budget Borrower will submit to Lender an Advance
Request (or written notice that no Advance Request will be submitted to Lender
with respect to such week) covering amounts identified in the Monthly Budget
which are due and payable by the end of such week. Each Advance Request will be
accompanied by Request for Disbursement from the Proceeds Account. If Lender
approves such Advance Request, and provided that Lender has not otherwise
elected not to terminate its commitment hereunder, not later than 5:00 p.m. on
Wednesday of such week Lender will Advance to Borrower the amounts identified in
such approved Advance Request by depositing such amount in the Proceeds Account.
The amounts will be disbursed to Borrower from the Proceeds Account pursuant to
the Request for Disbursement, and Borrower will immediately advance such amounts
to Dakota as a loan in accordance with Paragraph 3.(c) above.
4. Collateral Security, Security Agreement..
a. Agreements Regarding Cash Collateral. Borrower and Lender
hereby agree that Lender will establish a deposit account in England in
Borrower's name, from which amounts may be withdrawn only by Lender (the "Cash
Collateral Account"). Borrower and Lender agree to deposit in the Cash
Collateral Account (i) all proceeds from the termination of the Price Fixing
Commitments entered into by Borrower pursuant to the Hedging Agreement, plus
(ii) an amount from the Proceeds Account which, when combined with the proceeds
from termination of the Price Fixing Commitments will provide a total credit
balance of $1,100,000 for the Cash Collateral Account. Lender may withdraw funds
from the Cash Collateral Account as and when necessary to pay amounts due Lender
hereunder or under the Restated Credit Agreement or Loan Documents. Upon payment
in full of all amounts due Lender hereunder and under the Restated Credit
Agreement and Loan Documents and satisfaction of all Obligations, Lender will
upon Borrower's written request disburse to Borrower the credit balance of the
<PAGE>
Cash Collateral Account.
b. Security Agreement. Borrower hereby grants to Lender a lien
and encumbrance on and a security interest in, and pledges to Lender, (i) the
Cash Collateral Account and all credit balances therein and (ii) all of its
right, title and interest in the Dakota Demand Note and loan evidenced thereby,
as collateral security for the payment and performance of all obligations of
Borrower to Lender hereunder, under the Restated Credit Agreement and the Loan
Documents, and all other Obligations. Borrower hereby agrees that Lender is in
exclusive possession and control of the Cash Collateral Account and credit
balances therein. This Agreement constitutes a Security Agreement for all
purposes under the laws of the State of Colorado, the governing law agreed upon
by Lender and Borrower as the law applicable to this Agreement. To the extent
the laws of England apply to the Cash Collateral Account and the credit balances
therein and to the grant hereby by Borrower of a lien and encumbrance thereon, a
security interest therein, or a pledge or other form of collateral security
interest therein, it is the intention of Borrower hereby, notwithstanding the
specific language of grant contained in this Subparagraph b., to grant to or
create in favor of, Lender a lien, encumbrance, security interest, pledge or
other collateral security interest of the kind contemplated by the laws of
England with respect to the Cash Collateral Account and the credit balances
therein. Borrower agrees to take such actions, including executing and filing or
recording financing statements or other documents evidencing or perfecting the
liens, encumbrances and security interests in the Cash Collateral Account and
Dakota Demand Note provided for in this Paragraph 4.b. as Lender may require
from time to time. To the extent permitted by applicable law, Lender is hereby
authorized, without prior notice to Borrower, to realize upon the Cash
Collateral Account and credit balances therein by Lender's unilateral withdrawal
of all credit balances in the Cash Collateral Account and application thereof,
in such manner as Lender may elect, to any obligations of Borrower to Lender
hereunder or under the Restated Credit Agreement or Loan Documents. In the event
of a realization by Lender on the Cash Collateral Account and credit balances
therein, or upon the Dakota Demand Note, Lender shall be entitled to all
foreclosure and other rights and remedies set forth in applicable laws of the
State of Colorado, England or any other applicable jurisdictions.
5. Conditions Precedent. Each Advance of funds hereunder by Lender
shall be subject to satisfaction, or waiver by Lender in its sole discretion, of
each of the following conditions precedent:
a. Borrower and Lender shall have executed the Restated Credit
Agreement and each condition precedent to an Advance of a Loan thereunder shall
have been and remain satisfied;
<PAGE>
b. Dakota shall have executed and delivered to Borrower the
Dakota Demand Note and Borrower shall have taken such steps as Lender may
require, to have granted to Lender a perfected lien, encumbrance and security
interest on the rights of Borrower therein, including, as necessary, the pledge
and delivery of the Dakota Demand Note to Lender;
c. Lender, Borrower and Norwest Bank Colorado, National
Association shall have entered into an amendment of the Proceeds Account
Agreement in form satisfactory to Lender in its sole discretion;
d. Lender and Borrower shall have established the Cash
Collateral Account, which shall contain a credit balance of not less than the
Maximum Bridge Loan Amount, and Borrower shall have taken such steps as Lender
may require in its sole discretion to have perfected in favor of Lender a lien,
encumbrance or security interest in the Cash Collateral Account and credit
balances therein;
e. Lender and Gerald Metals, Inc. shall have entered
into an intercreditor agreement in form and substance acceptable to Lender in
its sole discretion;
f. Lender and D.H. Blattner & Sons shall have entered into an
intercreditor agreement in form and substance acceptable to Lender in its sole
discretion;
g. Lender shall have received such certificates, legal
opinions and other materials from Borrower as Lender may request, in its sole
discretion; and
h. No Event of Default or Default shall exist under this
Agreement or under the Restated Credit Agreement which has not been waived by
Lender in its sole discretion.
6. Additional Covenants of Borrower.
a. Gold Refining. Borrower will deliver dore and other
Gold bearing material produced from the Project exclusively to Handy & Harman
for refining.
b. Demand for Repayment of Loans by Dakota. In the event
Lender makes demand for repayment of amounts Advanced to Borrower hereunder,
upon request by Lender, Borrower will immediately demand repayment of amounts
loaned to Dakota pursuant to the Dakota Demand Note and will diligently and in
good faith pursue such repayment.
<PAGE>
7. Counterpart Execution. This Agreement may be executed in any number
of counterparts by different portion 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.
[balance of page intentionally blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective authorized representatives as of the date first above
written.
USMX OF ALASKA, INC.
By:______________________________
Name:____________________________
Title:_____________________________
Per Pro
N M ROTHSCHILD & SONS LIMITED
---------------------------------
---------------------------------
<PAGE>
EXHIBIT C.
RATIFICATION, CONFIRMATION AND AGREEMENT
THIS RATIFICATION, CONFIRMATION AND AGREEMENT (the Ratification) is
made as of the 11th day of February, 1998 by DAKOTA MINING CORPORATION, a
corporation continued under the Canada Business Corporation Act (Dakota) and
USMX, INC., a Delaware corporation (USMX) for the benefit of N M ROTHSCHILD &
SONS LIMITED, a company organized and existing under English law (NMR).
RECITALS
A. USMX of Alaska, Inc., an Alaska corporation (USMXAK) which is a
wholly owned subsidiary of USMX, is a party to and borrower under an Amended and
Restated Credit Agreement of even date herewith (the "Amended and Restated
Credit Agreement"), which amends, restates and replaces that certain Credit
Agreement dated as of July 11, 1996, as amended by a First Amendment to Credit
Agreement dated as of November 15, 1996, as further amended by a Second
Amendment to Credit Agreement dated as of July 28, 1997, and as further amended
by a Third Amendment to Credit Agreement dated as of September 19, 1997 (the
"Original Credit Agreement").
B. Pursuant to a Bridge Loan Agreement, Promissory Note and Security
Agreement of even date herewith between NMR and USMXAK (the "Bridge Loan
Agreement"), NMR has agreed to loan additional funds to USMXAK on a secured,
demand loan basis, for use by USMXAK to make loans to Dakota on an unsecured,
unsubordinated basis, to assist Dakota in meeting certain cash flow shortfalls.
C. The obligations of USMXAK under the Original Credit Agreement are
guaranteed by Dakota pursuant to a Guaranty dated as of July 28, 1997 (the
"Dakota Guaranty"), and the obligations of Dakota under the Dakota Guaranty are
secured by a Pledge and Security Agreement executed by Dakota, dated as of July
28, 1997, with the Dakota Guaranty and the Pledge and Security Agreement, and
any amendments, modifications, extensions or ratifications thereof, referred
collectively to as the Dakota Credit Support Documents.
<PAGE>
D. The obligations of USMXAK under the Original Credit Agreement are
guaranteed by USMX pursuant to a Guaranty dated July 11, 1996, as amended by an
Agreement dated as of July 28, 1997 (the "USMX Guaranty"), and the obligations
of USMX under the USMX Guaranty are secured by a Pledge and Security Agreement
dated as of July 11, 1996 and by certain Collateral Assignments of Deeds of
Trust dated as of July 11, 1996, as such Pledge and Security Agreement and
Collateral Assignments of Deeds of Trust were modified by the Agreement dated as
of July 28, 1997, with the USMX Guaranty, Pledge and Security Agreement,
Collateral Assignments of Deeds of Trust and all other documents and instruments
executed by USMX in connection with or as contemplated by the Original Credit
Agreement, and any amendments, modifications, extensions or ratifications
thereof, referred to collectively as the USMX Credit Support Documents.
