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) April 10, 1997
ALTA GOLD CO.
(Exact name of Registrant as specified in charter)
Nevada
(State or other jurisdiction of incorporation)
2-2274 87-0259249
(Commission File Number) (IRS Employee Identification No.)
601 Whitney Ranch Drive, Henderson, Nevada 89014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 433-8525
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On May 31, 1996, Alta Gold Co. (the "Company") received a
line of credit from Gerald Metals, Inc. ("Gerald Metals"),
pursuant to which the Company borrowed $5.0 million (the
"Original Loan") at an interest rate of LIBOR plus two percent.
The Company paid Gerald Metals three installments of principal
each in the amount of $100,000 on December 31, 1996, January 31,
1997 and February 28, 1997. Commencing on March 31, 1997 and
continuing on the last day of each month thereafter, the Company
was also required to pay Gerald Metals an additional nine
installments of principal each in the amount of one-ninth of the
principal balance of the Original Loan as of February 28, 1997.
On March 25, 1997, Gerald Metals agreed to defer until 1998
amortization of the outstanding balance of the Original Loan in
the approximate amount of $4.7 million. The deferral was in the
form of a Loan Agreement dated April 10, 1997, among the Company,
Gerald Metals and BHF-Bank Aktiengesellschaft, New York Branch
("BHF") to borrow up to $8.5 million (the "New Loan"). The New
Loan is to be used for the repayment of the Original Loan,
construction of the Company's Griffon mining property, working
capital and payment of certain expenses.
The New Loan is evidenced by two promissory notes (the
"Notes"), each in the original principal amount of $4.25 million,
payable to Gerald Metals and BHF, respectively. The Notes bear
interest at LIBOR plus two percent. Interest payments under the
Notes are payable monthly in arrears on the last business day of
each month commencing April 30, 1997. Principal payments under
the Notes are payable in fifteen equal monthly installments,
commencing on January 31, 1998. The Company must prepay the
Notes in the amount, and immediately upon receipt, of all
proceeds from (i) any public or private equity or debt offering
(except proceeds from (a) equity or convertible debt of not more
than $10 million received prior to October 31, 1997 and (b) any
exercise of rights under the employee stock option plan of
Borrower), (ii) any debt financing on the Company's Griffon
mining property (except for $2 million of equipment financing)
and/or Olinghouse mining property, or (iii) any sale of all or
any portion of Borrower's assets not in the ordinary course of
business.
The New Loan is secured by (i) a deed of trust granting a
first priority mortgage lien on the real estate and all
improvements thereon at the Company's Kinsley and Griffon mining
properties, and (ii) a first priority security interest in all of
the Company's tangible and intangible personal property. The New
Loan, like the Original Loan, contains certain covenants that
impose restrictions on the ability of the Company to, among other
things, change the Company's corporate structure, pay dividends
on or repurchase the Company's common stock, and create or suffer
to exist any liens (other than certain permitted liens) on the
Company's assets or properties. The Company is also required to
comply with certain financial covenants, including, without
limitation, the maintenance of a net worth of not less than $30
million and a prohibition on incurring capital expenditures
during the 1997 and 1998 calendar years in excess of $15 million
and $2 million, respectively. The Company cannot make requests
for advances under the New Loan in excess of $6.5 million unless
the Company has satisfied certain conditions, including,
2
<PAGE>
without limitation, obtaining all permits, licenses, consents and
authorizations necessary to conduct its business at the Griffon
mining property.
In connection with the New Loan, the Company is required to
sell 100% of its gold production to Gerald Metals through March
31, 1999, and to enter into a hedging program covering the
Company's projected gold production from June 1997 through
December 1998. Pursuant to this hedging program, the Company, on
March 21,1997, purchased put options for 108,500 ounces of gold
at $335 per ounce, and, to partially offset the cost of the put
options, sold call options for 45,000 ounces of gold at $390 per
ounce. The put options mature with respect to 3,500 ounces of
gold each month from June 1997 to December 1997, and with respect
to 7,000 ounces of gold each month from January 1998 to December
1998. The call options mature with respect to 3,750 ounces of
gold from January 1998 to December 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. Not
applicable.
(b) Pro forma financial information. Not applicable.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
10.01 Loan Agreement dated April 10, 1997, by and
among Alta Gold Co., Gerald Metals, Inc. and
BHF - Bank Aktiengesellschaft, New York Branch.
10.02 Deed of Trust With Assignment of Rents and
Royalties, Security Agreement and Financing
Statement (Nevada) dated April 10, 1997, made
by Alta Gold Co. as Trustor, to First American
Title Company of Nevada as Trustee for the
benefit of Gerald Metals, Inc. and BHF - Bank
Aktiengesellschaft, New York Branch as
beneficiaries.
10.03 Security Agreement dated April 10, 1997, by and
among Alta Gold Co., Gerald Metals, Inc. and
BHF - Bank Aktiengesellschaft, New York Branch.
10.04 Secured Promissory Note dated April 10, 1997,
made by Alta Gold Co. in favor of Gerald
Metals, Inc. in the principal amount of
$4,250,000.
10.05 Secured Promissory Note dated April 10, 1997,
made by Alta Gold Co. in favor of BHF - Bank
Aktiengesellschaft, New York Branch in the
principal amount of $4,250,000.
3
<PAGE>
EXHIBIT NO. DESCRIPTION
10.06 Agreement dated April 10, 1997, by and between
Alta Gold Co. and Gerald Metals, Inc. regarding
future contracts for the sale and purchase of
gold and gold options.
10.07 Purchase/Refining Agreement dated April 10,
1997, by and between Alta Gold Co. and Gerald
Metals, Inc. regarding the sale of gold to
Gerald Metals, Inc.; and Addendum 1 to
Purchase/Refining Agreement dated April 10,
1997.
SIGNATURE
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.
ALTA GOLD CO.
(Registrant)
Date: April 18, 1997 By: /s/ John A. Bielun
John A. Bielun
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
4
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
10.01 Loan Agreement dated April 10, 1997, by and 6
among Alta Gold Co., Gerald Metals, Inc. and
BHF - Bank Aktiengesellschaft, New York
Branch.
10.02 Deed of Trust With Assignment of Rents and 47
Royalties, Security Agreement and Financing
Statement (Nevada) dated April 10, 1997, made
by Alta Gold Co. as Trustor, to First
American Title Company of Nevada as Trustee
for the benefit of Gerald Metals, Inc. and
BHF - Bank Aktiengesellschaft, New York
Branch as beneficiaries.
10.03 Security Agreement dated April 10, 1997, by 70
and among Alta Gold Co., Gerald Metals, Inc.
and BHF - Bank Aktiengesellschaft, New York
Branch.
10.04 Secured Promissory Note dated April 10, 1997, 90
made by Alta Gold Co. in favor of Gerald
Metals, Inc. in the principal amount of
$4,250,000.
10.05 Secured Promissory Note dated April 10, 1997, 95
made by Alta Gold Co. in favor of BHF - Bank
Aktiengesellschaft, New York Branch in the
principal amount of $4,250,000.
10.06 Agreement dated April 10, 1997, by and 100
between Alta Gold Co. and Gerald Metals, Inc.
regarding future contracts for the sale and
purchase of gold and gold options.
10.07 Purchase/Refining Agreement dated April 10, 111
1997, by and between Alta Gold Co. and Gerald
Metals, Inc. regarding the sale of gold to
Gerald Metals, Inc.; and Addendum 1 to
Purchase/Refining Agreement dated April 10,
1997.
5
<PAGE>
10.01
<PAGE>
JPK
4/9/97
1:45 p.m.
LOAN AGREEMENT
AMONG
ALTA GOLD CO.
AS BORROWER,
AND
BHF-BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH
AND
GERALD METALS, INC.
AS LENDERS
<PAGE>
ARTICLE I......................................................1
DEFINITIONS...................................................1
ARTICLE II.....................................................5
GENERAL TERMS.................................................5
SECTION 2.01. LOAN.........................................5
SECTION 2.02. PAYMENTS OF PRINCIPAL AND INTEREST
ON THE LOAN..................................6
SECTION 2.03. WITHHOLDING..................................6
SECTION 2.04. USE OF PROCEEDS..............................6
SECTION 2.05. SECURITY.....................................7
ARTICLE III....................................................7
REPRESENTATIONS AND WARRANTIES................................7
SECTION 3.01. FINANCIAL STATEMENTS.........................7
SECTION 3.02. ORGANIZATION, ETC............................7
SECTION 3.03. AUTHORIZATION, COMPLIANCE, ETC...............7
SECTION 3.04. LITIGATION...................................8
SECTION 3.05. TITLE TO PROPERTIES..........................8
SECTION 3.06. FILING AND PAYMENT OF TAXES..................8
SECTION 3.07. FULL DISCLOSURE..............................8
SECTION 3.08. ENFORCEABILITY...............................8
SECTION 3.09. SOLVENCY.....................................8
ARTICLE IV.....................................................8
CONDITIONS PRECEDENT..........................................8
SECTION 4.01. CONDITIONS PRECEDENT TO INITIAL
ADVANCES......................................8
SECTION 4.02. CONDITIONS PRECEDENT TO SUBSEQUENT
ADVANCES......................................10
ARTICLE V......................................................10
FINANCIAL COVENANTS...........................................10
SECTION 5.01. COVENANTS OF BORROWER........................10
ARTICLE VI.....................................................11
AFFIRMATIVE COVENANTS.........................................11
SECTION 6.01. PRESERVATION OF ASSETS; COMPLIANCE
WITH LAW.....................................11
SECTION 6.02. TAXES, ETC...................................11
SECTION 6.03. NOTICE OF PROCEEDINGS OR ADVERSE
CHANGE.......................................11
SECTION 6.04. NOTICE OF DEFAULT OR EVENT OF
DEFAULT......................................11
SECTION 6.05. REIMBURSEMENT OF EXPENSES....................11
SECTION 6.06. INSURANCE....................................12
SECTION 6.07. FINANCIAL REPORTING..........................12
SECTION 6.08. VISITATION RIGHTS............................13
<PAGE>
ARTICLE VII....................................................13
NEGATIVE COVENANTS............................................13
SECTION 7.01. FUNDAMENTAL CHANGES..........................13
SECTION 7.02. ILLEGAL ACTIVITIES...........................13
SECTION 7.03. DIVIDENDS....................................13
SECTION 7.04. LIENS........................................13
ARTICLE VIII...................................................14
DEFAULTS/RIGHTS AND REMEDIES OF LENDERS UPON DEFAULT..........14
SECTION 8.01. EVENTS OF DEFAULT............................14
SECTION 8.02. DEFAULT RATE.................................15
ARTICLE IX.....................................................16
MISCELLANEOUS.................................................16
SECTION 9.01. INCREASED COSTS - CAPITAL....................16
SECTION 9.02. SURVIVAL.....................................16
SECTION 9.03. INDEMNIFICATION..............................16
SECTION 9.04. NONLIABILITY OF LENDERS......................17
SECTION 9.05. GOVERNING LAW; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL; WAIVER
OF DAMAGES...................................17
SECTION 9.06. AMENDMENTS, ETC..............................19
SECTION 9.07. WAIVER.......................................19
SECTION 9.08. NOTICES......................................19
SECTION 9.09. SUCCESSORS AND ASSIGNS.......................20
SECTION 9.10. SEVERABILITY.................................20
SECTION 9.11. SECTION HEADINGS.............................20
SECTION 9.12. INTEGRATION..................................20
SECTION 9.13. COUNTERPARTS.................................21
SECTION 9.14. SURVIVAL OF DEED OF TRUST....................21
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit A - Request for Advance
Exhibit B - Permitted Liens
Exhibit C - Opinion of Counsel
Exhibit D - Loss Payable Endorsement
Exhibit E - Griffon Mine
Exhibit F - Kinsley Mine
Exhibit G - Olinghouse Mine
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (as the same may be amended
from time to time, "this Agreement") is made as of the
10th day of April, 1997, among BHF-BANK
AKTIENGESELLSCHAFT, NEW YORK BRANCH with its principal
office at 590 Madison Avenue, New York, New York 10022-
2540 ("BHF"), GERALD METALS, INC., a Delaware
corporation with an office located at 6 High Ridge
Park, Stamford, Connecticut 06905 ("Gerald" and
together with BHF, each a "Lender" and collectively,
the "Lenders"), and ALTA GOLD CO., a Nevada corporation
with its principal office at 601 Whitney Ranch Drive,
Suite 10, Henderson, Nevada 89014 ("Borrower").
W I T N E S S E T H T H A T:
Borrower has requested that Lenders provide
Borrower with a secured loan in a principal amount of
up to Eight Million Five Hundred Thousand Dollars
($8,500,000) (the "Loan") and each Lender has agreed to
the extension of such Loan upon the terms and subject
to the conditions hereinafter set forth. Capitalized
terms used herein are defined in Article I of this
Agreement.
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the
indicated meanings:
"ADVANCE" or "ADVANCES" shall mean the
individual or aggregate principal amount
advanced by Lenders to Borrower pursuant to
Section 2.01 of this Agreement.
"BORROWER" shall have the meaning given
to such term in the preamble.