E. Dakota and USMX each desire hereby to confirm and to evidence their
agreement that (i) the Dakota Credit Support Documents and the USMX Credit
Support Documents remain in full force and effect in accordance with their terms
and apply to all obligations of USMXAK under the Amended and Restated Credit
Agreement and the other Loan Documents associated therewith and (ii) the Dakota
Credit Support Documents and the USMX Credit Support Documents apply with full
force and effect to all obligations of USMXAK under the Bridge Loan Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of NMR agreeing to the Amended and
Restated Credit Agreement and the Bridge Loan Agreement, Dakota and USMX agree
as follows:
1. Amendments to Dakota Guaranty. Dakota and NMR hereby agree to modify
the Dakota Guaranty by deleting the last sentence of Recital B of the Dakota
Guaranty in its entirety and substituting the following therefor:
"All obligations and amounts due under (i) the USMXAK Credit
Agreement and under the collateral and other documents
executed by USMX and USMXAK (together, the "Borrowers") in
connection therewith, (ii) the Bridge Loan Agreement dated as
of February 11, 1998 between USMXAK and Lender (the "Bridge
Loan Agreement") and under the collateral and other documents
executed by USMXAK in connection therewith, and (iii) the USMX
Guaranty and the collateral and other documents executed by
USMX in connection therewith, are referred to collectively as
the "USMX/Rothschild Obligations."
<PAGE>
2. Amendments to USMX Guaranty. USMX and NMR hereby agree that the term
"Obligations" in the USMX Guaranty shall refer to and have the same meaning as
the use of the defined term "Obligations" in the Amended and Restated Credit
Agreement (expressly including the obligations under the Bridge Loan Agreement),
and each reference in the USMX Guaranty to the term "Obligations" shall mean and
be a reference to such term as modified hereby.
3. Dakota Ratification and Confirmation. Dakota hereby (a) ratifies and
confirms the Dakota Credit Support Documents, (b) agrees that the Dakota Credit
Support Documents apply to all obligations of USMXAK under the Amended and
Restated Credit Agreement and under all Loan Documents contemplated thereby, (c)
agrees that the Dakota Credit Support Documents, as amended hereby, apply with
full force and effect to and secure all obligations of USMXAK under the Bridge
Loan Agreement, and (d) agrees and confirms that the Dakota Credit Support
Documents remain in full force and effect in accordance with their terms.
4. USMX Ratification and Confirmation. USMX hereby (a) ratifies and
confirms the USMX Credit Support Documents, (b) agrees that the USMX Credit
Support Documents apply to all obligations of USMXAK under the Amended and
Restated Credit Agreement and under all Loan Documents contemplated thereby, (c)
agrees that the USMX Credit Support Documents, as amended hereby, apply with
full force and effect to and secure all obligations of USMXAK under the Bridge
Loan Agreement, and (d) agrees and confirms that the USMX Credit Support
Documents remain in full force and effect in accordance with their terms.
5. Representations and Warranties. Each of Dakota and USMX hereby adopt
and restate the representations and warranties of each respective party in
Sections 7.1(a), (b), (c), (d), (f), (h), and (n) of the Amended and Restated
Credit Agreement as if such representations and warranties were set forth in
full herein. Each of Dakota and USMX hereby reaffirm each representation,
warranty and covenant contained in the Dakota Guaranty and the USMX Guaranty, as
made by the respective parties, with the same force and effect as if each were
separately stated herein and made as of the date hereof.
6. Authority; Binding Effect. Each of Dakota and USMX represents to NMR
(i) that it has the authority to execute and deliver this Ratification, (ii)
that it has duly executed and delivered this Ratification, (iii) that this
Ratification is binding on and enforceable against it in accordance with its
terms and (iv) that this Ratification, and the underlying Dakota Credit Support
Documents and USMX Credit Support Documents executed by the respective parties,
reasonably may be expected to benefit, directly or indirectly, Dakota and USMX,
respectively.
<PAGE>
7. Inurement. This Ratification is binding upon and will inure
to the benefit of the successors and assigns of Dakota, USMX and NMR,
respectively.
IN WITNESS WHEREOF, the undersigned have executed this Ratification as
of the date first above written.
DAKOTA MINING CORPORATION
By:_____________________________
Name:___________________________
Title:____________________________
USMX, INC.
By:______________________________
Name:____________________________
Title:_____________________________
<PAGE>
EXHIBIT D.
SECOND AMENDMENT
TO
DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT
AND FINANCING STATEMENT
(Minerals)
From
USMX OF ALASKA, INC.
To
FAIRBANKS TITLE AGENCY, INC.
as Trustee
And
N M ROTHSCHILD & SONS LIMITED
Dated as of February 11, 1998
THIS INSTRUMENT IS GOVERNED BY THE PROVISIONS OF ALASKA STATUTES " 34.20.010 ET
SEQ.
THIS INSTRUMENT SECURES FUTURE ADVANCES.
THE MAXIMUM AMOUNT OF PRINCIPAL SECURED BY THIS INSTRUMENT IS $11,160,309.75.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THE MINERAL INTERESTS INCLUDED IN THE PROPERTY SUBJECT HERETO WILL BE FINANCED
AT THE MINEHEAD AND ARE LOCATED ON THE REAL PROPERTY DESCRIBED IN EXHIBIT A
HERETO.
THIS INSTRUMENT IS TO BE RECORDED AS A DEED OF TRUST IN THE MT. MCKINLEY AND
NULATO RECORDING DISTRICTS.
THIS DOCUMENT WAS Joel O. Benson, Esq.
PREPARED BY AND WHEN Davis, Graham & Stubbs LLP
RECORDED AND/OR FILED 370 Seventeenth Street, Suite 4700
SHOULD BE RETURNED TO: Denver, CO 80202
<PAGE>
SECOND AMENDMENT
TO
DEED OF TRUST, ASSIGNMENT,
SECURITY AGREEMENT AND FINANCING STATEMENT
This Second Amendment to Deed of Trust, Assignment, Security Agreement
and Financing Statement (this "Amendment") is entered into as of February 11,
1998 by and among the undersigned USMX OF ALASKA, INC., a corporation organized
and existing under the laws of Alaska, whose address is 1560 Broadway, Suite
880, Denver, Colorado 80202 (herein called "Grantor"), FAIRBANKS TITLE AGENCY,
INC., whose address is 714 3rd Avenue, Fairbanks, Alaska 99701 (herein called
"Trustee") and N M ROTHSCHILD & SONS LIMITED, a company organized and existing
under the laws of England, whose address is New Court, St. Swithin's Lane,
London EC4P 4DU (herein called "Beneficiary").
Recitals
A. Grantor and Beneficiary have entered into an Amended and Restated
Credit Agreement, dated as of February 11, 1998 (the "Credit Agreement"), which
amends, restates and replaces that certain Credit Agreement, dated as of July
11, 1996, as amended by a First Amendment, dated as of November 15, 1996, a
Second Amendment, dated as of July 28, 1997 and a Third Amendment, dated as of
September 19, 1997 (the "Original Credit Agreement").
B. Grantor and Beneficiary have entered into a Bridge Loan Agreement,
Promissory Note and Security Agreement, dated as of February 11, 1998 (the
"Bridge Loan Agreement").
C. Pursuant to the Credit Agreement, the Beneficiary has extended to
Grantor certain loans to partially fund development of the Illinois Creek Gold
Property in Alaska. Pursuant to the Bridge Loan Agreement, the Beneficiary will
extend to Grantor certain additional loans for use by Grantor to make loans to
Dakota Mining Corporation.
D. Coincident with the Credit Agreement, the Grantor has executed and
delivered to Beneficiary a Replacement Demand Promissory Note (the "Note")
evidencing loans made pursuant to the Credit Agreement. The Note represents an
extension and renewal of the outstanding principal amount of, and a
continuation, replacement and substitution for, a certain promissory note of the
undersigned dated July 28, 1997, which was itself a modification and renewal of
and replacement for that certain promissory note of the undersigned dated July
11, 1996 (together, the "Prior Note"). The indebtedness evidenced by the Note is
a continuing indebtedness and nothing contained herein shall be construed to
deem paid the Prior Note or to release or terminate any lien or security
interests given to secure payment of the Prior Note. The Bridge Loan Agreement
includes and constitutes the promissory note evidencing the loans made pursuant
thereto.
<PAGE>
E. Grantor and Beneficiary desire hereby to amend that certain Deed of
Trust, Assignment, Security Agreement and Financing Statement entered into as of
July 11, 1996 by and among the Grantor, the Trustee and the Beneficiary (the
"Original Deed of Trust"), as amended by the First Amendment to Deed of Trust,
Assignment, Security Agreement and Financing Statement dated as of July 28, 1997
(the "First Amendment") (the Original Deed of Trust and the First Amendment are
referred to together as, the "Deed of Trust"), to secure all obligations of
Grantor to Beneficiary under the Credit Agreement, the Note, the Bridge Loan
Agreement and the other Loan Documents. The Deed of Trust was recorded in the
locations identified in Schedule 1 hereto. The Realty Collateral covered by the
Deed of Trust includes, but is not necessarily limited to, the interests of
Grantor described or specified in Exhibit A attached both to the Deed of Trust
and hereto.
Agreement
NOW, THEREFORE, in consideration of the mutual provisions set forth
below, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein but not otherwise
defined shall have the meaning given thereto in the Deed of Trust.
2. Status of Loan Documents. Grantor reaffirms its liability for all of
the obligations previously or now evidenced or secured by any of the Original
Credit Agreement, the Credit Agreement, the Prior Note, the Note, the Bridge
Loan Agreement and the other Loan Documents, and acknowledges that Grantor has
no defenses to enforcement of any thereof in accordance with their respective
terms and no basis for asserting any offset or other claim against Beneficiary.