"BUSINESS DAY" shall mean any day other
than a Saturday, Sunday or other day when
commercial banks are authorized or required
to be closed in the State of New York.
"CAPITAL EXPENDITURES" shall mean, for
any period, Exploration Expenses,
expenditures of funds by Borrower for, or the
purchase, contracting for the purchase, or
the lease of, capital improvements, fixed
assets or intangible assets which, in
accordance with GAAP, would be added as a
debit to the fixed assets account of
Borrower.
"COLLATERAL" shall mean any and all
assets, rights and interests in or to
property of Borrower pledged or mortgaged to
Lenders, or in which a security interest is
granted to Lenders, from time to time, as
security pursuant to the Security Documents,
whether now owned or hereafter acquired.
"COMMITMENT" shall have the meaning
given to such term in Section 2.01(a) of this
Agreement.
"CONVERTIBLE DEBENTURES" shall mean
certain four percent (4%) convertible
debentures (with interest payable quarterly
and a two (2) year term) now or hereafter
issued by Borrower.
<PAGE>
"CURRENT ASSETS" shall mean, at any date
as of which the amount thereof shall be
determined, all amounts that should, in
accordance with GAAP, be included as current
assets on the balance sheet of Borrower at
such date.
"CURRENT LIABILITIES" shall mean, at any
date as of which the amount thereof shall be
determined, all amounts that should, in
accordance with GAAP, be included as current
liabilities on the balance sheet of Borrower
as at such date, plus, to the extent not
already included therein, all Indebtedness
that is payable upon demand or within one (1)
year from the date of determination thereof
unless such Indebtedness is renewable or
extendable at the option of Borrower to a
date more than one (1) year from the date of
determination.
"DEFAULT" shall mean an event, condition
or default which with the giving of notice,
the passage of time, or both, would be an
Event of Default.
"DEFAULT RATE" shall have the meaning
given to such term in Section 8.02 of this
Agreement.
"EBITDA" shall mean, for any period, the
sum for such period (without duplication), as
determined in accordance with GAAP, of Net
Income PLUS interest expense, income taxes,
depreciation, amortization, expense arising
from the forgiveness, adjustment or
negotiated settlement of any indebtedness and
charges resulting from any change in the
method of accounting of Borrower.
"DOLLARS" AND $" shall mean United
States Dollars.
"EVENT OF DEFAULT" shall have the
meaning given to such term in Section 8.01 of
this Agreement.
"EXPENSES" shall mean all present and
future expenses incurred by or on behalf of
any Lender in connection with this Agreement
or any of the other Loan Documents, whether
incurred heretofore or hereafter, which
expenses shall include, without being limited
to, the cost of record searches, reasonable
attorneys' fees, disbursements and expenses,
all reasonable costs and expenses incurred by
any Lender in opening bank accounts,
depositing checks, receiving and transferring
funds, and any charges due to "insufficient
funds" of deposited checks and the applicable
Lender's standard fee relating thereto, fees
and expenses of accountants, appraisers or
other experts or advisors retained by
Lenders, fees and taxes relative to the
filing of financing statements, costs of
preparing and recording the Security
Documents and all expenses, costs and fees
set forth in Articles VI, VIII or IX of this
Agreement.
"EXPLORATION EXPENSES" shall mean all
present and future expenses incurred by or on
behalf of Borrower in connection with
exploration for ore (including, without
limitation, test work, drilling expenses,
geological surveying, assaying, prospecting,
trial pits and bore holes).
"FINANCIAL STATEMENTS" shall mean the
balance sheet, income statement, statement of
cash flows and retained earnings statement of
Borrower for the year or other period then
ended, together with supporting schedules,
audited (without qualification) by
independent
2
<PAGE>
certified public accountants approved by
Lenders (except that, in the case of
quarterly statements, such statements may be
unaudited) and prepared in accordance with
GAAP.
"GAAP" shall mean generally accepted
accounting principles in the United States of
America, as promulgated by the Financial
Accounting Standards Board and in effect from
time to time, consistently applied with past
financial statements of Borrower.
"GRIFFON MINE" shall mean Borrower's
mining properties in White Pine County,
Nevada as more particularly described on
EXHIBIT E hereto.
"GOVERNMENTAL AUTHORITY" shall mean the
United States government, any state or other
political subdivision thereof, any agency,
court or body of the United States
government, any state or other political
subdivision thereof, or any quasi-
governmental agency or authority exercising
executive, legislative, judicial, regulatory
or administrative functions.
"INDEBTEDNESS" shall mean all
indebtedness, obligations and liabilities of
Borrower, contingent or otherwise, direct or
indirect and howsoever evidenced or incurred,
that should be reflected as a liability on
the balance sheet of Borrower prepared in
accordance with GAAP.
"INITIAL ADVANCES" shall mean the first
Six Million Five Hundred Thousand Dollars
($6,500,000) of the Loan made to Borrower
pursuant to the terms and provisions hereof.
"KINSLEY MINE" shall mean Borrower's
mining properties in Elko County, Nevada as
more particularly described on EXHIBIT F
hereto.
"LENDER" shall have the meaning given to
such term in the preamble of this Agreement.
"LEVERAGE RATIO" shall mean, for any
applicable period, the ratio of (a) the
aggregate amount of all Indebtedness
outstanding at the end of such period to (b)
Net Worth of Borrower for such period.
"LIEN(S)" shall mean any lien, claim,
charge, pledge, security interest, mortgage,
deed of trust or other encumbrance.
"LIBOR" shall mean the one month London
Interbank Offered Rate for Dollars quoted by
Telerate, as of 11:00 A.M., London time, two
(2) Business Days prior to the commencement
of each calendar month, or as otherwise
mutually agreed.
"LOAN" shall have the meaning given to
such term in the preamble to this Agreement.
"LOAN DOCUMENTS" shall mean this
Agreement, the Notes, the Security Documents
and all other documents or instruments
executed and delivered by or on behalf of
Borrower in connection with the Loan and the
transactions contemplated hereby, as the
3
<PAGE>
same may hereafter be amended, supplemented,
restated or otherwise modified from time to
time.
"MATERIAL ADVERSE CHANGE" shall mean a
material adverse change in (i) the business,
prospects, operations, results of operations,
assets, liabilities or condition (financial
or otherwise) of Borrower or (ii) the
Collateral, in each case as determined by
Lenders.
"MATERIAL ADVERSE EFFECT" shall mean (i)
a Material Adverse Change, (ii) a material
adverse effect on Borrower's ability to
perform its obligations under this Agreement
or any of the other Loan Documents to which
it is a party or (iii) a material adverse
effect on the rights and remedies of any
Lender under any of the Loan Documents, in
each case as determined by Lenders.
"MATURITY DATE" shall mean March 31,
1999.
"NET INCOME" shall mean, for any period,
the net income (or loss) of Borrower,
excluding any extraordinary income (or loss)
of Borrower for such period (taken as a
cumulative whole), after deducting all
operating expenses, provisions for all taxes
and reserves (including reserves for deferred
income taxes) and all other proper
deductions, all determined in accordance with
GAAP.
"NET WORTH" shall mean, at any date as
of which the amount thereof shall mean, at
any date as of which the amount thereof shall
be determined for Borrower, the total assets
of Borrower determined in accordance with
GAAP MINUS (i) the sum of any amounts
attributable to (a) intangible assets,
including, without limitation, goodwill,
unamortized debt discount and expense,
patents, trademarks, service marks,
tradenames, customer lists, and copyrights,
(b) all reserves not already deducted from
assets, (c) to the extent not otherwise
approved in advance by Lenders, any write-up
in the book value of assets resulting from
any revaluation thereof subsequent to the
December 31, 1996 Financial Statements of
Borrower, (d) the net book value of leasehold
improvements MINUS (ii) Total Liabilities;
plus the outstanding principal amount of
Subordinated Indebtedness.
"NOTES" shall mean those certain Secured
Promissory Notes of even date herewith in the
aggregate original principal amount of
$8,500,000 made by Borrower in favor of
Lenders to evidence the Loan, as the same may
be amended, supplemented, restated or
otherwise modified from time to time.
"OBLIGATIONS" shall mean the Loan,
together with interest thereon (including
interest which would be payable as post-
petition interest in connection with any
bankruptcy or similar proceeding).
Obligations shall also include any other
indebtedness owing to any Lender by Borrower
under this Agreement, the Notes, the Security
Documents or under any other agreement or
arrangement now or hereafter entered into
between Borrower and any Lender with respect
to the Loan.
"OLINGHOUSE MINE" shall mean Borrower's
mining properties in Washoe County, Nevada as
more particularly described on EXHIBIT G
attached.
4
<PAGE>
"PERMITTED LIENS" shall mean certain
liens identified on EXHIBIT B hereto.
"PERSON" shall mean any individual, sole
proprietorship, partnership, joint venture,
trust, unincorporated organization,
association, corporation, limited liability
company, institution, entity, party or
government (including any division, agency or
department thereof), and, as applicable, the
successors, heirs and assigns of each.
"PRIME RATE" shall mean the rate which
The Chase Manhattan Bank, N.A. announces from
time to time at its principal office in New
York, New York as its prime lending rate, as
in effect from time to time. The Prime Rate
is a reference rate and does not necessarily
represent the lowest or best rate actually
charged to any customer.
"SECURITY AGREEMENT" shall mean that
certain Security Agreement of even date
herewith made by Borrower in favor of
Lenders, as the same may be amended,
supplemented, restated or otherwise modified
from time to time.
"SECURITY DOCUMENTS" shall have the
meaning given to such term in Section 2.05 of
this Agreement.
"SUBORDINATED INDEBTEDNESS" shall mean
Indebtedness of Borrower which is
subordinated to Borrower's Obligations to
Lenders.
"SUBSEQUENT ADVANCES" shall mean the
aggregate Advances made to Borrower pursuant
to the terms and provisions hereof after
giving effect to the Initial Advances;
PROVIDED, HOWEVER, the Subsequent Advances
shall not exceed an aggregate principal
amount greater than Two Million Dollars
($2,000,000).
ARTICLE II
GENERAL TERMS
SECTION 2.01. LOAN. (a) Subject to all of the
terms and conditions contained in this Agreement and
provided no Default or Event of Default has occurred,
Lenders agree to make Advances to Borrower from time to
time until December 31, 1997 (the "Loan") in the
aggregate principal amount of up to Eight Million Five
Hundred Thousand Dollars ($8,500,000) (the
"Commitment"). Notwithstanding the foregoing, Borrower
may not request Advances in excess of Six Million Five
Hundred Thousand Dollars ($6,500,000) unless Borrower
has complied with Section 4.02 hereof. Borrower may
request Advances from Lenders in accordance with
Section 2.01(b) hereof. Each Advance shall be in an
amount of at least Two Hundred Fifty Thousand Dollars
($250,000). If at any time the outstanding principal
balance of the Loan exceeds the Commitment, Borrower
shall immediately pay to Lenders the amount of such
excess. The Advances shall be evidenced by the Notes,
which Notes are hereby incorporated herein by reference
and made a part hereof. No Advances will be made on or
after December 31, 1997. Any Advances repaid or prepaid
may not be reborrowed.
(b) Advances under the Loan will be made in
equal amounts by Lenders to Borrower upon telephonic
request to credit such Advance to Borrower's account
made by an officer of Borrower who has been duly
authorized by its board of directors and whose name,
along with a certified copy of such resolutions, has
been transmitted to Lenders. Such request shall be
confirmed in writing by Lenders'
5
<PAGE>
receipt, within two (2) Business Days thereafter, of a
request for Advance in the form of EXHIBIT A hereto,
signed by a duly authorized officer of Borrower
indicating the date and amount of the Advance requested
and acknowledging the principal balance outstanding on
the Loan, as of the said date after taking into
consideration the amount of the Advance as so
requested.
SECTION 2.02. PAYMENTS OF PRINCIPAL AND INTEREST
ON THE LOAN. (a) Unless the Default Rate shall apply,
the outstanding principal balance of the Loan shall
bear interest at LIBOR plus two percent (2%). Interest
will be computed based on a three hundred sixty (360)
day year counting the actual number of days elapsed and
will be payable in arrears on the last Business Day of
each month (commencing April 30, 1997) for the month
thean ending.
(b) Commencing January 31, 1998 and
continuing on the last Business Day of each month
thereafter, Borrower will remit to Lenders fifteen (15)
installments of principal each in an aggregate amount
equal to one-fifteenth (1/15th) of the aggregate
principal amount outstanding under the Notes on
December 31, 1997. If any monthly principal
installment is paid in a different amount and/or on a
date other than the last Business Day of each such
month, then Lenders, at their sole discretion, may
charge breakage costs to Borrower. A final payment of
all remaining principal and accrued interest will be
made by Borrower to Lenders on the Maturity Date.