3. Amendments to Deed of Trust. Grantor and Beneficiary hereby
agree to amend the Deed of Trust as follows:
a. The cover page of the Deed of Trust is hereby amended by deleting
the amount "$30,750,000" as the maximum amount of principal secured by the Deed
of Trust and inserting the amount "$11,160,309.75" thereto.
b. The Recitals to the Deed of Trust are hereby amended by deleting
Recitals A, B and C in their entirety and substituting the following Recitals
therefor:
"A. Grantor and Beneficiary have entered into an
Amended and Restated Credit Agreement dated as of February 11,
1998, which amends, restates and replaces the Credit Agreement
dated as of July 11, 1996, as amended by a First Amendment
dated as of November 15, 1996, a Second Amendment, dated as of
July 28, 1997 and a Third Amendment, dated as of September 19,
1997 (collectively, as the same may be amended, modified or
replaced, the "Credit Agreement");
<PAGE>
B. Pursuant to the Credit Agreement, the Beneficiary
has extended certain loans to Grantor, the repayment of which
is due on demand.
C. Coincident with the Credit Agreement, Grantor has
executed and delivered to Beneficiary a Restated Demand
Promissory Note date February 11, 1998, which promissory note
evidences the loan made pursuant to the Credit Agreement and
constitutes an extension, renewal and continuation of that
certain Promissory Note made by the Grantor dated July 11,
1996, as modified, renewed and replaced by the Promissory Note
dated July 28, 1997 (collectively, as amended, modified and
restated, the "Note").
D. Grantor and Beneficiary have entered into a Bridge
Loan Agreement, Promissory Note and Security Agreement dated
as of February 11, 1998 (as it may hereafter be amended,
modified, supplemented or extended in accordance with its
terms, the "Bridge Loan Agreement").
E. Pursuant to the Bridge Loan Agreement, Beneficiary
will extend to Grantor certain demand loans up to the maximum
principal amount of $1,100,000. The Bridge Loan Agreement
itself serves as and constitutes the promissory note
evidencing the loans made or to be made pursuant to the Bridge
Loan Agreement."
c. The Definition of "Obligations" is hereby amended by deleting
subsections (i) and (ii) therefrom in their entirety and substituting the
following therefor:
"(i) all obligations of Grantor under the Credit Agreement,
which obligations include the repayment, on demand, of the
principal amount of the loan advanced by Beneficiary to
Grantor thereunder in the principal amount of Ten Million
Sixty Thousand Three Hundred Nine Dollars and Seventy-Five
Cents ($10,060,309.75), interest thereon at the rates and in
accordance with the Credit Agreement and all other fees and
amounts due thereunder, as such Credit Agreement may be
amended, modified, renewed or extended, in whole or in part;
(ii) all amounts payable by Grantor pursuant to the Note in
the principal amount of Ten Million Sixty Thousand Three
Hundred Nine Dollars and Seventy-Five Cents ($10,060,309.75),
which Note is due on demand and bears interest at the rate
specified in and otherwise subject to the terms of the Credit
Agreement, together with all other notes given in substitution
therefor or in modification, renewal or extension thereof, in
whole or in part;"
d. The Definition of "Obligations" is hereby further amended by adding
the following new subsection (iii) thereto and by changing the headings of
former subsections (iii), (iv), (v), (vi) and (vii) to (iv), (v), (vi), (vii)
and (viii), respectively:
<PAGE>
"(iii) all obligations of Grantor under and all amounts
payable by Grantor pursuant to the Bridge Loan Agreement,
including, without limitation, the payment obligation of the
loan thereunder up to the maximum principal amount of One
Million One Hundred Thousand Dollars ($1,100,000), bearing
interest at the rates specified in and otherwise subject to
the terms of the Bridge Loan Agreement, together with all
amendments, modifications, renewals or extensions thereof, in
whole or in part;"
4. Status of Deed of Trust. The Deed of Trust, as modified by this
Amendment and as further amended from time to time, shall secure the Grantor's
obligations under the Original Credit Agreement, the Credit Agreement, the Prior
Note, the Note, the Bridge Loan Agreement and the other Loan Documents. Each
reference in the Deed of Trust to the Credit Agreement shall mean and be a
reference to the Amended and Restated Credit Agreement dated as of February 11,
1998 between Grantor and Beneficiary and to the Bridge Loan Agreement. Each
reference in the Deed of Trust to the Note or Notes shall mean and be a
reference to the Restated Demand Promissory Note dated February 11, 1998 and to
the Bridge Loan Agreement as a note.
5. Reaffirmation. Grantor hereby reaffirms each representation,
warranty and covenant contained in the Deed of Trust, as amended by this
Amendment, with the same force and effect as if each were separately stated
herein and made as of the date hereof.
6. Title Matters. Grantor represents and warrants to Beneficiary that
it is the sole owner of the Property, and that the Property is free and clear of
all material defects of title or Liens except as have previously been disclosed
to and permitted by Beneficiary.
7. Default Under Loan Documents. Grantor acknowledges and agrees that
any default by Grantor under the Deed of Trust, as amended by this Amendment,
shall constitute a default under the Credit Agreement, the Bridge Loan Agreement
and each of the other Loan Documents, entitling Beneficiary to exercise any or
all rights and remedies provided for in the Credit Agreement, the Bridge Loan
Agreement or the other Loan Documents. Beneficiary's execution and delivery of
this Amendment shall not be construed as a waiver of any existing default under
the Credit Agreement or any of the other Loan Documents, whether or not such
default is known to Beneficiary.
8. Ratification of Deed of Trust. Grantor hereby (a) ratifies and
confirms the Deed of Trust, as amended by this Amendment, (b) agrees that the
Deed of Trust, as amended by this Amendment, secures all obligations of Grantor
under the Credit Agreement, the Note, the Bridge Loan Agreement and the other
Loan Documents, and (c) agrees and confirms that the Deed of Trust, as amended
by this Amendment, remains in full force and effect in accordance with its
terms. If and only if the immediately preceding sentence is inadequate (due to
the absence therefrom of language making express grants) to expand and extend
the Lien granted by the Deed of Trust as amended hereby to secure repayment of
Obligations the repayment of which was not secured by the Deed of Trust prior to
amendment thereof by this Amendment, then for such purposes:
<PAGE>
(i) Grantor hereby grants, bargains, sells, warrants,
mortgages, assigns, transfers and conveys the Realty Collateral and Fixture
Collateral to the Trustee, with power of sale, for the benefit of Beneficiary,
to have and to hold the Realty Collateral and Fixture Collateral, together with
all and singular rights, privileges, contracts, and appurtenances now or
hereafter at any time before the foreclosure or release hereof in any way
appertaining or belonging thereto, unto the Trustee and to its substitutes or
successors, forever, upon the terms and conditions set forth in the Deed of
Trust as amended hereby, and
(ii) Grantor hereby grants to Beneficiary a first and prior
security interest (except as permitted by the Credit Agreement as amended by
this Amendment) in all Personalty Collateral, now owned or hereafter acquired by
Grantor, and in all proceeds.
9. Successors and Assigns. Nothing in this Amendment shall be construed
as waiving or modifying any provision of the Deed of Trust, as amended by this
Amendment, prohibiting transfer of the Property without the prior written
consent of Beneficiary, or making any such transfer a default under the Deed of
Trust, as amended by this Amendment.
10. Governing Law; Severability. This Amendment shall be governed by
and construed in accordance with the laws of the State of Alaska. Wherever
possible, each provision of the Loan Documents is to be interpreted so as to be
effective and valid under applicable law. If any provision of any Loan Document
is for any reason and to any extent, invalid or unenforceable, then neither the
remainder of the Loan Document in which such provision appears, nor any other
Loan Document, nor the application of the provisions to other persons or
entities or in other circumstances, shall be affected by such invalidity or
unenforceability.
11. Execution in Counterparts. This Amendment may be executed in two or
more counterparts, all of which shall, upon execution of identical counterparts
by all parties, constitute a single agreement. Beneficiary and its attorneys are
authorized to remove and reattach signature and acknowledgment pages of various
counterparts in order to avoid unnecessary recording expense and to provide
fully-executed counterparts to each party. Subject to the preceding sentence,
this Amendment shall bind and benefit the parties and their respective
successors and assigns.
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
GRANTOR:
USMX OF ALASKA, INC.
By:
Name:
Title:
BENEFICIARY:
PER PRO
N M ROTHSCHILD & SONS LIMITED
<PAGE>
STATE OF COLORADO )
)ss.
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this __ day of
February, 1998 by ________________________________, as
______________________________ of USMX OF ALASKA, INC., an Alaskan corporation,
on behalf of the corporation.
Witness my hand and official seal.
My commission expires:_____________________
[SEAL] ___________________________________
Notary Public
Address:____________________________
-----------------------------------
<PAGE>
STATE OF COLORADO )
)ss.
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this __ day of
February, 1998 by ________________________________, as
______________________________ of N M ROTHSCHILD & SONS LIMITED, a corporation
organized and existing under the laws of England, on behalf of the corporation.
Witness my hand and official seal.
My commission expires:_____________________
[SEAL] ___________________________________
Notary Public
Address:____________________________
-----------------------------------
<PAGE>
EXHIBIT E.
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (this "Agreement") is made as of February
11, 1998 by and between N M ROTHSCHILD & SONS LIMITED,a company organized under
the laws of England ("NMR") and D. H. BLATTNER & SONS, INC. a Minnesota
corporation ("Blattner").