(c) In addition to payment of monthly
installments of principal as provided in Subsection
2.02(b) above, Borrower shall prepay the Notes in the
amount, and immediately upon receipt, of all proceeds
from (i) any public or private equity or debt offering
of Borrower (except proceeds from (A) equity or
convertible debt of not more than Ten Million Dollars
($10,000,000) received prior to October 31, 1997 and
(B) any exercise of rights under the employee stock
option plan of Borrower), (ii) any debt financing on
the Griffon Mine (except for Two Million Dollars of
equipment financing) and/or Olinghouse mining
properties of Borrower or (iii) any sale of all or any
portion of Borrower's assets not in the ordinary course
of business.
(d) All payments to be made by Borrower of
principal of, and interest on, the Notes and all
Expenses payable by Borrower hereunder, shall be made
in such manner as may be designated by Lenders in
writing to Borrower, and in any event all such payments
shall be made to Lenders in U.S. dollars in immediately
available funds prior to 12:00 o'clock Noon (New York
City time) on or before the day that such payment is
due.
SECTION 2.03. WITHHOLDING. Borrower hereby
agrees to indemnify and save each Lender harmless from
and against any liability (either directly or by way of
deduction, withholding, or otherwise) for any present
or future tax, duty, levy, impost, fee or charge in
respect of, or arising out of, the execution and
delivery of or performance under this Agreement or the
making of the Loan hereby or the consummation of any of
the transactions contemplated by this Agreement, or
upon any payment made by Borrower hereunder, other than
taxes which are assessed on a net income basis and
remitted by Lenders to the United States of America and
any political subdivision or taxing authority thereof
or therein in respect of, or arising out of, the making
of the Loan hereunder and the entering into of the
transactions described above. The obligations of
Borrower to pay any sums which may become payable under
this Section 2.03 will survive the expiration or other
termination of this Agreement.
SECTION 2.04. USE OF PROCEEDS. The proceeds of
the Loan shall be used exclusively by Borrower for
repayment of all indebtedness, liabilities and
obligations of Borrower to Gerald with respect to the
existing Five Million Dollar ($5,000,000) secured loan
made as of May 31, 1996, construction of the Griffon
Deposit Mine, working capital and payment of Expenses.
6
<PAGE>
SECTION 2.05. SECURITY. Payment and performance
of the Obligations and any other indebtedness and
liabilities of Borrower to any Lender, whether under
the Notes or otherwise, shall be secured by:
(a) a first priority security interest
in tangible and intangible personal property
of Borrower pursuant to the terms of the
Security Agreement;
(b) deeds of trust executed by Borrower
granting thereby a first priority mortgage
lien on the real estate and all improvements
thereon located at the Kinsley Mine and
Griffon Mine; and
(c) such other agreements may be
required by any Lender and necessary to
attach or perfect a Lien in the items covered
by Subsections (a) and (b) above.
All agreements and instruments described in this
Section 2.05, together with any and all other
agreements and instruments now or hereafter securing
the Notes, are sometimes hereinafter referred to
collectively as the "Security Documents" and
individually as a "Security Document".
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce Lenders to enter into this Agreement and
to make the Loan, Borrower hereby represents and
warrants to Lenders (which representations and
warranties shall survive the delivery of the Notes and
the making of the Loan and shall continue until payment
in full of the Obligations) that:
SECTION 3.01. FINANCIAL STATEMENTS. Borrower has
heretofore furnished to Lenders Borrower's Financial
Statements dated December 31, 1996 which fairly present
the financial condition of Borrower as of their date,
and the results of its operations for the year or other
period then ended. To the best of Borrower's knowledge
and belief, Borrower does not have any contingent
obligations, liabilities for taxes or unusual forward
or long-term commitments except as specifically
mentioned in the Financial Statements. Since the date
of the Financial Statements, there has been no Material
Adverse Change and no dividends or other distributions
have been declared or paid or made to the shareholders
of Borrower.
SECTION 3.02. ORGANIZATION, ETC. Borrower (a) is
duly organized, validly existing and in good standing
under the laws of the State of Nevada, (b) is duly
qualified to transact business in every jurisdiction
where, because of the nature of its business or
property, such qualification is required, (c) has full
power and authority to own its property and assets and
to carry on its business as now conducted, and (d) has
full power to execute, deliver and perform its
obligations under the Loan Documents to which it is a
party.
SECTION 3.03. AUTHORIZATION, COMPLIANCE, ETC.
The execution and delivery of, and the performance by
Borrower of its Obligations under, the Loan Documents
(a) are within its corporate powers, (b) have been duly
authorized by all requisite corporate action, (c) do
not violate any provision of law, any order of any
court or other agency of government, the corporate
charter or by-laws of Borrower, and (d) do not violate
any indenture, agreement or other instrument to which
Borrower is a party, or by which it is bound, or be in
conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default
under, or except as may be provided by this Agreement,
result in the creation or imposition of any Lien upon
any of the property or assets of Borrower pursuant to,
any such indenture,
7
<PAGE>
agreement or instrument. Borrower is not required to
obtain any consent, approval or authorization from, or
to file any declaration or statement with, any
Governmental Authority in connection with or as a
condition to the execution, delivery or performance of
the Loan Documents.
SECTION 3.04. LITIGATION. There is no action,
suit or proceeding at law or in equity or by or before
any Governmental Authority now pending or, to the
knowledge of Borrower, threatened against or affecting
Borrower which, if adversely determined, would have a
Material Adverse Effect.
SECTION 3.05. TITLE TO PROPERTIES. Borrower has
good title to all Collateral, free and clear of all
Liens of any kind, except Permitted Liens and
restrictions, easements and minor irregularities in
title which do not and will not interfere with the
occupation, use and enjoyment of Borrower of such
properties and assets in the normal course of its
business as presently conducted or materially impaired
the value of such properties and assets for the purpose
of such business.
SECTION 3.06. FILING AND PAYMENT OF TAXES.
Borrower has filed all tax returns required to be filed
by Borrower, and has paid, or made adequate provision
for the payment of, all taxes, charges and assessments
due and payable by Borrower.
SECTION 3.07. FULL DISCLOSURE. Neither the
Financial Statements referred to in Section 3.01, nor
any statement of fact made by or on behalf of Borrower
in this Agreement or any of the other Loan Documents or
any certificate, written statement or schedule
furnished to any Lender pursuant hereto, contains any
untrue statement of a material fact or omits to state
any material fact necessary to make statements
contained herein or therein not misleading. There is
no fact known to Borrower which has not been disclosed
to Lenders in writing, which could have a Material
Adverse Effect.
SECTION 3.08. ENFORCEABILITY. This Agreement and
all of the other Loan Documents executed and delivered
in connection herewith are legal, valid and binding
obligations of Borrower and are enforceable against
Borrower, in accordance with their terms except as such
enforceability may be limited by (i) the effect of any
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally and (ii) general principles of equity.
SECTION 3.09. SOLVENCY. The fair saleable value
of Borrower's assets exceeds all probable liabilities
of Borrower; Borrower, to the best of its knowledge,
does not have unreasonably small capital in relation to
the business in which it is or proposes to be engaged;
and Borrower has not incurred, nor believes that it
will incur after giving effect to the transactions
contemplated by this Agreement, debts beyond its
ability to pay such debts as they become due.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. CONDITIONS PRECEDENT TO
INITIAL ADVANCES. The obligation of Lenders to make
any Initial Advance is subject to the satisfaction of
the following conditions precedent:
(a) The representations and warranties
set forth in Article III hereof and in all
other Loan Documents shall be true and
correct.
8
<PAGE>
(b) Borrower shall have executed and
delivered to Lenders, or caused to be
executed and delivered to Lenders, on or
prior to the date of execution of this
Agreement, the following:
(i) The Notes;
(ii) A certificate of the
Secretary or Assistant Secretary of
Borrower certifying to the votes of
Borrower's Board of Directors
authorizing the execution and delivery
of this Agreement, the Notes and the
Loan Documents;
(iii) A certificate of the
Secretary or Assistant Secretary of
Borrower which shall certify the names
of the officers of Borrower authorized
to sign this Agreement, the Notes, and
any other documents or certificates to
be delivered pursuant to this Agreement
by Borrower or any of its officers,
together with the true signatures of
such officers. Lenders may conclusively
rely on such certificate until they
shall receive a further certificate of
the Secretary or an Assistant Secretary
of Borrower canceling or amending the
prior certificate and submitting the
signatures of the officers named in such
further certificate;
(iv) Good Standing Certificates,
dated reasonably near the date of the
Loan, of the Nevada Secretary of State
stating that Borrower is duly
incorporated (or qualified) and in good
standing in such jurisdiction and has
filed all annual reports and has paid
all franchise and other taxes required
to be filed or paid to the date of such
certificate;
(v) A favorable written opinion of
Borrower's counsel in favor of Lenders,
dated the date of this Agreement, in the
form attached hereto as EXHIBIT C;
(vi) The Security Documents,
together with any other documents
required by the terms thereof;
(vii) Insurance certificates
showing compliance with the provisions
of Section 6.06 hereof; and
(viii) Such other supporting
documents, legal opinions, agreements
and certificates as any Lender or its
counsel may request.
(c) All legal matters incident to the
transactions hereby contemplated shall be
satisfactory to the respective counsel of
Lenders.
(d) No Default or Event of Default
shall have occurred and be continuing or
would result from the making of the Loan, as
determined by Lenders in their sole
discretion.
(e) No Material Adverse Change, or
development reasonably likely to have a
Material Adverse Effect, shall have occurred
and be continuing, as determined by Lenders
in their sole discretion.
9
<PAGE>
(f) Borrower shall have established a
gold floor program with Gerald (to remain in
effect during the term of this Agreement)
covering 108,500 troy ounces of gold at a
minimum price of $335 per troy ounce and
shall have simultaneously entered into
Gerald's standard trading/margin agreement.
(g) Borrower shall have entered into a
Gold Purchase and Refining Contract with
Gerald with respect to Gerald's purchase of
one hundred percent (100%) of Borrower's gold
production for a period of two (2) years from
the date of execution and delivery of this
Agreement.
SECTION 4.02. CONDITIONS PRECEDENT TO
SUBSEQUENT ADVANCES. The obligation of Lenders to make
any Subsequent Advance is subject to the satisfaction
of the following conditions precedent:
(a) No Default or Event of Default
shall have occurred and be continuing or
would result from the making of such
Subsequent Advance, as determined by Lenders
in their sole discretion.
(b) No Material Adverse Change, or
development reasonably likely to have a
Material Adverse Effect, shall have occurred
and be continuing, as determined by Lenders
in their sole discretion.
(c) Borrower shall have obtained all
permits, licenses, consents and
authorizations (including, without
limitation, environmental and mining permits)
necessary (as determined by Lenders in their
sole discretion) to conduct its business at
the Griffon Deposit Mine.
(d) The representations and warranties
set forth in Article III hereof and in all
other Loan Documents shall be true and
correct.
ARTICLE V
FINANCIAL COVENANTS
Borrower covenants and agrees that, until payment
and satisfaction in full of all Obligations, whether
now existing or arising hereafter, Borrower will:
(a) Maintain at all times a Net Worth
(tested quarterly) of not less than Thirty
Million Dollars ($30,000,000);
(b) Not permit the ratio of Current
Assets to Current Liabilities at any time
(tested quarterly) to be less than 1.05:
1.00;
(c) Not make or incur Capital
Expenditures during each of the calendar
years 1997 and 1998 (or any portion thereof),
tested at the end of each such year, in
excess of:
10
<PAGE>
1997 $15,000,000
1998 $2,000,000;
(d) For each fiscal quarter during this
Agreement, maintain a ratio of EBITDA to
total interest expense on all Indebtedness of
not less than 3.00: 1.00;
(e) For each fiscal quarter during this
Agreement, maintain a Leverage Ratio of not
more than 0.75: 1.00 (or, if the Convertible
Debentures are converted to equity, .50:
1.00);
(f) For each fiscal quarter during this
Agreement, maintain a ratio of EBITDA to
total interest expense and principal payments
of Indebtedness of not less than 1.25: 1.00;
and
(g) Within forty-five (45) days after
the end of each fiscal quarter, provide
Financial Statements for such period and the
fiscal year to date, and a written report for
such quarter as to compliance with the
provisions of this Article V.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment
and satisfaction in full of all Obligations, whether
now existing or arising hereafter, Borrower will:
SECTION 6.01. PRESERVATION OF ASSETS; COMPLIANCE
WITH LAW. (a) Do or cause to be done all things
necessary to preserve, renew and keep in full force and
effect its corporate existence, rights, licenses,
permits and franchises; and
(b) Comply with all applicable laws, rules,
regulations and orders, whether now in effect or
hereafter enacted or promulgated by any applicable
Governmental Authority.
SECTION 6.02. TAXES, ETC. Pay and discharge or
cause to be paid and discharged, when due, all taxes,
assessments and governmental charges or levies imposed
upon it or upon its respective income and profits or
upon any of the Collateral.
SECTION 6.03. NOTICE OF PROCEEDINGS OR ADVERSE
CHANGE. Give written notice to each Lender, as soon as
possible and in any event within fifteen (15) days
after Borrower has knowledge, of (i) any proceedings or
investigations being instituted by or against Borrower
in any federal or state court or before any commission
or other regulatory body, whether federal, state or
local which, if adversely determined, would have a
Material Adverse Effect and (ii) any Material Adverse
Change.
SECTION 6.04. NOTICE OF DEFAULT OR EVENT OF
DEFAULT. Immediately advise each Lender of the
occurrence of any Default or Event of Default.
SECTION 6.05. REIMBURSEMENT OF EXPENSES. On the
date of execution of this Agreement, reimburse each
Lender for all Expenses incurred by such Lender on or
prior to such date. From and after
11
<PAGE>
such date, Borrower shall promptly reimburse each
Lender for all Expenses as the same are incurred by
such Lender and upon receipt of invoices therefor.
SECTION 6.06. INSURANCE. Maintain at all times
insurance coverage in respect of the properties and
assets of Borrower in amounts, on terms and with such
financially sound and reputable insurers reasonably
acceptable to Lenders, as is consistent with Borrower's
ordinary course of business. Such coverage shall
include, without limitation, fire and extended coverage
insurance for the full insurable value of all buildings
and other improvements located on property constituting
Collateral and public liability and worker's
compensation insurance, all in amounts not less than
the amount of the coverage maintained immediately prior
to the execution of this Agreement and under policies
in form and content reasonably acceptable to Lenders.
All policies of insurance shall name each Lender as
loss payee and additional insured pursuant to a non-
contributory loss payable endorsement in form similar
to the endorsement as set out in EXHIBIT D hereto and
satisfactory in all respects to Lenders.
Any surplus remaining from any such insurance in
excess of all indebtedness, liabilities and obligations
of Borrower to Lenders shall be delivered to Borrower,
or its successors or assigns.
Borrower shall furnish Lenders with an original
copy of all policies of insurance. If Lenders permit
Borrower to provide any of the required insurance
through blanket policies, Borrower shall furnish
Lenders with a certificate of insurance for each such
policy setting forth coverage, the limits of liability,
the name of the carrier, the policy number, and the
expiration date.
SECTION 6.07. FINANCIAL REPORTING. Furnish to
Lenders:
(a) Within one hundred twenty (120) days of
the end of each fiscal year (beginning December
31, 1997), Financial Statements showing the
financial condition at the close of such fiscal
year, the results of operations during such year
and containing a statement to the effect that its
independent certified public accountants have
examined the provisions of this Agreement and that
no Default or Event of Default has occurred,
together with a copy of the management letter and
any other written reports delivered by such
accountants to Borrower with respect to such
Financial Statements and the audit thereof
conducted by such accountants:
(b) Within forty-five (45) days after the
end of each quarter in each such fiscal year,
Financial Statements for such period and the
fiscal year to that date, subject to changes
resulting from routine year-end audit adjustments,
together with a comparison to the Financial
Statements for the same period in the prior year
in form satisfactory to Lenders:
(c) Copies of all reports filed with the
Securities Exchange Commission; and
(d) Copies of mining reports and mining
plans on properties provided to shareholders.
12
<PAGE>
SECTION 6.08. VISITATION RIGHTS. Permit agents
or representatives of Lenders to inspect and to discuss
the affairs, finances and accounts of Borrower with its
officers, at any time and from time to time during
normal business hours.
ARTICLE VII
NEGATIVE COVENANTS
Borrower covenants and agrees that, until payment
and satisfaction in full of all Obligations, whether
now existing or arising hereafter, Borrower will not,
directly or indirectly:
SECTION 7.01. FUNDAMENTAL CHANGES. Dissolve,
liquidate, merge, consolidate or otherwise alter or
modify Borrower's corporate name, mailing address,
principal place of business, structure, status or
existence or enter into or engage in any operation or
activity materially different from that presently
conducted by Borrower; make any substantial change in
its executive management; amend its corporate charter
or by-laws in any manner that could have a Material
Adverse Effect; or sell or otherwise transfer all or
substantially all of Borrower's assets.
SECTION 7.02. ILLEGAL ACTIVITIES. Engage in any
conduct or activity, including, without limitation, a
pattern of racketeering activity, that could subject
any of Borrower's assets to forfeiture or seizure.
SECTION 7.03. DIVIDENDS. Pay any dividends, or
make any distribution of cash or property, or both, to
holders of shares of its capital stock, or directly or
indirectly, redeem, purchase or otherwise acquire for a
consideration, any shares of its capital stock, of any
class.
SECTION 7.04. LIENS. Create, incur, assume or
suffer to exist any mortgage, pledge, lien, charge or
other encumbrance of any nature whatsoever on any of
its assets or properties, now or hereafter owned, other
than:
(i) liens securing the payment of
taxes, either not yet due or the validity of
which is being contested in good faith by
appropriate proceedings, and as to which it
shall have set aside on its books adequate
reserves;
(ii) deposits under worker's
compensation, unemployment insurance and
social security laws, or to secure the
performance of bids, tenders, contracts
(other than for the repayment of borrowed
money) or leases, or to secure statutory
obligations or surety or appeal bonds or
reclamation bonds, or to secure indemnity,
performance or other similar bonds in the
ordinary course of business;
(iii) liens imposed by law, such as
carriers', warehousemen's or mechanics'
liens, incurred by it in good faith in the
ordinary course of business, and liens
arising out of a judgment or award against it
with respect to which it shall currently be
prosecuting an appeal, a stay of execution
pending such appeal having been secured;
(iv) liens in favor of any Lender;
(v) liens in favor of other entities
providing financing to Borrower related to
mining properties and not to exceed One
Million Dollars ($1,000,000) in the aggregate
at any time; and
13
<PAGE>
(vi) Permitted Liens.
ARTICLE VIII
DEFAULTS/RIGHTS AND REMEDIES OF LENDERS UPON DEFAULT
SECTION 8.01. EVENTS OF DEFAULT. In each case of
happening of any of the following events (each of which
is herein and in the Note and the Security Documents
sometimes called an "Event of Default"):
(a) failure of Borrower to pay (i) any
installment of principal of, or interest on,
any Note (provided, however, in the case of
interest on such Note, that such failure
continues for a period of three (3) Business
Days following its occurrence), (ii) Expenses
or (iii) any other Obligations, when the same
shall become due and payable, whether at the
due date thereof or by acceleration or
otherwise;
(b) failure of Borrower to perform,
comply with or observe any term, covenant or
agreement applicable to Borrower (other than
as set forth in other paragraphs of this
Section 8.01) contained in Articles II, VI or
VII hereof, Section 9.02 hereof or in any
Note, which failure continues for a period of
ten (10) days following its occurrence;
(c) failure of Borrower to perform,
comply with or observe any other term,
covenant or agreement applicable to Borrower
pursuant to this Agreement other than as set
forth in other paragraphs of this Section
8.01, and such default shall continue
unremedied for a period of twenty (20) days
after the delivery of written notice thereof
by Lenders to Borrower;
(d) any representation or warranty made
by or on behalf of Borrower pursuant to this
Agreement, any other Loan Document or any
other agreement, document, instrument or
certificate executed by Borrower in favor of
any Lender shall be untrue or misleading in
any material adverse respect as of the date
such representation or warranty was made or
is deemed to have been made;
(e) the occurrence of a default or
event of default with respect to any
Indebtedness (other than to Lenders but
including, without limitation, the
Convertible Debentures), if the effect of
such default is to accelerate the maturity of
such Indebtedness or to permit the holder
thereof to cause such Indebtedness to become
due prior to the stated maturity thereof, or
if any Indebtedness of Borrower (other than
to Lenders) is not paid, when due and
payable, whether at the due date thereof or
by acceleration or otherwise;
(f) the occurrence of any "Event of
Default" as defined in any Security Document;
(g) Borrower shall (i) discontinue or
abandon operation of its business, (ii) apply
for or consent to or suffer the appointment
of a receiver, trustee, custodian or
liquidator of it or any of its property,
(iii) admit in writing its inability to pay
its debts as they mature, (iv) make a general
assignment for the benefit of creditors, (v)
file, or have filed against it, a petition
for relief under Title 11 of the United
States Code, (vi) file, or have filed against
it, a petition in bankruptcy, or a petition
or an answer seeking reorganization or an
14
<PAGE>
arrangement with creditors or to take
advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution
or liquidation law or statute, or an answer
admitting the material allegations of a
petition filed against it in any proceeding
under any such law, or if corporate or action
shall be taken for the purpose of effecting
any of the foregoing, (vii) become insolvent,
(viii) fail to generally pay its debts as
they mature or (ix) have liabilities which
exceed the fair value of its assets;
(h) for any reason, any Security
Document at any time shall not be in full
force and effect in all material respects or
shall not be enforceable in all material
respects in accordance with its terms, or any
Lien granted pursuant thereto shall fail to
be perfected within ten (10) days subsequent
to the execution and delivery of this
Agreement as a first priority lien;
(i) Borrower suffers or sustains a
Material Adverse Change or the prospect of
repayment of any Lender is materially
impaired;
(j) the occurrence of any "Event of
Default" as defined in that certain Trading
Agreement between Borrower and Gerald dated
January 24, 1995, as amended or modified from
time to time; or
(k) any change of fifty percent (50%)
or more in the share ownership of Borrower;
then, upon the occurrence of any such Event of Default
which has not been cured by Borrower or waived in
writing by Lenders, any Lender may, by notice to
Borrower, declare all Obligations to be immediately due
and payable. Upon such declaration, the Obligations
shall become immediately due and payable, both as to
principal and interest, without presentment, demand,
protest or notice of any kind, all of which are hereby
expressly waived, anything contained herein or in any
Note or other evidence of such Obligations to the
contrary notwithstanding (except with respect to any
Event of Default set forth in Section 8.01(f), in which
case all Obligations shall automatically become
immediately due and payable without the necessity of
any notice or other demand) and any obligation of
either Lender to make the Loan to Borrower shall
immediately terminate. Lenders may enforce payment of
the same and exercise any or all of the rights, powers
and remedies possessed by Lenders, whether under this
Agreement, the Security Documents or under any
agreement securing the Obligations of Borrower
hereunder, or afforded by applicable law. The remedies
provided for herein are cumulative and are not
exclusive of any other remedies provided by law.
Borrower agrees to pay each Lender's attorneys'
reasonable fees and legal expenses incurred in
enforcing such Lender's rights, powers and remedies
under this Agreement, any Note, the Security Documents
and any other agreement securing the Obligations.
SECTION 8.02. DEFAULT RATE. Without regard to
whether any Lender has exercised any other rights or
remedies hereunder, if an Event of Default shall have
occurred and be continuing, the applicable interest
rate under the Notes shall be increased, to the extent
permitted by law, to a rate per annum equal to the
Prime Rate plus three percent (3%).
15
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. INCREASED COSTS - CAPITAL. If any
Lender shall have determined that the adoption of any
applicable law, rule, regulation, guideline, directive
or request (whether or not having force of law)
regarding capital requirements, or the interpretation
or administration thereof, by any Governmental
Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or
compliance by such Lender with any of the foregoing
with respect to the Loan imposes or increases a
requirement by any Lender to allocate capital resources
to its commitments, including the Loan hereunder, which
has or would have the effect of reducing the return on
such Lender's capital to a level below that which
Lender could have achieved (taking into consideration
such Lender's then existing policies with respect to
capital adequacy and assuming full utilization of such
Lender's capital) but for such adoption, change or
compliance by any amount deemed by such Lender to be
material, then, in each such case: (i) such Lender
shall promptly after its determination of such
occurrence give notice thereof to Borrower and (ii)
Borrower shall pay to Lender as an additional fee from
time to time on demand such amount as Lender certifies
to be the amount that will compensate it for such
reduction. A certificate of such Lender claiming
compensation under this Section 9.01 shall be
conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the
occurrence giving rise to such compensation, the
additional amount or amounts to be paid to it hereunder
and the method by which such amounts were determined.
In determining such amounts, a Lender may use any
reasonable averaging and attribution methods.
SECTION 9.02. SURVIVAL. This Agreement and all
covenants, agreements, representations and warranties
herein and in the certificates delivered pursuant
hereto, shall survive the making by any Lender of the
Loan and the execution and delivery to Lenders of the
Notes and shall continue in full force and effect so
long as any Note and any other indebtedness of Borrower
to any Lender is outstanding and unpaid.
SECTION 9.03. INDEMNIFICATION. Borrower shall
and hereby agrees to indemnify, defend and hold
harmless each Lender and its directors, officers,
agents, employees and counsel from and against any and
all losses, claims, damages, liabilities, deficiencies,
judgments or expenses incurred by any of them (except
to the extent that it is finally judicially determined
to have resulted from their own gross negligence or
willful misconduct) arising out of or by reason of any
litigation, investigations, claims or proceedings which
arise out of or are in any way related to (i) this
Agreement or the transactions contemplated hereby, (ii)
any actual or proposed use by Borrower of the proceeds
of the Loan, (iii) any breach by Borrower of any of the
provisions of this Agreement or (iv) such Lender's
entering into this Agreement, the other Loan Documents
or any other agreements and documents relating hereto,
including, without limitation, amounts paid in
settlement, court costs and fees and disbursements of
counsel incurred in connection with any such
litigation, investigation, claim or proceeding or any
advice rendered in connection with any of the
foregoing. If and to the extent that any Obligations
are unenforceable for any reason, Borrower hereby
agrees to make the maximum contribution to the payment
and satisfaction of such Obligations which is
permissible under applicable law. Borrower's
obligations set forth in this Section 9.03 shall
survive any termination of this Agreement and the other
Loan Documents and the payment in full of the
Obligations, and are in addition to, and not in
substitution of, any other of its obligations set forth
in this Agreement or otherwise. In addition, Borrower
shall, upon demand, pay to each Lender all costs and
expenses (including the reasonable fees and
disbursements of counsel) paid or incurred by such
Lender in (i) enforcing or defending its rights under
or in respect of this Agreement, the other Loan
Documents or any other document or instrument now or
hereafter executed and delivered in connection
herewith, (ii) collecting the Loan, (iii) foreclosing
or
16
<PAGE>
otherwise collecting upon the Collateral or any part
thereof and (iv) obtaining any legal, accounting or
other advice in connection with any of the foregoing.