Recitals
A. Pursuant to a Credit Agreement dated as of July 11, 1996, as amended
by a First Amendment dated as of November 15, 1996, a Second Amendment dated as
of July 28, 1997 and a Third Amendment dated as of September 19, 1997
(collectively, the "Existing Credit Agreement") NMR has advanced certain funds
to USMX of Alaska, Inc., a corporation organized and existing under the laws of
Alaska ("USMX-AK"). Such funds have been utilized to fund construction and
operation of the Illinois Creek Gold Mine in Alaska (the "Mine"). USMX-AK and
NMR intend to amend and restate the Existing Credit Agreement pursuant to an
Amended and Restated Credit Agreement dated as of February 11, 1998 (the
"Amended and Restated Credit Agreement"). In addition, NMR is prepared to
advance certain additional funds to USMX-AK pursuant to a Bridge Loan Agreement,
Promissory Note and Security Agreement between NMR and USMX-AK dated as of
February 11, 1998 (the "Bridge Loan Agreement"). Amounts due NMR from USMX-AK
pursuant to the Existing Credit Agreement and documents executed or transactions
entered into in connection therewith, and amounts which will be due NMR from
USMX-AK pursuant to the Amended and Restated Credit Agreement and Bridge Loan
Agreement and documents executed or transactions entered into in connection
therewith are referred to as the "NMR Debt". The NMR Debt is secured by
perfected liens and encumbrances on all real and personal property of USMX-AK
associated with the Mine, together with production therefrom.
B. Blattner has performed, and it is anticipated will continue to
perform, various construction and operation services for USMX-AK on the site of
the Mine, and as a result thereof, USMX-AK is indebted to Blattner for such
services (the "Blattner Debt"). Blattner has filed mechanics liens with respect
to the Mine to secure payment of the Blattner Debt.
C. NMR and Blattner desire hereby to set forth certain agreements
between them as creditors of USMX-AK.
<PAGE>
Agreement
NOW, THEREFORE, in consideration of the following mutual covenants, NMR
and Blattner agree as follows:
1. Prior Notice of Commencement of Lien Enforcement. NMR and Blattner
each hereby agree to give the other party not less than three days prior written
notice of commencement of any action to enforce any liens held or purported to
be held by the party giving notice on any real or personal property located at
the Mine.
2. Information Concerning Mine Production and Operations. NMR agrees to
use commercially reasonable efforts to cause USMX-AK to provide to Blattner from
time to time copies of all reports submitted to NMR by USMX-AK concerning Mine
operations, expenses and revenues.
3. Allocation of Net Mine Production Revenues. NMR and Blattner agree
to cooperate with one another during the term of this Agreement to cause the net
proceeds to USMX-AK from the sale of production from the Mine, as shown on the
Monthly Payment Calculation report to be prepared by USMX-AK in the form of
Attachment 1 hereto, to be paid two-thirds to NMR and one-third to Blattner, to
be applied by NMR and Blattner upon receipt against amounts due each such party
from USMX-AK. USMX-AK has established a Proceeds Account into which all proceeds
from the sale of production from the Mine are required to be deposited by
USMX-AK and from which disbursements are required to be approved by NMR. During
the term hereof NMR agrees to approve disbursements from the Proceeds Account
pursuant to Requests for Disbursement from USMX-AK in the form of Attachment 2
hereto, of amounts equal to the Cash Available for Payment set forth in such
Monthly Payment Calculation report such that two thirds of such Cash Available
for Payment is paid to NMR and one third of such Cash Available for Payment is
paid to Blattner, for application by NMR and Blattner as provided above.
4. Term of Agreement. This Agreement will remain in effect until the
first to occur of (a) payment in full of amounts due NMR or Blattner, whereupon
it will automatically terminate, (b) notice from NMR to Blattner or from
Blattner to NMR of an intention to enforce a lien or purported lien against real
or personal property at the Mine, with this Agreement to automatically terminate
three days after the effective time of such notice, (c) the mutual written
agreement of NMR and Blattner to terminate the Agreement, with the effective
time of termination to be as agreed by the parties, or (d) written notice from
one party to the other party of its election to terminate this Agreement, with
termination hereof to occur automatically three days after the effective time of
<PAGE>
such notice.
5. Notices Notices or deliveries of information from one party to
another party hereunder shall be effective if in writing and if transmitted by
facsimile, followed by first class mail transmission, or by courier, to the
following addresses:
If to NMR: c/o Rothschild Denver Inc.
370 Seventeenth Street, Suite 2150
Denver, Colorado 80202
Attention: Mark Williamson
Facsimile: (303) 607-0998
If to Blattner: D. H. Blattner & Sons
16733 Rd. 9
Avon, Minnesota 56310
Attention: David Blattner, Jr.
Facsimile: (320) 356-7392
Notices or deliveries of information shall be effective upon receipt, which, in
the case of a facsimile transmission, shall be conclusively presumed to have
occurred at the time at which an electronic confirmation of receipt is received
by the sending party.
6. Miscellaneous.
a. Each party hereto represents to the other party hereto that
this Agreement has been duly authorized and executed by the representing party,
and is binding on and enforceable against the representing party in accordance
with its terms.
b. This Agreement is binding upon and will inure to the
benefit of the successors and assigns of the parties hereto.
c. 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.
[balance of page intentionally blank]
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first above written.
Per Pro
N M ROTHSCHILD & SONS LIMITED
---------------------------
----------------------------
D H. BLATTNER & SONS
By:_________________________
Name: David Blattner, Jr.
Title: Executive Vice President,
General Counsel
<PAGE>
EXHIBIT F.
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (this "Agreement") is made as of February
11, 1998 by and between N M ROTHSCHILD & SONS LIMITED, a company organized under
the laws of England ("NMR") and GERALD METALS, INC., a Delaware corporation
("Gerald").
Recitals
A. Pursuant to a Credit Agreement dated as of July 11, 1996, as amended
by a First Amendment dated as of November 15, 1996, a Second Amendment dated as
of July 28, 1997 and a Third Amendment dated as of September 19, 1997
(collectively, the "Existing Credit Agreement") NMR has advanced certain funds
to USMX of Alaska, Inc., a corporation organized and existing under the laws of
Alaska ("USMX-AK"). Such funds have been utilized to fund construction and
operation of the Illinois Creek Gold Mine in Alaska (the "Mine"). USMX-AK and
NMR intend to amend and restate the Existing Credit Agreement pursuant to an
Amended and Restated Credit Agreement dated as of February 11, 1998 (the
"Amended and Restated Credit Agreement"). In addition, NMR is prepared to
advance certain additional funds to USMX-AK pursuant to a Bridge Loan Agreement,
Promissory Note and Security Agreement between NMR and USMX-AK dated as of
February 11, 1998 (the "Bridge Loan Agreement"). Funds advanced to USMX-AK
pursuant to the Bridge Loan Agreement will be loaned, on an unsecured demand
basis, by USMX-AK to Dakota Mining Corporation, a federal corporation continued
under the Canada Business Corporation Act ("Dakota"), which controls USMX-AK.
Amounts due NMR from USMX-AK pursuant to the Existing Credit Agreement and
documents executed or transactions entered into in connection therewith, and
amounts which will be due NMR from USMX-AK pursuant to the Amended and Restated
Credit Agreement and Bridge Loan Agreement and documents executed or
transactions entered into in connection therewith are referred to as the "NMR
Debt".
B. Pursuant to a certain Amended and Restated Loan Agreement dated as
of March 20, 1997, Gerald agreed to extend loans to Dakota and certain
subsidiaries thereof up to a maximum amount of $7,500,000. All indebtedness of
Dakota and its subsidiaries to Gerald pursuant to (or evidenced by) such Amended
and Restated Loan Agreement, together with all indebtedness of Stibnite Mine,
Inc. a Delaware corporation and Brohm Mining Corp., a South Dakota Corporation,
under a certain $1,157,991 Secured Loan Note in favor of D. H. Blattner & Sons,
Inc., which note and the security therefore have been assigned to Gerald, are
referred to herein as the "Gerald Debt."
<PAGE>
C. Gerald and USMX-AK have an existing arrangement pursuant to which
quantities of dore from the Mine are delivered by USMX-AK to Gerald from time to
time and Gerald delivers such dore to Handy & Harman for refining. Pursuant to
such arrangement, upon confirmation of delivery of such dore to Handy & Harman,
Gerald advances to USMX-AK a dollar amount equal to a portion of the current
spot market value of net amount of gold which will be recovered from such dore
for the account of USMX-AK. When refining of a shipment of dore is completed,
the net gold recovered therefrom for the account of USMX-AK is credited to the
account of Gerald at Handy & Harman, Gerald arranges for the sale of such gold,
and Gerald pays to USMX-AK the amount realized from such sale, less the amount
previously advanced by Gerald to USMX-AK and interest and fees associated with
such advance (with the amount so payable to USMX-AK referred to as the "Final
Payment").
D. NMR and Gerald desire hereby to set forth certain agreements between
them as creditors of USMX-AK and Dakota.
Agreement
NOW, THEREFORE, in consideration of the following mutual covenants, NMR
and Gerald agree as follows:
1. Prior Notice of Commencement of Lien Enforcement. NMR and Gerald
each hereby agree to give the other party not less than three days prior written
notice of commencement of any action to enforce any liens held or purported to
be held by the party giving notice on any real or personal property of Dakota,
USMX-AK or any other subsidiary of Dakota, except that actions by either party
to protect its collateral may be taken without such prior notice, but the party
taking such action will notify the other party thereof forthwith.