SECTION 9.04. NONLIABILITY OF LENDERS. THE
RELATIONSHIP BETWEEN BORROWER AND EACH LENDER SHALL BE
SOLELY THAT OF BORROWER AND LENDER. NO LENDER SHALL
HAVE ANY FIDUCIARY RESPONSIBILITIES TO BORROWER.
BORROWER (i) AGREES THAT NEITHER LENDER SHALL HAVE ANY
LIABILITY TO BORROWER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY BORROWER
IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY
RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE
RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS OR ANY OTHER AGREEMENT ENTERED INTO IN
CONNECTION HEREWITH OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A JUDGMENT OF A COURT THAT IS BINDING ON
SUCH LENDER (WHICH JUDGMENT SHALL BE FINAL AND NOT
SUBJECT TO REVIEW ON APPEAL), THAT SUCH LOSSES WERE THE
RESULT OF ACTS OR OMISSIONS ON THE PART OF SUCH LENDER,
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AND
(ii) WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY
CLAIM AGAINST SUCH LENDER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE), EXCEPT A CLAIM BASED UPON GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. WHETHER OR NOT SUCH
DAMAGES ARE RELATED TO A CLAIM THAT IS SUBJECT TO THE
WAIVER EFFECTED ABOVE AND WHETHER OR NOT SUCH WAIVER IS
EFFECTIVE, SUCH LENDER SHALL NOT HAVE ANY LIABILITY
WITH RESPECT TO, AND BORROWER HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY CLAIM FOR, ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES SUFFERED BY
BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO THE TRANSACTIONS CONTEMPLATED OR THE
RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS OR ANY OTHER AGREEMENT ENTERED INTO IN
CONNECTION HEREWITH OR THEREWITH OR ANY ACT, OMISSION
OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH,
UNLESS IT IS DETERMINED BY A JUDGMENT OF A COURT THAT
IS BINDING ON SUCH LENDER (WHICH JUDGMENT SHALL BE
FINAL AND NOT SUBJECT TO REVIEW ON APPEAL), THAT SUCH
DAMAGES WERE THE RESULT OF ACTS OR OMISSIONS ON THE
PART OF SUCH LENDER CONSTITUTING WILLFUL MISCONDUCT.
SECTION 9.05. GOVERNING LAW; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL; WAIVER OF DAMAGES.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK,
AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN BORROWER AND ANY LENDER IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF
LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW
YORK.
(b) EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH
AND IN PARAGRAPH (f) BELOW, BORROWER AND EACH LENDER
AGREE THAT ALL DISPUTES BETWEEN THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY
STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK,
17
<PAGE>
BUT BORROWER AND EACH LENDER ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. BORROWER
WAIVES IN ALL DISPUTES ANY OBLIGATION THAT IT MAY HAVE
TO THE LOCATION OF SUCH COURT CONSIDERING THE DISPUTE
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(c) BORROWER AGREES THAT EACH LENDER SHALL
HAVE THE RIGHT TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TO PROCEED AGAINST BORROWER OR ITS PROPERTY IN A
COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH
TO ENABLE SUCH LENDER TO REALIZE ON SUCH PROPERTY, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF LENDER. BORROWER AGREES THAT IT WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING
BROUGHT BY ANY LENDER TO REALIZE ON SUCH PROPERTY, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
SUCH LENDER. BORROWER WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH ANY LENDER
HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS.
(d) BORROWER AND EACH LENDER EACH WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM
IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY
DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
(e) BORROWER HEREBY IRREVOCABLY DESIGNATES
KUMMER, KAEMPFER, BONNER & RENSHAW, 3800 HOWARD HUGHES
PARKWAY, 7TH FLOOR, LAS VEGAS, NEVADA 89109 FAX NO.
(701) 796-7181 ATTENTION: MICHAEL BONNER, ESQ. AS THE
DESIGNEE, APPOINTEE AND AGENT OF BORROWER TO RECEIVE,
FOR AND ON BEHALF OF BORROWER, SERVICE OF PROCESS IN
SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT. BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
BORROWER AT ITS ADDRESS SPECIFIED IN THIS AGREEMENT,
SUCH SERVICE TO BECOME EFFECTIVE THREE (3) BUSINESS
DAYS AFTER SUCH MAILING.
(f) NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER
JURISDICTION.
(g) BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY LENDER IN CONNECTION WITH ANY
JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF ANY LENDER, OR
TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
18
<PAGE>
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION THIS AGREEMENT OR ANY OTHER AGREEMENT OR
DOCUMENT BETWEEN BORROWER AND ANY LENDER.
SECTION 9.06. AMENDMENTS, ETC. No amendment or
waiver of any provision of this Agreement, or of any
Note, or of any of the Security Documents, nor consent
to any departure by Borrower from a provision, shall be
effective unless the same shall be in writing and
signed by Lenders. A written amendment, consent or
waiver shall be effective only in the specific
instance, and for the purpose, for which given. No
notice to, or demand, on Borrower, in any one case,
shall entitle Borrower to any other or future notice or
demand in the same, similar or other circumstances.
SECTION 9.07. WAIVER. Neither any failure nor
any delay on the part of any Lender in exercising any
right, power or privilege hereunder, or under any Note,
or any Security Document shall operate as a waiver
thereof, nor shall a single or partial exercise thereof
preclude any other or future exercise, or the exercise
of any other right, power or privilege.
SECTION 9.08. NOTICES. All notices and
correspondence hereunder shall be in writing and sent
by certified or registered mail, return receipt
requested, or by overnight delivery service, with all
charges prepaid, to the applicable party at the
addresses set forth below, or by facsimile transmission
(including, without limitation, computer generated
facsimile), promptly confirmed in writing sent by first
class mail, to the FAX numbers and addresses set forth
below.
If to Lenders:
BHF-BANK Aktiengesellschaft, New York Branch
590 Madison Avenue
New York, New York 10022-2540
Attention: Robert Novak
Fax No.: (212) 756-5911
and Gerald Metals, Inc.
6 High Ridge Park,
Stamford, Connecticut 06905
Attention: Robert Kaeser
Fax No.: (203) 609-8301
With a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: James P. Kelly, Esq.
FAX No.: (401) 276-6611
19
<PAGE>
If to Borrower:
Alta Gold Co.
601 Whitney Ranch Drive
Suite 10
Henderson, Nevada 89014
Attention: President
FAX No.: (702) 433-1547
With a copy to:
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Parkway
7th Floor
Las Vegas, NE 89109
Attention: Michael Bonner, Esq.
FAX No.: (702) 796-7181
or, as to each party, at such other address as shall be
designated by such party in a written notice to the
other party complying as to delivery with the terms of
this Section. All such notices and correspondence
shall be deemed given upon the earliest to occur of (i)
actual receipt, (ii) if sent by certified or registered
mail, three (3) Business Days after being postmarked,
(iii) if sent by overnight delivery service, when
received at the above stated addresses or when delivery
is refused or (iv) if sent by facsimile transmission,
when receipt of such transmission is acknowledged.
SECTION 9.09. SUCCESSORS AND ASSIGNS. This
Agreement shall be binding upon and inure to the
benefit of Borrower and each Lender and their
respective successors and assigns, except that Borrower
shall not have the right to assign this Agreement or
any interest herein without the prior written consent
of each Lender. Either Lender may, without the consent
of Borrower, assign to one or more banks, financial
institutions or investment companies all or a portion
of such Lender's rights and obligations under this
Agreement, any Note and the Security Documents.
SECTION 9.10. SEVERABILITY. In case any
provision in or obligation under this Agreement or any
Note or the other Loan Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby.
SECTION 9.11. SECTION HEADINGS. The Article and
Section headings in this Agreement are inserted for
convenience of reference only and shall not in any way
affect the meaning or construction of any provision of
this Agreement.
SECTION 9.12. INTEGRATION. This Agreement
supersedes Borrower's application for credit,
commitment letters and proposal letters in respect
hereof, and all other prior dealings between the
parties hereto and their respective agents, employees
or officers with respect to the credit facilities
extended hereby, and this Agreement, together with the
other Loan Documents and the Notes, constitutes the
entire agreement of the parties hereto with respect to
the subject matter hereof.
20
<PAGE>
SECTION 9.13. COUNTERPARTS. This Agreement may
be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each
of which when so executed and delivered shall be an
original, but all of which shall together constitute
one and the same instrument.
SECTION 9.14. SURVIVAL OF DEED OF TRUST The
representations, warranties, covenants, agreements and
indemnification of Borrower, as well as all other
provisions, contained in paragraphs 8, 9, 10, 11 and 12
of the Deed of Trust are hereby fully incorporated
herein by reference, as if fully set forth herein, and
the parties hereby agree that all such provisions shall
survive any release, satisfaction, termination or other
extinguishment of the Deed of Trust, or the first
priority lien established thereby.
IN WITNESS WHEREOF, each Lender and Borrower have
caused this Agreement to be duly executed by their duly
authorized officers, all as of the day and year first
above written.
Lenders:
BHF-BANK
Aktiengesellschaft
By_______________________
Title____________________
By_______________________
Title____________________
GERALD METALS, INC.
By_______________________
Title____________________
By_______________________
Title____________________
Borrower:
ALTA GOLD CO.
By_______________________
Title____________________
By_______________________
Title____________________
21
<PAGE>
EXHIBIT A
REQUEST FOR ADVANCE
__________________, 199__
BHF-BANK Aktiengesellschaft, New York Branch
590 Madison Avenue
New York, New York 10022-2540
Attention: Robert Novak, Trade Finance
Gerald Metals, Inc.
6 High Ridge Park,
Stamford, Connecticut 06905
Attention: Robert Kaeser
Ladies and Gentlemen:
Pursuant to the provisions of Section 2.01 of the
Loan Agreement dated as of _________, 1997, among the
undersigned, BHF-BANK Aktiengesellschaft and Gerald
Metals, Inc.( as amended or modified from time to time,
the "Loan Agreement"), the undersigned, as borrower,
hereby requests an Advance of $____________ to be made
on ________________, 199__, which Advance shall be
evidenced by the undersigned's Secured Promissory Notes
dated [] ___, 1997. The principal balance outstanding
under said Secured Promissory Notes, after taking into
consideration the amount of the Advance requested
hereunder, is $_____________.
The undersigned hereby represents and warrants
that (i) no event has occurred and is continuing, or
would result from the proposed Advance, which
constitutes an "Event of Default" or a "Default" as
each term is defined in the Loan Agreement and (ii) the
representations and warranties in Article III of the
Loan Agreement remain true and correct as of the date
hereof. The undersigned further represents and
warrants that the financial condition of the
undersigned has not materially adversely changed since
the submission of the undersigned's most recent
financial information to the Lenders.
The officer signing below hereby individually
represents that he/she is an authorized officer of the
undersigned borrower and is authorized to request the
Advance on behalf of such borrower.
Very truly yours,
ALTA GOLD CO.
By_______________________
Title____________________
<PAGE>
PERMITTED LIENS
(A)Property described in the following financing
statements on file on date hereof:
<TABLE>
<CAPTION>
FILE COLLATERAL
FILING OFFICE SECURED PARTY FILE NO. DATE DESCRIPTION
<S> <C> <C> <C> <C>
Nevada Secretary NERCO Exploration 91-10688 11/19/91 Escrow
of State Company funds
Cargill Leasing 95-08576 06/19/95 Equipment
Corporation (assigned
to Cargill Leasing
Receivables, LLC)
Cargill Leasing 95-12612 09/06/95 Equipment
Corporation (assigned
to Cargill Leasing
Receivables, LLC)
First National Bank 96- 3/ /96 Mill and
of Ely equipment
Lyon Credit Corp. 96-06852 5/3/96 Equipment
Cargill Leasing 97-02722 2/18/97 Equipment
Receivables, LLC
Concord Commercial 96-09309 6/13/96 Equipment
Clark County Gerald Metals, Inc. Bk 960716 7/16/96 All assets
Recorder (assigned to BHF Inst 00621
Bank, etc.)