Notwithstanding the foregoing, Gerald may continue to apply the proceeds of gold
produced by Dakota and its subsidiaries other than USMX, Inc. and USMX-AK to the
Gerald Debt.
2. USMX-AK/Dakota Loan Proceeds. To the extent that any cash or credit
balances in accounts of Dakota are proceeds of funds loaned by USMX-AK to Dakota
using proceeds of the Bridge Loan Agreement, Gerald agrees to use its best
efforts to cause such sums to be repaid by Dakota to USMX-AK, or if Gerald has
possession or control of any such sums, by foreclosure or otherwise, Gerald
agrees to cause such sums to be paid to NMR, to be credited by NMR against
amounts due under the NMR Debt.
3. Gerald Agreements Regarding Gold Sales and Final Payments. Gerald
hereby agrees that any and all gold from the Mine which is credited to Gerald's
account at Handy & Harman constitutes collateral for the NMR Debt and is not
collateral for and will not be utilized or applied by Gerald in any manner in
<PAGE>
payment or satisfaction of the Gerald Debt. Gerald agrees to adhere to the
arrangements described in Recital C. hereof, and in the event of any
acceleration or demand for payment by NMR of the NMR Debt of which Gerald has
notice, promptly to make all Final Payments which thereafter become due USMX-AK
directly to NMR, to be applied against the NMR Debt.
4. Term of Agreement. This Agreement will remain in effect until the
first to occur of (a) payment in full of the NMR Debt or the Gerald Debt,
whereupon it will automatically terminate, (b) notice from NMR to Gerald or from
Gerald to NMR of an intention to enforce a lien or purported lien against real
or personal property of Dakota, USMX-AK or any other subsidiary of Dakota, with
this Agreement to automatically terminate three days after the effective time of
such notice except as to Paragraph 3 hereof, which shall remain in effect so
long as the arrangements described in Recital C remain in effect, (c) the mutual
written agreement of NMR and Gerald to terminate the Agreement, with the
effective time of termination to be as agreed by the parties, or (d) written
notice from one party to the other party of its election to terminate this
Agreement, with termination hereof to occur automatically three days after the
effective time of such notice except as to Paragraph 3 hereof, which shall
remain in effect so long as the arrangements described in Recital C remain in
effect.
5. Certain Agreements Concerning Dakota Obligations and Collateral Held
by Gerald. Nothing contained herein or in that certain First Amendment to Loan
Documents made as of July 18, 1997 by and among USMX, USMX-AK and Dakota and
relating to that certain Loan Agreement among them dated March 11, 1997, which
First Amendment purports to subordinate Dakota's rights in and to payment of the
$5,000,000 loan (evidenced by a $3,000,000 note and a $2,000,000 note) made by
Dakota to USMX and USMX-AK under said Loan Agreement, shall, subject to
Paragraph 1 hereof, impair Gerald's rights in and to that certain $3,000,000
promissory note from USMX and USMX-AK to Dakota dated March 11, 1997 (the
"$3,000,000 Note") and the collateral therefor; all of Dakota's right, title and
interest in and to said $3,000,000 Note, and all of the collateral therefor,
having been pledged to Gerald as collateral for the Gerald Debt on March 20,
1997. All proceeds of the collateral for the $3,000,000 Note are therefore
payable to Gerald regardless of the terms of said First Amendment.
6. Notices Notices or deliveries of information from one party to
another party hereunder shall be effective if in writing and if transmitted by
facsimile, followed by first class mail transmission, or by courier, to the
following addresses:
If to NMR: c/o Rothschild Denver Inc.
370 Seventeenth Street, Suite 2150
Denver, Colorado 80202
Attention: Mark Williamson
Facsimile: (303) 607-0998
<PAGE>
If to Gerald: Gerald Metals, Inc.
Six High Ridge Park
Stamford, CT 069905
Attention: Susan Scoggins
cc: Treasurer
Facsimile: (203) 609-8301
Notices and deliveries of information shall be effective upon receipt, which, in
the case of a facsimile transmission, shall be conclusively presumed to have
occurred at the time at which an electronic confirmation of receipt is received
by the sending party.
7. Miscellaneous.
a. Each party hereto represents to the other party hereto that
this Agreement has been duly authorized and executed by the representing party,
and is binding on and enforceable against the representing party in accordance
with its terms.
b. This Agreement is binding upon and will inure to the
benefit of the successors and assigns of the parties hereto.
c. 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.
[balance of page intentionally blank]
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first above written.
Per Pro
N M ROTHSCHILD & SONS LIMITED
GERALD METALS, INC.
By:
Name:
Title:
By:_____________________
Name:________________
Title:_________________
This Intercreditor Agreement is executed by USMX of Alaska, Inc. for
purposes of confirming USMX-AK's irrevocable instruction to Gerald and agreement
with Gerald and NMR that Gerald act in accordance with the provisions of
Paragraph 3 hereof.
Date: February , 1998 USMX OF ALASKA, INC.
---
By:_____________________
Name:________________
Title:_______________
<PAGE>
This Intercreditor Agreement is executed by Dakota Mining Corporation
for purposes of confirming its agreement with the provisions of Paragraph 5
hereof.
Date: February , 1998 DAKOTA MINING CORPORATION
---
By:____________________________
Name:_____________________
Title:____________________
<PAGE>
EXHIBIT G.
DEMAND PROMISSORY NOTE
U.S.$1,100,000.00
Denver, Colorado
February 11,1998
FOR VALUE RECEIVED, the undersigned, Dakota Mining Corporation, a
corporation continued under the Canada Business Corporation Act ("Maker"),
hereby promises to pay and deliver to the order of USMX of Alaska, Inc., an
Alaska corporation ("USMXAK"), or other holder hereof (with USMXAK and any other
holder hereof sometimes referred to herein as the "Holder"), on demand, in
immediately available funds, the principal amount of US$1,100,000.00 loaned to
Maker by USMXAK, or such lesser sum otherwise outstanding from time to time,
together with interest on such outstanding principal balances at the Interest
Rate as hereinafter defined. This Promissory Note evidences the loans which may
be made by Holder to Maker as described in that certain Bridge Loan Agreement,
Promissory Note and Security Agreement dated of even date herewith between
Holder as Borrower and N M Rothschild & Sons Limited ("NMR") as Lender (the
"USMXAK Bridge Loan Agreement"). Capitalized terms used herein but not defined
shall have the meanings given to them in the USMXAK Bridge Loan Agreement.
All amounts outstanding hereunder are payable on demand; if demand has
not been made, all amounts outstanding hereunder are payable at such time as
Maker sells all or substantially all its assets or merges with another entity.
Maker acknowledges (a) receipt of the USMXAK Bridge Loan Agreement, (b)
that this Promissory Note will be pledged to NMR as security for the loans by
NMR to USMXAK pursuant to the USMXAK Bridge Loan Agreement, (c) that USMXAK
shall have no obligation to make any advances to Maker except to the extent
funds are actually advanced by NMR to USMXAK pursuant to the USMXAK Bridge Loan
Agreement, and (d) that this Promissory Note may not be amended without the
prior written consent of NMR. Without limiting, the foregoing, Maker
acknowledges it has read and understands the provisions of Section 6.b to the
USMXAK Bridge Loan Agreement which requires USMXAK to demand repayment of all
amounts evidenced hereby if NMR demands repayment of the obligations of USMXAK
to NMR pursuant to the USMXAK Bridge Loan Agreement. The Interest Rate payable
hereunder shall be the "Interest Rate" as that term is defined in the USMXAK
Bridge Loan Agreement.
Maker agrees it shall use the proceeds of any advances hereunder for
the purposes set forth in the USMXAK Bridge Loan Agreement and shall cooperate
with USMXAK and NMR and provide such further documents and take such further
acts as either may reasonably request in order to effect the intents and
purposes hereof.
Maker agrees, subject only to any limitation imposed by applicable law,
to pay all expenses incurred by Holder in endeavoring to collect amounts due
hereunder which are not paid when due, whether by acceleration or otherwise.
To the maximum extent permitted by applicable law, Maker, for itself
and for all endorsers or guarantors hereof, hereby waives notice, demand,
presentment for payment, protest and notice of dishonor.
<PAGE>
This Promissory Note and the rights of Maker and any Holder hereof are
governed by the laws of the State of Colorado.
IN WITNESS WHEREOF, Maker has executed and delivered this Promissory
Note on the date first above written.
DAKOTA MINING CORPORATION
By:_______________________
Allan R. Bell, President
<PAGE>
EXHIBIT H.
FORBEARANCE AGREEMENT
This Forbearance Agreement ("Agreement") made this 11th day of February,
1998 by and among Gerald Metals, Inc. ("Gerald") having a principal office at 6
High Ridge Park, Stamford, Connecticut 06905 and Dakota Mining Corporation, a
federal corporation organized under the Canada Business Corporation Act
("Dakota"), Brohm Mining Corp., a South Dakota corporation ("Brohm"), Stibnite
Mine Inc., a Delaware corporation ("Stibnite"), and Barrier Reef Inc., a
Delaware corporation ("Barrier" and, jointly and severally with Dakota, Brohm
and Stibnite, the "Borrowers"), and MinVen Gold (USA) Corporation, a Delaware
corporation ("MinVen" or "Guarantor", and together with the Borrowers the
"Obligors"), all with principal offices at 1560 Broadway, Suite 880, Denver,
Colorado 80202.
Reference is hereby made to the following documents by and among the
Obligors, and Gerald:
1. Amended and Restated Loan Agreement among Borrowers and Gerald dated as
of the 20th day of March, 1997 (the "Loan Agreement");
2. $7,500,000 Amended and Restated Secured Loan Note of Borrowers in
favor of Gerald dated March 20, 1997 (the "Note").
3. First Mortgage Assignment of Rents and Royalties, Security Agreement and
Financing Statement (Idaho) from Stibnite and Brohm to Gerald, dated April 12,
1996 as amended March 20, 1997 (the "Idaho Mortgage").
4. Mortgage-Collateral Real Estate from Brohm to Gerald, dated April
12, 1996 as amended March 20, 1997 (the "Gilt Edge Mortgage").
5. Amended and Restated Security Agreements dated March 20, 1997 from
Dakota, Brohm, Stibnite and Barrier to Gerald (the "Security Agreements").
6. Amended and Restated Limited Guaranty from MinVen dated March 20, 1997
(the "Guaranty").
7. Amended and Restated Pledge Agreement from MinVen in favor of Gerald
dated March 20, 1997 and relating to all the outstanding shares of the Common
Stock of Brohm, Stibnite and Barrier.
8. Refining/Gold Purchase Contract between Borrowers and Gerald dated April
12, 1996 (the "Gold Purchase Contract").
All those documents pertaining to the subject loan transaction including,
but limited to the aforementioned documents, are collectively referred to as the
<PAGE>
"Loan Documents". All capitalized terms used in this Agreement which are not
defined herein but which are defined in or by reference in the Loan Agreement
shall have the same meaning herein as therein.
NOW, THEREFORE, the Obligors acknowledge and agree that certain Events of
Default have occurred and are continuing as a result of the Borrowers' failure
to comply with certain terms of the Note and the other Loan Documents. As a
result of those Events of Default, Gerald has accelerated the payment in full of
all of the Borrowers' obligations to Gerald under the Note, and the other Loan
Documents. Obligors acknowledge and agree that Gerald has no obligation to make
additional loans or otherwise extend credit to the Borrowers under the Note or
otherwise. The Borrowers have now requested that Gerald forbear from taking
present action to collect payment in full of Obligors' obligations to Gerald
under the Loan Documents. In response to Borrowers' request, Gerald agrees to
forbear from taking present action to collect payment in full Obligors'
obligations to Gerald until the Forbearance Termination Date (as hereinafter
defined) upon the following terms and conditions:
1. Ratification of Existing Agreements. All of the Obligors' obligations,
indebtedness and liabilities to Gerald as evidenced by or otherwise arising
under the Loan Documents, except as expressly modified in this Agreement upon
the terms set forth herein and therein, are, by the Obligors' execution of this
Agreement ratified and confirmed in all respects by the Obligors. All of the
Borrowers' obligations, indebtedness and liabilities to Gerald under the Note
and the other Loan Documents are joint and several. In addition, by Obligors'
execution of this Agreement, each Obligor represents and warrants that no
counterclaim, right of set off or defense of any kind exists or is outstanding
with respect to such obligations, indebtedness and liabilities. As of the date
hereof, the aggregate principal amount of the Borrowers' joint and several
obligations to Gerald under the Loan Documents is equal to $3,971,740.80, plus
accrued and unpaid interest and any other cost (including legal fees) incurred
under the Loan Documents or this Agreement. Obligors acknowledge that the Idaho
Mortgage, the Gilt Edge Mortgage, and the Security Agreements securing
Borrowers' obligations to Gerald constitute valid liens on and security
interests in the collateral described therein, and that Borrowers shall take no
action to impair or invalidate the security interests and liens created thereby.
Borrowers acknowledge that the Gold Purchase Contract is in full force and
effect and that they have no counterclaim, right of set-off or defense of any
kind with respect thereto. Borrowers agree that they shall deliver to Gerald all
gold subject to the Gold Purchase Contract as produced and in accordance with
the terms thereof, without hindrance or delay of any kind.
2. Representations and Warranties. Except as previously disclosed to
Gerald, to the best of the Obligors' knowledge, all of the representations and
warranties made by the Obligors in the Note, Guaranty , and the Loan Documents
are true and correct on the date hereof as if made on and as of the date hereof,
except to the extent that any such representations and warranties related by
their terms to a prior date. Dakota specifically acknowledges and agrees that
pursuant to its Security Agreement, it has granted to Gerald a security interest
in that certain Promissory Note dated March 11, 1997 (the "USMX Note"), in the
principal amount of $3,000,000 executed by USMX, Inc. ("USMX") and USMX of
Alaska, Inc. and payable to the order of Dakota, (ii) that certain MXUS Pledge
Agreement, dated as of March 11, 1997, by and between Debtor, USMX and USMX of
Nevada, Inc., and (iii) that certain mortgage, dated March 11, 1997, between
USMX and Debtor relating to among other things, an Exploration and Option to
<PAGE>
Purchase Agreement covering lands in Valley County Idaho (collectively, the
"USMX Collateral") that such security interest constitutes a valid lien on
pledge of, and security interest in the USMX Collateral, and hereby reaffirms
and grants such security interest. Dakota further represents and warrants that
it is the valid and lawful holder of the USMX Note, that it has not sold or
granted a security interest in the USMX Note or the USMX Collateral to any party
other than Gerald, that the outstanding principal balance of the USMX Note is
$3,000,000, that the USMX Note matured on August 31, 1997, and has not been
extended, modified or amended in any way. Dakota further represents, warrants
and agrees that it will not extend, modify, waive or amend the USMX Note, or
release, modify or waive any term or provision of any of the USMX Collateral
without the prior written consent of Gerald, which consent may be granted or not
at the absolute and unfettered discretion of Gerald.
3. Forbearance Obligations. Subject to the satisfaction of the conditions
precedent set forth below, Gerald agrees to forbear from instituting proceedings
to enforce its rights and remedies under the Loan Documents until the
"Forbearance Termination Date" which is defined as the earlier to occur of: (a)
March 12, 1998, (b) an Event of Default under the Loan Agreement or the Loan
Documents (other than those Events of Default now existing, and existing
defaults not having been waived hereunder), (c) the failure of the Obligors to
comply with the terms of this Agreement, (d) the initiation of any federal or
state bankruptcy, insolvency or similar proceeding by (or against) any, (e) the
commencement of litigation or legal proceedings by any Obligor (or any party
claiming for, through or on account of any Obligor) against Gerald, (f) the
failure of any Obligor to comply with any term or condition of any other
agreement, document or instrument evidencing any other indebtedness owed to
Gerald or N.M. Rothschild & Sons Limited ("Rothschild"), (g) or the termination
by Rothschild or the default by any Obligor with respect to that certain Bridge
Loan Agreement, Promissory Note and Security Agreement dated as of February 12,
1998, or (h) the commencement of litigation or legal proceedings by any person
against or relating to any of Gerald's Collateral, or any material impairment of
said Collateral; provided, however, that so long as none of the foregoing events
have occurred, the Forbearance Termination Date may be extended by the Obligors
for two (2) additional 30 day periods upon 5 days prior written notice to
Gerald. Nothing in this Section 3 shall alter Borrower's obligations under
Section 7(b), or Gerald's ability to apply the sums paid thereunder to the
principal of the Loan.
Upon the termination of Gerald's forbearance obligations hereunder Gerald
shall be free in its sole and absolute discretion to proceed to enforce any or
all of its rights and remedies under the respect of the Note, Guaranty, the Loan
Documents, the USMX Collateral and applicable law. All of Borrowers' obligations
and liabilities to Gerald thereunder (including without limitation the
Borrowers' payment obligations) shall survive the Forbearance Termination Date.
4. Conditions. Gerald's forbearance obligations thereunder shall be subject
to the satisfaction on or before February 12, 1998 of the following conditions
precedent:
(a) Borrowers shall have delivered to Gerald on or before February 12, 1998
all gold and silver produced by them and subject to the Gold Purchase Contract.
<PAGE>
(b) Reissuance of Options. On or before March 12, 1998, Dakota shall issue
to Gerald 200,000 new warrants in substitution of the 200,000 existing warrants
held by Gerald. Said new warrants shall (i) be for a term of five (5) years from
the date hereof, (ii) contain an exercise price equal to the market value of
Dakota's common shares on February 11, 1998; (iii) otherwise contain terms and
conditions substantially the same as said existing warrants. Upon receipt of
said new warrants, Gerald agrees to return the existing warrants for
cancellation.
5. [Intentionally Left Blank]
6. Interest.
Notwithstanding anything to the contrary set forth in the Loan Documents,
the outstanding principal amount of the Loan shall bear interest after the date
hereof at a rate per annum equal to the prime rate announced from time to time
by the Chase Manhattan Bank plus four percent. Prior to the Forbearance
Termination Date, all interest accrued on the Loan shall be added to principal
at the end of each calendar month.
7. Covenants.
(a) Notwithstanding anything to the contrary set forth in the Loan
Documents, the Borrowers agree to pay in full, in cash, the outstanding
principal amount of Obligors' indebtedness to Gerald under the Loan Documents,
together with all the interest thereon and all fees and expenses of Gerald
incurred in connection therewith on the earlier to occur of May 12, 1998 or (ii)
the Forbearance Termination Date.
(b) Notwithstanding anything to the contrary set forth in the Loan
Documents, the Borrowers agree to apply the proceeds of all gold produced from
all of the Obligors' mines (other than Illinois Creek) to the outstanding
principal amount of the Loan.