Gerald Metals, Inc. Bk 950727 7/16/96 Equipment
Inst 01195
Elko County Gerald Metals, Inc. 386760 6/12/96 All assets
Recorder (assigned to BHF Bank Bk 942
Akhiengelsellschaft) Pg 164
Elko County Gerald Metals, Inc. 366877 4/20/95 All assets
Recorder
Washoe County Gerald Metals, Inc. 1887690 9/24/95 All assets
Recorder
White Pine County Gerald Metals, Inc. Bk 235 4/21/95 All assets
Recorder Pg 583
</TABLE>
(B) Purchase money security interests in property
acquired after the date hereof.
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL
April 14, 1997
BHF - Bank Aktiengesellschaft
New York Branch
590 Madison Avenue
New York, New York 10022-2540
Gerald Metals, Inc.
6 High Ridge Park
Stamford, Connecticut 06905
Re: $8,500,000 Loan to Alta Gold Co.
Ladies and Gentlemen:
We have acted as Nevada counsel for Alta Gold Co., a
Nevada corporation ("Borrower"), in connection with a loan made
by BHF Bank Aktiengesellschaft, New York Branch ("BHF") and
Gerald Metals, Inc. ("Gerald") (Gerald, together with BHF, each a
"Lender" and collectively, the "Lenders") to Borrower in the
original principal amount of $8,500,000 (the "Loan"). All
capitalized terms used herein and not specifically defined shall
have the meanings given such terms in the Loan Agreement (as
defined below).
For purposes of this opinion letter, we have examined
and relied upon the following documents, all of which are dated
as of the date hereof:
1. The Loan Agreement among Borrower, BHF and Gerald
(the "Loan Agreement");
2. Secured Promissory Note in the original principal
amount of $4,250,000 made by Borrower and payable to BHF (the
"BHF Note");
3. Secured Promissory Note in the original principal
amount of $4,250,000 made by Borrower and payable to Gerald (the
"Gerald Note");
<PAGE>
BHF - Bank Aktiengesellschaft
Gerald Motors, Inc.
April 14, 1997
Page 2
4. Security Agreement among Borrower, BHF and Gerald
(the "Security Agreement");
5. Deed of Trust Assignment of Rents and Royalties,
Security Agreement, Financing Statement and Fixture Filing made
by Borrower as Trustor, to First American Title Company of Nevada
as Trustee for the benefit of BHF and Gerald as beneficiaries
(the "Deed of Trust"); and
6. UCC-1 Financing Statements as referenced in the
Loan Agreement (the "Financing Statements").
(The Loan Agreement, the BHF Note, the Gerald Note, the Security
Agreement and the Deed of Trust are hereinafter collectively
referred to as the "Loan Documents.")
We have also examined and relied upon, with respect to
all matters contained therein, the following documents relating
to Borrower:
1. Officers Certificate of Borrower dated April 14,
1997, with attached Articles of Incorporation, Bylaws and
resolutions of the Board of Directors of the Company with respect
to the Loan (the "Officers Certificate"); and
2. Certificate of Corporate Existence (including
Amendments) from the Nevada Secretary of State dated April 11,
1997, concerning the "good standing" of Borrower to do business
in the State of Nevada (the "Good Standing Certificate").
(The Officers Certificate and Good Standing Certificate are
hereinafter collectively referred to as the "Authorization
Documents.")
In addition to the Loan Documents and the Authorization
Documents, we have caused to be made, and have relied upon, the
following searches, with respect to Borrower, of the records of
the following offices. The scope of each report issued by the
respective office is stated. We have searched only under the
corporate name of Borrower (the reports are hereinafter
collectively referred to as the "Search Reports").
1. Plaintiff/defendant indices of the official
records of the Eighth Judicial District Court of the State of
Nevada, Clark County, for civil suits filed since January 1, 1992
(current through April 10, 1997);
2. Plaintiff/defendant indices of the official
records of the Federal District Court for the District of the
State of Nevada, Southern Office, for civil suits filed since
January 1, 1992 (current through April 10, 1997);
<PAGE>
BHF - Bank Aktiengesellschaft
Gerald Motors, Inc.
April 14, 1997
Page 3
3. UCC lien search of the official records of the
County Recorder of Clark County, Nevada (current through April 9,
1997);
4. UCC lien search of the official records of the
County Recorder of Washoe County, Nevada (current through April
10, 1997);
5. UCC lien search of the official records of the
County Recorder of Elko County, Nevada (current through April 10,
1997);
6. UCC lien search of the official records of the
County Recorder of White Pine County, Nevada (current through
April 8, 1997); and
7. UCC lien search of the official records of the
Secretary of State of Nevada (current through April 11, 1997).
We have also reviewed such other instruments,
documents, and agreements as we have deemed necessary or
appropriate in the circumstances for the purposes of rendering
this opinion letter. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to the original
documents of all documents submitted to us as copies and the
authenticity of the originals of such copies. We have assumed the
legal capacity of natural persons who signed or who will sign the
Loan Documents. We have further assumed that the Loan Documents
accurately describe and contain your understanding of the matters
contained in them and that there are no oral or written
statements or agreements between Borrower and the Lenders (or
either Lender) that modify, amend or vary, or purport to modify,
amend or vary the terms of the Loan Documents except that certain
side-letter from Borrower to Lenders relating to the notification
by Borrower of the hypothecation of water permits to be issued to
Borrower by the Nevada State Engineer (the "Side-Letter").
For purposes of this opinion letter, for all the
relevant times stated herein, we have assumed that the Lenders
have all requisite power and authority to enter into the Loan
Documents to which they are a party and have taken all necessary
action to execute and deliver such Loan Documents. We have
assumed that the Loan Documents, when executed and delivered by
the Lenders, shall constitute legal, valid and binding
obligations and shall be enforceable against the Lenders in
accordance with their respective terms. We have assumed the due
execution by the Lenders of the Loan Documents to which they are
a party. We have also assumed that the Lenders have been duly
organized, are validly existing, and are in good standing under
their respective jurisdictions of organization and possess the
corporate or other organizational power to perform their
obligations thereunder. We have further assumed that the Lenders
are exempt from, or have complied with, all federal, state and
municipal laws, rules and regulations necessary to make the Loan.
<PAGE>
BHF - Bank Atkiengesellschaft
Gerald Motors, Inc.
April 14, 1997
Page 4
Whenever our opinion or statement with respect to the
existence or absence of facts is based on our knowledge or
awareness, it is intended to signify that no information has come
to our attention which would give us actual knowledge of the
existence or absence of such facts. Our knowledge is based on the
actual current knowledge of attorneys in our firm who have worked
on this matter. Except to the extent expressly set forth herein,
we have not undertaken any independent investigation to determine
the existence or absence of facts, and no inference as to our
knowledge of the existence or absence of such facts should be
drawn from the opinions expressed below. In addition, we have
not made an independent investigation or verification of any
facts set forth in the Loan Documents, the Authorization
Documents or the Search Reports. We have assumed the correctness
and accuracy of all the factual and legal matters set forth in
the Authorization Documents and the Search Reports. In addition,
as to the matters expressed in opinion no. 1(a) below, we have
solely relied on the Good Standing Certificate.
We have not made or undertaken to make any
investigation of the state of title to, or the description of the
real and personal property described in the Loan Documents or the
Financing Statements, and we express no opinion with respect to
the title thereto. In giving the opinions set forth below, we
have assumed that Borrower has an interest in the property
encumbered by the Deed of Trust and the Security Agreement. We
have assumed that the Search Reports are accurate and complete
and that no judgment liens or other liens have been filed
covering any portion of the real or personal property described
in the Loan Documents or the Financing Statements since the date
of the Search Reports. We have assumed that the Deed of Trust
has been or will be properly filed or recorded with the Offices
of the County Recorder of White Pine and Elko Counties, Nevada.
We have also assumed that the Financing Statements have been or
will be properly filed or recorded with the Offices of the County
Recorder of Clark, Washoe, White Pine and Elko Counties, Nevada
and with the Nevada Secretary of State, in Carson City, Nevada
(collectively, the "Filing Offices").
With respect to the personal property described in the
Loan Documents, we have assumed that (i) Borrower has "rights" in
such personal property, as that term is expressed in Nevada
Revised Statutes ("NRS") Section 104.9203, (ii) other than the
Side-Letter, there is no agreement between the Lenders (or either
Lender) and Borrower postponing the time of attachment of any
security interest granted under the Loan Documents, and (iii) the
description of the personal property described in the Financing
Statements is accurate and is sufficient to enable the
identification thereof by a subsequent purchaser or mortgagee.
In this connection, we note that the law is not well developed in
the State of Nevada with respect to the specificity of
description necessary to perfect a valid security interest in
personal property. To insure beyond any doubt that a sufficient
description has been provided, the personal property intended to
be subject to a perfected security interest should be identified
by serial or identification numbers or by some other method of
specific identification. However, the more general description
of the personal property collateral used in the Loan Documents is
consistent with that commonly used by major lenders in the State
of Nevada and, although the matter is not free from doubt,
such general description should be held by a Nevada
court to be sufficient to perfect a security interest
<PAGE>
BHF - Bank Aktiengesellschaft
Gerald Motors, Inc.
April 14, 1997
Page 5
in the personal property described therein. We have assumed that
none of the Collateral is covered by a certificate of title
issued under a statute of the State of Nevada or of another
jurisdiction under the law of which indication of a security
interest on the certificate is required as a condition of
perfection.
We are admitted to the bar of the State of Nevada and
in rendering our opinions hereinafter stated, we have assumed
that the laws of the State of New York are identical in all
respects to the laws of the State of Nevada. Moreover, in
rendering our opinions hereinafter stated, we have relied solely
on the applicable laws of the State of Nevada and the federal
laws of the United States of America as those laws presently
exist and as they have been applied and interpreted by courts
having jurisdiction in the State of Nevada. We express no
opinion as to the laws of any jurisdiction other than the State
of Nevada and the United States of America.
Based upon the foregoing, and in reliance thereon, and
subject to the assumptions, exceptions, qualifications, and
limitations set forth herein, we are of the opinion that:
1. Borrower (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Nevada; (b) has the power and authority to own its properties
and to carry on its business as now being conducted and as
presently contemplated to be conducted; (c) is duly qualified to
transact business in each jurisdiction where the nature of its
activities requires such qualifications; and (d) has the power to
execute and deliver, and to perform its obligations under, the
Loan Documents.
2. The execution, delivery and performance by
Borrower of the Loan Documents to which Borrower is a party have
been duly authorized by all necessary action and (a) will not
violate any provision of (i) Borrower's Articles of Incorporation
or By-laws; or (ii) any applicable law as to which we are opining
or any order, judgment or decree of any court within the State of
Nevada or other agency of government within the State of Nevada;
or (b) will not result in a breach or constitute a default under
any agreement to which Borrower is a party or by which any of
Borrower's respective properties are bound, including, without
limitation, any indenture, loan or credit agreement, lease, debt
instrument or mortgage of which we are aware, or result in or
require the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of
Borrower's properties, except the security interests and liens
granted to Lenders under the Loan Documents and the Financing
Statements; provided, however, we note that it is common in such
indentures, loan or credit agreements, leases, debt instruments
and mortgages that the written consent, approval or authorization
of the lender, lessor or secured party thereto, as applicable,
must be obtained prior to the execution, delivery, and the
performance of documents such as the Loan Documents and the
Financing Statements, and we assume that any such necessary
written consent, approval or authorization has been obtained.
<PAGE>
BHF - Bank Aktiengesellschaft
Gerald Motors, Inc.
April 14, 1997
Page 6
3. No permits, authorizations, consents, approvals,
licenses, franchises, patents, trademarks, trade names,
copyrights, and other rights and privileges to allow Borrower to
operate its business, or registrations with, any court or
governmental department or commission, board, bureau, agency or
instrumentality are or will be necessary for the valid execution,
delivery or performance by Borrower of the Loan Documents, except
filings required to perfect under applicable law the liens
granted to the Lenders pursuant thereto.
4. Each of the Loan Documents to which Borrower is
named as a party has been duly authorized, executed and delivered
and constitutes the legal, valid and binding obligation of
Borrower, enforceable in accordance with their respective terms,
except as such enforcement of the Loan Documents may be limited
by, or subject to:
a. Bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium, or other laws of general
application relating to or affecting the enforcement of
creditors' rights;
b. General principles of equity regardless of
whether such issues are considered in a proceeding in equity or
at law which provide, among other things, that the remedies of
specific performance and other forms of equitable relief are
subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought;
c. NRS 40.430, to the extent applicable, as it
may be applied from time to time by courts interpreting Nevada
law, which requires a lender to first exhaust the security or
lien in real property before commencing any other action or
proceeding with respect to the indebtedness owed by an obligor or
a grantor of a deed of trust other than those acts or proceedings
not deemed to be an "action" under subsection 4 of NRS 40.430;
d. NRS 40.451 through 40.459, to the extent
applicable, as they may be applied from time to time by courts
applying Nevada law, which require a lender to obtain a
deficiency judgment after a foreclosure sale before further
pursuing unpledged or general assets of a borrower or guarantor;
e. NRS 40.453, to the extent applicable, which
renders certain waiver provisions in documents relating to the
sale of real property unenforceable where a mortgagor or grantor
of a deed of trust or a guarantor or surety of the indebtedness
secured thereby waives any right secured to them by the laws of
the State of Nevada;
f. The fact that a court may view any provision
of the Loan Documents as unconscionable, against public policy or
subject to an obligation that the parties to the Loan Documents
act reasonably or in a commercially reasonable manner; and
<PAGE>
BHF - Bank Aktiengesellschaft
Gerald Motors, Inc.
April 14, 1997
Page 7
g. The fact that certain remedies contained in
the Loan Documents may be qualified under the laws of the State
of Nevada, none of which qualifications will materially interfere
with the practical realization of the benefits and security
provided thereby.
5. The Security Agreement is sufficient to
create a security interest in the accounts, chattel paper,
negotiable documents, goods and general intangibles included as a
part of the Collateral. The Deed of Trust is sufficient to
create a valid lien in all right, title and interest of Borrower
in and to the mining claims and water rights set forth on
Exhibits A and B of the Deed of Trust.
6. To the best of our knowledge (i) there are no
actions, suits or proceedings pending or threatened against
Borrower in any court at law or in equity in Clark County, Nevada
or before or by any governmental department, commission, board,
bureau, agency or instrumentality within the State of Nevada
which are material, either individually or in the aggregate, to
the business, financial condition or prospects of Borrower or
could, if adversely decided, have a Material Adverse Effect.
The foregoing opinions are subject to the following
additional qualifications:
1. We express no opinion as to the effectiveness of
any provision of the Loan Documents permitting retention by a
lender of insurance or condemnation proceeds in excess of the
impairment of such lender's security.
2. We express no opinion as to the effect of a
lender's security interest in personal property proceeds as
against the rights of a trustee (or debtor in possession) in
bankruptcy in proceeds, in the event of insolvency proceedings
instituted by or against Borrower where such security interest in
proceeds is not one of those described in NRS 104.9306(4).
3. We express no opinion concerning the validity,
perfection, or priority of a security interest in proceeds (as
defined in NRS 104.9306) ten days after Borrower's receipt
thereof, unless: (i) the proceeds are collateral in which a
security interest may be perfected by filing in the offices where
the Financing Statements have been filed and, if the proceeds are
acquired with cash proceeds, the description of collateral in the
Financing Statements indicates the types of property
constituting the proceeds; (ii) the proceeds are identifiable
cash proceeds; or (iii) the security interest in the proceeds is
perfected before the expiration of the ten day period.
4. We express no opinion as to the effectiveness
under all circumstances of waivers of rights available to debtors
or obligors under the laws of the State of Nevada.
5. We express no opinion as to the effectiveness of
any provision, directly or indirectly, requiring that any
consent, modification, amendment, or waiver be in writing.
<PAGE>
BHF - Bank Aktiengesellschaft
Gerald Motors, Inc.
April 14, 1997
Page 8
6. We express no opinion as to the validity or
enforceability of any provision of the Loan Documents which
imposes a penalty for late payment or other impositions for
penalties or forfeitures; or provides that remedies or rights are
not exclusive, that every remedy or right is cumulative and may
be exercised in addition to or with any right or remedy does not
preclude recourse to one or more other rights or remedies.
7. We express no opinion as to a lender's ability to
appoint a receiver to take possession of the real or personal
property without first proving, among other things, impairment of
lender's security interest in such property.
8. We express no opinion as to the validity or
enforceability of any provision selecting a forum for the
institution of any action at law or in equity.
9. We express no opinion as to the enforceability of
any provision in the Loan Documents releasing a party from, or
indemnifying a party against, liability for its own wrongful or
negligent acts or where such release or indemnification is
contrary to public policy.
10. We express no opinion as to the enforceability of
any liquidated damage provision in the Loan Documents in the
event that actual damages can be determined, or in the event that
the liquidated damages are disproportionate to the actual damages
incurred.
11. We express no opinion as to the limitations
imposed by the remedies section of Article 9 of the Nevada
Uniform Commercial Code with respect to "notice" and "commercial
reasonableness" in foreclosing security interests in real
property.
12. As stated previously, we express no opinion as to
the title to, or ownership of, any of the Collateral or Property
contemplated as security by the Loan Documents. We have
conducted no title search with respect to the Collateral, nor
have we verified the accuracy of any legal description or other
collateral description.
13. We express no opinion as to the perfection of
certain Collateral in the Loan Documents, including, without
limitation, (i) cash, cash proceeds, or instruments, that may
only be perfected by possession pursuant to the Nevada Uniform
Commercial Code; (ii) accounts, general intangibles, mobile goods
and a nonpossessory security interest in chattel paper, that are
perfected in accordance with the laws (including the conflict of
laws rules) of the jurisdiction in which the debtor is located;
(iii) goods covered by a certificate of title, that are governed
by the law (including the conflict of laws rules) of the
jurisdiction issuing the certificate of title until four months
after the goods are removed from that jurisdiction and thereafter
until the goods are registered in another jurisdiction, but in
any event not beyond surrender of the certificate; (iv) minerals;
and (v) water rights.
<PAGE>
BHF - Bank Aktiengesellschaft
Gerald Motors, Inc.
April 14, 1997
Page 9
14. We express no opinion as to the enforceability of
Section 1(b) (page 5) of the Deed of Trust with regard to
Trustor's waiver, following a foreclosure, of any rights it may
have under anti-deficiency legislation.
15. We express no opinion as to the enforceability of
Section 15 of the Deed of Trust.
16. Perfection of an assignment or other transfer of
water rights requires a notice of such assignment or transfer to
be provided to the Nevada State Engineer. Consequently, we
express no opinion as to the enforceability of the provisions of
the Loan Documents and the Financing Statements which purport to
convey certain of Borrower's water rights to the Lenders.
We direct your attention to the following:
1. Since the opinions expressed in this letter are
based upon the law in effect on the date hereof, we assume no
obligation to revise or supplement this opinion letter should
such law be changed by legislative action, judicial decision or
otherwise.
2. Under the laws of the State of Nevada, a financing
statement filed in the State of Nevada is effective for a period
of five years from the date of filing (and for an additional
period in certain limited circumstances). The effectiveness of a
financing statement may be continued, however, by filing a
continuation statement, in the manner prescribed by law, in the
office in which the financing statement was originally filed,
within six months prior to the end of each such five-year period.
If the Borrower changes its name or identity or if the
information in the Financing Statement otherwise becomes
inaccurate or incomplete, an amendment or supplement to the
Financing Statement or the filing of an additional financing
statement may be required.
3. NRS 107.080 limits a lender's ability to
(i) accelerate the maturity date of a loan or (ii) enforce a
default. Specifically, NRS 107.080 provides that where any
transfer in trust of any estate in real property is made to
secure the performance of an obligation or the payment of any
debt, the power of sale cannot be exercised by the trustee after
a breach of an obligation until: (i) the beneficiary or trustee
executes and records in the office of the county recorder of the
county in which the property is located a notice of breach and
election to sell; (ii) the grantor fails to remedy the deficiency
in performance or payment for a period of 35 days after the
recording of the notice; and (iii) not less than three months
elapse after the recording of the notice.
4. NRS 100.091 and NRS 106.105 require a lender to
comply with certain statutory procedures with the implementation
and maintenance of an impound account in connection with a loan
secured by real property.
These opinions are effective as of the date hereof. No
extension of our opinions may be made by implication or
otherwise. We express no opinion other than as herein expressly
<PAGE>
BHF - Bank Aktiengelsellschaft
Gerald Motors, Inc.
April 14, 1997
Page 10
set forth. Our opinions are not to be otherwise quoted in whole
or in part without the prior express, written consent of this
firm. These opinions are intended for your exclusive use in
connection with the transactions described in the Loan Documents
and may not be relied upon by any person other than you, and your
counsel and assignees, or the respective successors in interest.
Sincerely,
<PAGE>
EXHIBIT D
LOSS PAYABLE ENDORSEMENT
Policy No.:
Named Insured: Alta Gold Co.
_______________________________________________________
Name of Loss Payees and Additional Insureds: BHF-BANK
Aktiengesellschaft, New York Branch and Gerald Metals,
Inc.
Respective Addresses:
590 Madison Avenue
New York, New York 10022-2540
6 High Ridge Park,
Stamford, Connecticut 06905
Interest/Description of Property:
Loss under this policy will be payable to the
above named Loss Payees and Additional Insureds as
Lenders' or mortgagees' interests may appear.
The Loss Payees and Additional Insureds now have
or will acquire from time to time an insurable interest
in certain property insured under this policy Such
interests will be established by documentary or other
written evidence (including, without limitation, a
security agreement).
The interest of the Loss Payees and Additional
Insureds will not be impaired by:
1. any act or neglect of the borrower,
mortgagor or owner of the above described
property except as provided in the last
paragraph of this endorsement;
2. any change in the title or ownership of
the property; or
3. a more hazardous occupancy of the
premises where the property is located
than is permitted by this policy.
We reserve the right to cancel this policy at any
time as provided by its terms. If we do so, this
policy will continue in force for the benefit only of
the Loss Payees and Additional Insureds for sixty (60)
days after notice to the Loss Payees and Additional
Insureds of such cancellation and will then cease.
Whenever we will pay the Loss Payees and
Additional Insureds any sum for loss or damage under
this policy and claim that, as to the borrower,
mortgagor or owner, no liability existed then we will,
to the extent of such payment, be legally subrogated to
all the rights of the party to whom the payment will be
<PAGE>
made, under all securities held as collateral to the
debt. At our option, we may pay the Loss Payees and
Additional Insureds the whole principal due or to grow
due on the debt with interest, and thereupon receive a
full assignment and transfer of the debt and of the
mortgage and all of such other securities as evidence
of the interest of the Loss Payees and Additional
Insureds in the described property. However, no
subrogation will impair the Loss Payees and Additional
Insureds' right to recover the full amount of its claim
against the borrower, mortgagor or owner.
All other provisions of the policy apply.
<PAGE>
10.02
<PAGE>
THIS DOCUMENT IS ALSO A FIXTURE FILING IN ACCORDANCE WITH
NRS 104.9402(6)
DEED OF TRUST
ASSIGNMENT OF RENTS AND ROYALTIES,
SECURITY AGREEMENT AND FINANCING STATEMENT
(NEVADA)
THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS AND ROYALTIES,
SECURITY AGREEMENT AND FINANCING STATEMENT (the "Deed of Trust"),
is made as of the 10th day of April, 1997, by ALTA GOLD CO., a
Nevada corporation, herein called "Trustor", whose mailing
address is 601 Whitney Ranch Drive, Suite 10, Henderson, Nevada
89014, in favor of FIRST AMERICAN TITLE COMPANY OF NEVADA, a
Nevada corporation, as trustee, herein called "Trustee", whose
address is 241 Ridge Street, Reno, Nevada 89504, for the benefit
of BHF-BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH with its
principal office at 590 Madison Avenue, New York, New York 10022-
2540 ("BHF") and GERALD METALS, INC., a Delaware corporation with
an office located at 6 High Ridge Park, Stamford, Connecticut
06905 ("Gerald" and together with BHF, each a "Beneficiary" and
collectively the "Beneficiaries"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed
thereto in the "Loan Agreement" (as defined below).
W I T N E S S E T H
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, Trustor hereby
irrevocably grants, transfers and assigns to Trustee in trust
with power of sale and right of entry and possession, all right,
title and interest which Trustor presently has or may hereafter
acquire in and to certain mining claims, easements, rights of way
and water rights, consisting of patented mining claims,
unpatented mining claims, unpatented millsite claims (and any
amendments or relocations of such unpatented mining and millsite
claims) and water rights, on properties (the "Mining Property")
located in Elko and White Pine Counties, Nevada, as more
particularly described in EXHIBITS A AND B hereto and made a part
hereof;
TOGETHER with all precious and non-precious metals and other
mineral deposits, ore in place or otherwise, water and water
rights (including, without limitation, the water rights permits
described in EXHIBITS A AND B hereto), leases covering any of the
Mining Property, assignable governmental permits, easements,
royalties in favor of Trustor, revenues, rents, issues, proceeds,
including cash proceeds, and profits thereof, said items to be
collectively a part of and included in the term "Mining
Property"; subject, however, to the right, power and authority
hereinafter given
<PAGE>
to and conferred upon each Beneficiary to collect and apply such
rents, royalties, issues, revenues and profits.
FOR THE PURPOSE OF SECURING:
I. Full and timely payment and performance by Trustor
of each and every agreement, covenant, term and condition of (i)
that certain Loan Agreement of even date herewith among Trustor
and each Beneficiary (as amended, hereinafter referred to as the
"Loan Agreement"); (ii) that certain Refining Agreement of even
date herewith between Trustor and Gerald (as amended, the
"Refining Agreement"); (iii) that certain Trading Agreement of
even date herewith between Trustor and Gerald (as amended, the
"Trading Agreement"), (iv) that certain Secured Promissory Note
of even date herewith issued by Trustor to BHF pursuant to the
Loan Agreement and that certain Secured Promissory Note of even
date herewith issued by Trustor to Gerald pursuant to the Loan
Agreement (each a Note and, collectively, the "Notes"); and (v)
all other agreements and instruments now or hereafter securing
either of the Note or the Loan Agreement (the documents referred
to in the immediately preceding clauses (i) through (v),
inclusive, collectively the "Loan Documents" and individually as
a "Loan Document").