(c) To the extent that the Borrowers now posses or hereafter obtain the
same, the Borrowers shall cause to be delivered to Gerald appraisals and
environmental site assessments of all real property owned by the Borrowers, or
by USMX, Inc. or USMX of Alaska, Inc.
(d) Obligor shall comply and continue to comply with all of the terms,
covenants and provisions contained in the Loan Documents, except as such terms,
covenants and provisions are expressly modified by this Agreement upon the terms
set forth herein.
(e) Each Obligor shall at any time or from time to time execute and deliver
such further instruments, and take such further action as Gerald may reasonably
request, in each case further to effect the purposes of this Agreement and the
Loan Documents.
(f) Each Obligor shall take such action, or cause such action to be taken,
and expend such funds, as may be necessary to preserve and protect the
Collateral and their respective interests therein, including but not limited to
making any and all lease or rental payments necessary to preserve and protect
their respective development rights.
<PAGE>
8. Releases of Collateral; Restricted Payments, Dividends, etc.(a) So long
as the Forbearance Termination Date has not occurred, the Borrowers or Guarantor
may request that Gerald release its security interest in any item of Gerald's
collateral (a "Release Request") to be sold by the Borrowers or the Guarantor in
the ordinary course of business, provided that such Release Request shall be
given not less than five (5) days nor more than thirty (30) days, prior to the
proposed sale date. Any request for such a release shall be accompanied by a
written statement from the Borrowers certified by an officer of the Borrowers,
describing in reasonable detail (i) the asset to be sold, (ii) the date such
sale is to be consummated, (iii) the purchase price of the asset to be sold and
(iv) the net proceeds resulting from such sale is amount. Gerald agrees that it
shall not unreasonably withhold its consent to any such sale, provided that the
sales price represents the fair value of the subject asset and Gerald receives
One Hundred percent (100%) of all net proceeds (gross proceeds less reasonable
and customary closing costs acceptable to Gerald) from such sale. Amounts
retained by Gerald pursuant to this section 8 shall be applied first to repay
fees and expenses owing to Gerald in respect of the Loan, then to accrued and
unpaid interest on the Loan, then to principal of the Loan.
(b) Dakota shall not pay or declare or permit to be paid or declared any
dividend on shares of any class of its capital stock or make or permit to be
made any other distribution (by reduction of capital or otherwise) in respect of
shares of any class of its capital stock or make any other payment or
distribution to or for the benefit of its stockholders (except reasonable salary
payments in the ordinary course of business) or purchase o r redeem or permit to
be purchased or redeemed or provide funds for the purpose of purchasing or
redeeming or retiring any share of any class of its capital stock.
9. Expenses. Obligors agree to pay to Gerald upon demand (a) an amount
equal to any and all out-of-pocket costs or expenses (including reasonable legal
fees which may include the allocable cost of staff counsel and disbursements)
incurred or sustained by Gerald in connection with the preparation of this
Agreement and all related matters and (b) from time to time after the
Forbearance Termination Date, any and all out-of-pocket costs or expenses
(including reasonable legal fees and disbursements and reasonable consulting,
accounting, appraisal and other similar professional fees and expenses)
hereafter incurred or sustained by Gerald in connection with the administration
of credit extended by Gerald to Obligors or the preservation of or enforcement
of any rights of Gerald under the Note, Guarantee, and the Loan Documents or in
respect of any of the Obligors' other obligations to Gerald.
10. Partial Payment Not Waiver. Any partial payment amounts made by
Obligors or any other party on Obligors' behalf and accepted by Gerald will not
constitute a waiver of any default, waiver of demand, or waiver of any other
right held by Gerald under the Loan Documents or this Agreement.
11. No Waiver. Except as otherwise expressly provided for in this
Agreement, nothing in this Agreement shall extend to or affect in any way any of
the Obligors' obligations or any of the rights of Gerald and remedies of Gerald
arising under the Loan Documents executed in connection therewith, and Gerald
shall not be deemed to have waived any or all of such rights or remedies with
respect to any Event of Default or event or condition which, with notice or the
lapse of time, or both would become an Event of Default under the Note,
<PAGE>
Guarantee, or the other Loan Documents and which upon the Obligors' execution
and delivery of this Agreement might otherwise exist or which might hereafter
occur.
12. Release of Gerald. By execution of this Agreement, Borrowers and
Guarantor jointly and severally acknowledge and confirm that they do not have
any offsets, defenses or claims against Gerald, or any of its officers, agents,
directors or employees whether asserted or unasserted. To the extent that they
may have offsets, defenses or claims, the Borrowers and the Guarantor and each
of the their respective successors, assigns, parents, subsidiaries, affiliates,
predecessors, employees, agents, heirs, executors, as applicable, jointly and
severally release and forever discharge Gerald, it subsidiaries, affiliates,
officers, directors, employees, agents, attorneys, successors and assigns, both
present and former (collectively the "Gerald Affiliates") of and from any and
all manner of action and actions, cause and causes of action, suits, debts,
controversies, damages, judgments, executions, claims and demands whatsoever,
asserted or unasserted in law or in equity which against Gerald and/or Gerald
Affiliates they ever had, now have or which any of the Borrowers' or Guarantor's
successors, assigns, parents, subsidiaries, affiliates, predecessors, employees,
agents, heirs, executors, as applicable, both present and former ever had or now
has, upon or by reason of any manner, cause, causes or thing whatsoever.
including without limitation, any presently existing claim or defense whether or
not presently suspected, contemplated or anticipated.
13. No Future Commitments. Borrowers and Guarantor each acknowledge their
understanding that while Gerald has agreed to review a plan or plans for
restructure of the existing loan to Borrowers such plans will be presented to
Gerald by Borrowers and Guarantor, Gerald has not committed to enter into any
such restructure. The occurrence of such restructure should not be relied upon
by Borrowers or Guarantor whatsoever. In light of the above, Borrowers and
Guarantor understand that during the term of this Agreement it may need to
pursue refinancing of its obligations to Gerald and /or the obtaining of
additional working capital in the event that on the Forbearance Termination
Date, Gerald and Borrower are unable to enter into an arrangement for
restructure of the obligations, the result of which if the requirement that all
obligations due from Borrowers to Gerald are due and payable in full on such
Forbearance Termination Date.
14. Voluntary Agreement. Each Obligor represents and warrants that it is
represented by legal counsel of their choice, are fully aware of the terms
contained in this Agreement and have voluntarily and without coercion or duress
of any kind, entered into this Agreement and the documents executed in
connection with this Agreement.
15. Notices. Any notice, payment, demand or communication required or
permitted to be given by any provision of this Agreement will be deemed to have
been given when delivered personally to the party designated to receive such
notice or, on the third business day after the same is sent by certified mail,
postage and charges prepaid, directed to the addresses set forth above or to
such other or additional addresses as any party might designate by written
notice to the other parties:
16. Entire Agreement; Binding Affect. This Agreement constitutes the entire
and final agreement among the parties and there are no agreements,
<PAGE>
understandings, warranties or representations among the parties except as set
forth herein. This Agreement will inure to the benefit and bind the respective
heirs, administrators, executors, representatives, successors and permitted
assigns of the parties hereto.
17. Negation of Partnership. The relationship between the Borrowers and
Guarantor and Gerald is that of debtor and creditor. Nothing contained in this
Agreement will be deemed to create a partnership or joint venture between
Borrowers and Guarantor and Gerald, or to cause Gerald to be liable or
responsible in any way for the actions, liabilities, debts, or obligations of
Borrowers and Guarantor.
18. Severability. If any clause or provision of this Agreement is
determined to be illegal, invalid or unenforceable under any present or future
law by the final judgment of a court of competent jurisdiction, the remainder of
this Agreement will not be affected thereby. It is the intention of the parties
that if any such provision is held to be invalid, illegal or unenforceable,
there will be added in lieu thereof a provision as similar in terms to such
provision as is possible, and that such added provision will be legal, valid and
enforceable.
19. Headings. All headings contained in this Agreement are for reference
purposes only and are not intended to affect in any way the meaning or
interpretation of this Agreement.
20. Governing Law. This Agreement is executed and delivered in the State of
New York and it is the desire and intention of the parties that it be in all
respects interpreted according to the laws of the State of New York.
21. Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original document, but all of which will constitute a
single document. This document will not be binding on or constitute evidence of
a contract between the parties until such time as a counterpart of this document
has been executed by each of the parties and a copy thereof delivered to each
party under this Agreement.
22. Amendment. Neither this Agreement nor any of the provisions hereof can
be changed, waived, discharged or terminated, except by an instrument in writing
signed by the parties against whom enforcement of the change, waiver, discharge
or termination is sought.
23. WAIVER OF JURY TRIAL. EACH OBLIGOR KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE, OR HEREAFTER HAVE, TO A TRIAL BY
JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE UNDERLYING TRANSACTIONS. EACH OBLIGOR CERTIFIES THAT
NEITHER GERALD NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT GERALD WOULD NOT, IN THE EVENT OF ANY
SUCH SUIT, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
24. Restriction of Assignment. No right, benefit or interest hereunder may
be assigned without written consent of Gerald. This Agreement shall be binding
<PAGE>
upon the Borrowers, Guarantor, their heirs, successors, assigns (as Gerald may
consent to), and representatives and shall inure to the benefit of Gerald and it
successors, endorsees and assigns.
GERALD METALS, INC.
BY:______________________
DAKOTA MINING CORPORATION
BY:______________________
<PAGE>
BROHM MINING CORP.
BY:______________________
STIBNITE MINE INC.
BY:______________________
BARRIER REEF, INC.
BY:______________________
MINVEN GOLD (USA)
CORPORATION
BY:______________________
<PAGE>
EXHIBIT I.
GUARANTY
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to induce D. H. Blattner & Sons, Inc., a
Minnesota corporation (the "Contractor"), at its option at any time or from time
to time to provide mining services to, or to extend other accommodations to or
for the account of any of Dakota Mining Corporation's, an Canadian corporation
("DMC") now existing or hereafter arising subsidiaries (each a "DMC Sub" and
collectively the "DMC Subs") including, without limitation, the DMC Subs
described on Exhibit A attached hereto and incorporated herein by reference, the
undersigned, DMC, hereby absolutely and unconditionally guarantee(s) to the
Contractor the full and prompt payment and performance when due, whether at
maturity or earlier by reason of acceleration or otherwise, of each and every
debt, liability and obligation of every type which any DMC Sub may now or at any
time hereafter owe to the Contractor arising under any now existing or hereafter
entered into mining contract between the Contractor and such DMC Sub including
without limitation the mining contracts described on Exhibit A attached hereto
and incorporated herein by reference, whether such debt, liability or obligation
now exists or is hereafter created or incurred, and whether it is or may be
direct or indirect, due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or joint, several or joint and several
and interest accrued on any of the foregoing, both before an after the filing of
a bankruptcy petition by or against the Borrower (all such debts, liabilities
and obligations are herinafter collectively referred to as the "Indebtedness").
The undersigned further acknowledges and agrees with the Contractor
that:
No act or thing need occur to establish the liability of the
undersigned hereunder, and no act or thing except full payment and discharge of
all Indebtedness shall in any way exonerate the undersigned or modify, reduce,
limit or release the liability of the undersigned hereunder.
This is an absolute, unconditional and continuing guaranty of payment of
the Indebtedness and shall continue to be in force and be binding upon the
undersigned, whether or not all Indebtedness is paid in full, until this
guaranty is revoked as to future transactions by written notice actually
received by the Contractor. Such revocation shall not be effective as to
Indebtedness existing or committed for at the time of actual receipt of such
notice by the Contractor, or as to any renewals or extensions, interest accrued
and accruing on such Indebtedness and all other costs, expenses and attorneys'
fees arising from such Indebtedness. The dissolution or adjudication of
bankruptcy of the undersigned shall not revoke this guaranty, except upon actual
receipt of written notice thereof by the Contractor and only prospectively, as
to future transactions, as herein set forth.
3. The undersigned represents and warrants to the Contractor that: (a)
the undersigned is a corporation duly organized and existing in good standing
and has full power and authority to make and deliver this guaranty; (b) the
execution, delivery and performance of this guaranty by the undersigned have
been duly authorized by all necessary action of its directors and shareholders
and do not and will not violate the provisions of, or constitute a default
<PAGE>
under, any presently applicable law or its articles of incorporation or bylaws
or any agreement presently binding on it; (c) this guaranty has been duly
executed and delivered by the authorized officers of the undersigned and
constitutes its lawful, binding and legally enforceable obligation; and (d) the
authorization, execution, delivery and performance of this guaranty do not
require notification to, registration with, or consent or approval by, any
federal, state, provincial or local regulatory body or administrative agency.
The liability of the undersigned hereunder shall be unlimited.
5. Notwithstanding any payment or payments made by the undersigned
hereunder, the undersigned waives all rights of subrogation to any of the rights
of the Contractor against each DMC Sub or any other person liable for payment of
any of the Indebtedness or any collateral security held by the Contractor for
the payment of the Indebtedness, and the undersigned waives all rights to seek
any recourse to or contribution or reimbursement from any DMC Sub or any other
person liable for payment of any of the Indebtedness in respect of payments made
by the undersigned hereunder.
The undersigned will pay or reimburse the Contractor for all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
the Contractor in connection with the protection, defense or enforcement of this
guaranty, whether or not suite is commenced, which attorneys' fees and legal
expenses shall include, but not be limited to, any attorneys' fees and legal
expenses incurred in connection with any appeal of a lower court's judgment or
order.
Whether or not any existing relationship between the undersigned and any
DMC Sub has been changed or ended and whether or not this guaranty has been
revoked, the Contractor may, but shall not be obligated to, enter into
transactions resulting in the creation or continuance of Indebtedness, without
any consent or approval by the undersigned and without any notice to the
undersigned. The liability of the undersigned shall not be affected or impaired
by any of the following acts or things: (i) any acceptance of collateral
security, guarantors, accommodation parties or sureties for any or all
Indebtedness; (ii) any one or more extensions or renewals of Indebtedness
(whether or not for longer than the original period) or any modification of the
interest rates, maturities or other contractual terms applicable to any
Indebtedness; (iii) any waiver or forbearance granted to any DMC Sub, any delay
or lack of diligence in the enforcement of Indebtedness, or any failure to
institute proceedings, file a claim, give any required notices or otherwise
protect any Indebtedness; (iv) any full or partial release of, settlement with,
or agreement not to sue, any DMC Sub or any other guarantor or other person
liable in respect of any Indebtedness; (v) any discharge of any evidence of
Indebtedness or the acceptance of any instrument in renewal thereof or
substitution therefor; (vi) any failure to obtain collateral security (including
rights of setoff) for Indebtedness, or to see to the proper or sufficient
creation and perfection thereof, or to establish the priority thereof, or to
protect, insure, or enforce any collateral security; or any modification,
substitution, discharge, impairment, or loss of any collateral security; (vii)
any foreclosure or enforcement of any collateral security; (viii) any transfer
of any Indebtedness or any evidence thereof; and (ix) any order of application
of any payments or credits upon Indebtedness.
<PAGE>
The undersigned waive(s) any and all defenses and claims of any DMC Sub, or
any other obligor pertaining to Indebtedness, except the defense of discharge by
payment in full. Without limiting the generality of the foregoing, the
undersigned will not assert, plead or enforce against the Contractor any defense
of waiver, release, discharge in bankruptcy, statute of limitations, res
judicata, statute of frauds, anti-deficiency statute, fraud, incapacity,
minority, usury, illegality or unenforceability which may be available to any
DMC Sub or to any other person liable for any Indebtedness. The undersigned
expressly agree(s) that the undersigned shall be and remain liable for any
deficiency remaining after foreclosure of any mortgage or security interest
securing Indebtedness, whether or not the liability of any DMC Sub or any other
obligor for such deficiency is discharged pursuant to statute or judicial
decision.
The undersigned waive(s) presentment, demand for payment, notice of
dishonor or nonpayment and protest of any instrument evidencing Indebtedness.
The Contractor shall not be required first to resort for payment of the
Indebtedness to any DMC Sub or other persons or their properties or first to
enforce, realize upon or exhaust any collateral security for indebtedness,
before enforcing the guaranty.
If any payment applied by the Contractor to Indebtedness is thereafter set
aside, recovered, rescinded or required to be returned for any reason
(including, without limitation, the bankruptcy, insolvency or reorganization of
any DMC Sub or any other obligor), the Indebtedness to which such payment was
applied shall for the purposes of this guaranty be deemed to have continued in
existence, notwithstanding such application, and this guaranty shall be
enforceable as to such Indebtedness as fully as if such application had never
been made.
The undersigned acknowledges and agrees that the Contractor (a) has not
made any representations or warranties with respect to, (b) does not assume any
responsibility to the undersigned for, and (c) has no duty to provide
information to the undersigned regarding, the enforceablility of any of the
Indebtedness or the financial condition of any DMC Sub. The undersigned has
independently determined the creditworthiness of each DMC Sub and the
enforceability of the Indebtedness and until the Indebtedness is paid in full
will independently and without reliance on the Contractor continue to make such
determinations.
The liability of the undersigned under this guaranty is in addition to and
shall be cumulative with all other liabilities of the undersigned to the
Contractor as guarantor or otherwise, without any limitation as to amount,
unless the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
This guaranty shall be enforceable against each entity signing this
guaranty. If there be more than one signer of this guaranty or if there be more
than one guarantor of the Indebtedness, all agreements and promises herein shall
be construed to be joint and several with all other guarantors of the
Indebtedness, whether pursuant to this guaranty or separate guaranty and shall
be fully binding upon and enforceable against any or all of the undersigned and
the other guarantors. This guaranty shall be binding upon the undersigned and
the successors and assigns of the undersigned and shall inure to the benefit of
the Contractor and its participants, successors and assigns. Any invalidity or
unenforceability of any provision or application of this guaranty shall not
affect other lawful provision and application hereof, and to this end the
<PAGE>
provisions of this guaranty are declared to be severable. This guaranty may not
be waived, modified, amended, terminated, released or otherwise changed except
by a writing signed by the undersigned and the Contractor. This guaranty shall
be governed by the substantive laws (other than the law of conflicts) of the
State of Minnesota. The undersigned waive(s) notice of the Contractor's
acceptance hereof.
AT THE OPTION OF THE CONTRACTOR, THIS GUARANTY MAY BE ENFORCED IN ANY
FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY OR RAMSEY
COUNTY, MINNESOTA; AND THE UNDERSIGNED CONSENTS TO THE JURISDICTION AND VENUE OF
ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT.
Wherever possible, each provision of this guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this guaranty.
IN WITNESS WHEREOF, this guaranty has been duly executed by the
undersigned this 11th day of February, 1998.
Dakota Mining Corporation
By _________________________
Its _________________________
Address: 1560 Broadway
Suite 880
Denver, CO 80202
Fax No. _____________________