II. Full and timely performance of each agreement of
Trustor herein contained.
III. Full and timely performance by Trustor of all the
terms, conditions, agreements and obligations in the Loan
Documents.
IV. Full and timely payment of all monies which become
due and payable to either Beneficiary or Trustee under the
provisions of this Deed of Trust.
TRUSTOR REPRESENTS AND WARRANTS THAT:
Trustor is the sole owner of the Mining Property and
there are no liens or encumbrances affecting the Mining Property
which have been created by, through or under Trustor, other than
the lien of this Deed of Trust which shall be and remain a first
lien on the Mining Property (subject only to (i) in the case of
unpatented mining claims, the paramount title of the United
States of America and the requirements of a valid discovery and
(ii) liens imposed by a governmental authority for taxes,
assessments or charges not yet due.
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR
AGREES:
A. To keep the Mining Property in good condition and
repair; not to remove or demolish any structure or improvement
used in the operation of the Mining Property, except in the
ordinary course; to complete or restore promptly and in a good
and workmanlike manner any structure and improvement which may be
constructed, damaged or destroyed thereon, except in the ordinary
course; to comply with all material and applicable laws affecting
the Mining Property or requiring any alterations or improvements
to be made thereon; and not to commit, suffer or permit any act
upon the Mining Property in violation of a material and
applicable law (except that, in the case of any violation of
health and safety laws or environmental laws, the violation shall
not
-2-
<PAGE>
be a default so long as Trustor is diligently effecting a cure of
the same) or which could invalidate any insurance coverage on the
Mining Property; not to abandon any mining claims other than non-
millsite claims with no proven reserves and as to which the prior
written consent of each Beneficiary has been obtained, which
consent will not be unreasonably withheld.
B. To provide, maintain and deliver to each
Beneficiary fire and extended coverage insurance on the
structures located on the Mining Property in a sum no less than
the value thereof with loss payable to Beneficiaries, as their
respective interests appear, in such form, for such periods and
written by such companies as may be reasonably satisfactory to
Beneficiaries; all such policies shall provide for at least
thirty (30) days' written minimum cancellation notice to each
Beneficiary; Trustor shall furnish each Beneficiary with
certificates or other evidence satisfactory to such Beneficiary
of compliance with the foregoing insurance provisions.
C. To appear in and defend any action or proceeding
purporting to affect the security hereof, and to pay all costs
and expenses of all parties, including each beneficiary and,
including cost of evidence to title and attorneys' fees, in any
such action or proceeding in which any Beneficiary or Trustee may
appear, and in any suit brought by any Beneficiary to foreclose
or enforce any provisions of this Deed of Trust.
D. To pay, at least ten (10) days before delinquency,
all claim maintenance fees, taxes and assessments affecting the
Mining Property and, when due, all material encumbrances, charges
and liens on the Mining Property or any part thereof, with
interest, which appear to be prior or superior hereto, except
permitted liens as set forth in EXHIBIT C hereto, and provided
that Trustor shall have the right to contest the same.
E. To pay immediately upon notice all sums expended by
any Beneficiary or Trustee pursuant to the provisions of this
Deed of Trust (including, without limitation, expenses incurred
under paragraph 6 below), with interest from date such notice is
given, at the Default Rate (as provided in the Loan Agreement);
provided, however, all agreements between Trustor and
Beneficiaries are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to
Beneficiaries for the use, forbearance or detention of
indebtedness evidenced or secured hereby exceed the maximum
permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date
hereof, provided, however, that in the event there is a change in
the law which results in a higher permissible rate of interest,
then this Deed of Trust shall be governed by such new law as of
its effective date. In this regard, it is expressly agreed that
it is the intent of Trustor and Beneficiaries in the execution,
delivery and acceptance of this Agreement to contract in strict
compliance with the laws of the State of New York from time to
time in effect. If, from any circumstance whatsoever,
fulfillment of any provision hereof or of the Loan Documents at
the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law,
then the obligation to be fulfilled shall automatically be
reduced to the limit of such validity, and if from any
circumstances Beneficiaries should ever receive as interest an
amount which would exceed the highest lawful rate such amount
which would be excessive interest shall be applied to the
reduction of the principal balances of the Notes and not to the
payment of interest. This
-3-
<PAGE>
provision shall control every other provision of all agreements
between Trustor and Beneficiaries in connection with the
transactions provided for in the Loan Documents.
F. Should Trustor fail to make any payment or to do
any act as herein provided, then any Beneficiary or Trustee, but
without obligation to do so, and upon twenty (20) days' written
notice or demand upon Trustor, and without releasing Trustor from
any obligation hereof, Trustee or such Beneficiary may make or do
the same in such manner and to such extent as either may deem
necessary to protect the security hereof, such Beneficiary or
Trustee being authorized to enter upon the Mining Property for
such purposes, to appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers
of such Beneficiary or Trustee, and to pay, purchase, contest or
compromise any encumbrance, charge or lien which in the judgment
of either appears to be prior or superior hereto, except
permitted liens as set forth in EXHIBIT C hereto, and, in
exercising any such powers, to pay (or reimburse each Beneficiary
for) necessary expenses, employ counsel and pay reasonable
counsel fees.
G. To perform all work on the Mining Property in a
good workmanlike and minerlike manner; to comply in all material
respects with all applicable laws, rules and regulations of any
governmental agency, whether state or federal, including, without
limitation, all laws, rules and regulations relating to the
maintenance and reclamation of the Mining Property to the extent
that such is required for activities conducted during the term
hereof; and to perform all work, including required reclamation,
in a timely fashion and hold such Beneficiary and Trustee
harmless from any liability therefor.
H. Subject to permitted liens as set forth in EXHIBIT
C hereto, to do all things necessary to maintain this Deed of
Trust as a prior perfected lien on the Mining Property; and to
allow no liens to remain on the Mining Property on account of any
debt for materials or services furnished to Trustor for the
benefit of the Mining Property during the term hereof.
I. To hold each Beneficiary and Trustee harmless and
indemnify each Beneficiary and Trustee against any claims,
losses, damages, expenses and attorneys' fees, and to defend each
Beneficiary and Trustee from any suit, claim, judgment or demand
whatsoever, relating to or arising out of this Deed of Trust, the
Loan Agreement or any transaction contemplated hereby or thereby.
J. To maintain at its sole expense liability insurance
covering the activities on the Mining Property and naming each
Beneficiary and Trustee as co-insureds. At Trustor's sole
option, such insurance may be by way of endorsement to Trustor's
general liability insurance or by separate policy. Such policy
shall have personal injury limits of not less than One Million
Dollars ($1,000,000) per person and Two Million Dollars
($2,000,000) per accident, and Six Million Dollars ($6,000,000)
umbrella coverage. All such policies shall be prepaid annually
in advance and shall provide for at least ten (10) days' written
minimum cancellation notice to each Beneficiary; Trustor shall
furnish each Beneficiary with certificates or other evidence
satisfactory to such Beneficiary of compliance with the foregoing
insurance provisions. Each Beneficiary and Trustee shall be
provided with a copy of the insurance policy in force within ten
(10) days of the receipt of such policy by Trustor.
-4-
<PAGE>
K. To pay maintenance fees or perform such labor as is
required to maintain all unpatented mining claims included in the
Mining Property, to timely record and file appropriate proofs
thereof with the County Recorders of Elko and White Pine
Counties, Nevada, the United States Bureau of Land Management,
and such other place or places as may be required from time to
time and to furnish to each Beneficiary and Trustee appropriate
proofs of such payment or performance. As to unpatented millsite
claims, Trustor shall timely record and file with the County
Recorders of Elko and White Pine Counties, Nevada, the United
States Bureau of Land Management and such other place or places
as may be required from time to time and shall furnish to
Beneficiary and Trustee appropriate proofs of such payment or
performance.
In the event of the repeal or substantial modification
of the current General Mining Law during the life of this Deed of
Trust with Assignment of Rents and Royalties, Security Agreement
and financing statement, such that the interest of Trustor
hereunder is modified, reduced or transformed, Trustor shall
consult with Beneficiary to determine how best to preserve the
interests of Beneficiary hereunder. Trustor shall take no action
as a result of such repeal or substantial modification without
the written consent of each Beneficiary having been first
obtained, such consent not to be unreasonably withheld.
L. If any state, federal, municipal or other
governmental law, order, rule or regulation, passed subsequent to
the date hereof, in any manner changes or modifies existing laws
governing the taxation of deeds of trust or debts secured by
deeds of trust, or the manner of collecting taxes so as to
materially and adversely affect the rights of any Beneficiary,
the entire balance of the indebtedness and other sums secured by
this Deed of Trust and all interest accrued thereon shall (unless
Trustor makes such Beneficiary whole) upon thirty (30) days'
notice become due and payable forthwith at the option of such
Beneficiary.
IT IS MUTUALLY AGREED THAT:
1. The parties to this Deed of Trust agree that their
rights and obligations under this Deed of Trust and under the
Loan Agreement and the Notes shall be governed by and construed
and interpreted in accordance with the laws of the State of New
York, without giving effect to the conflicts-of-law rules and
principles of such state. The parties further agree and
stipulate that the State of New York has a substantial
relationship to the parties and to the underlying transactions
secured by this Deed of Trust. Notwithstanding the foregoing,
the parties agree that:
(a) The procedures governing the enforcement by
any Beneficiary of the provisional remedies against
Trustor, including by way of illustration but not
limitation, actions for replevin, for claim and
delivery of property, for injunctive relief or for the
appointment of a receiver shall be governed by the laws
of the State of Nevada;
(b) Trustee shall comply with applicable Nevada
law to the extent required in connection with the
foreclosure of the security interests and liens created
-5-
<PAGE>
hereby; provided, however, that this subparagraph shall
in no event be construed to provide that the
substantive law of the State of Nevada shall apply to
the indebtedness secured by this Deed of Trust or
evidenced by the Loan Agreement or any Note, which are
and shall continue to be governed by the substantive
law of the State of New York. The parties further
agree that any Beneficiary may enforce its rights under
this Deed of Trust, the Loan Agreement and any Note,
including, but not limited to, its rights to sue
Trustor, to collect any outstanding indebtedness or to
obtain a judgment for any deficiency following
foreclosure, in accordance with the laws of the State
of New York, and Trustor hereby waives, to the maximum
extent permitted by applicable law, any rights which it
may have under anti-deficiency legislation. Trustor
agrees to pay all reasonable attorneys' fees and legal
expenses incurred in enforcing the rights, powers and
remedies of Trustee and each Beneficiary under this
Deed of Trust.
2. Notwithstanding anything contained herein which may
be to the contrary, this Deed of Trust, the Loan Agreement, any
agreement, deed of trust or other document referred to herein by
reference, whether specifically or generally, and the
transactions contemplated hereby do not and will not constitute,
create, indirect, actual or practical ownership of Trustor by any
Beneficiary, or control, affirmative or negative, direct or
indirect, by any Beneficiary over the programming, management, or
any other aspect of the day-to-day operation of Trustor, which
control remains in Trustor, its shareholders and board of
directors.
3. By allowing payment of any sum secured hereby after
its due date, neither Beneficiary waives its rights either to
require prompt payment when due of all other sums so secured or
to declare default for failure to pay such other sums when due.
4. Upon written request of each Beneficiary stating
that all sums secured hereby have been paid, and upon surrender
of this Deed of Trust and a copy of the Notes and Loan Agreement
marked "Paid" and certified to be a true and correct copy by each
Beneficiary to Trustee, and upon payment of its fees, Trustee
shall reconvey to Trustor, without warranty, the real property
then held hereunder.
5. Trustor hereby gives to and confers upon each
Beneficiary the right, power and authority, during the
continuance of this Deed of Trust, to collect the rents,
royalties due to Trustor, issues and profits of the Mining
Property. Prior to the occurrence of any Event of Default (as
that term is herein defined) by Trustor, Trustor shall have a
license to collect and retain such rents, royalties, issues and
profits as they become due and payable, which license shall be
terminable at the sole option of either Beneficiary upon the
occurrence and during the continuance of any Event of Default.
6. Upon the occurrence of any Event of Default, each
Beneficiary may, upon twenty (20) days' written notice, either in
person, by agent or by a receiver to be appointed by a court, and
without regard to the adequacy of any security for the
indebtedness or obligations secured hereby, enter upon and take
possession of the Mining Property or any part thereof in its own
name, sue for or otherwise collect such rents, royalties, issues
and profits, including those
-6-
<PAGE>
past due and unpaid, and apply the same, less costs and expenses
of operation and collection, including reasonable attorneys'
fees, upon any indebtedness or obligation secured hereby, in such
order as such Beneficiary may determine.
7. It is understood and agreed that neither the
foregoing assignment of rents and royalties, issues and profits
to any Beneficiary nor the exercise by such Beneficiary of any of
its rights or remedies under this Deed of Trust, shall be deemed
to make such Beneficiary "mortgagee-in-possession" or otherwise
responsible or liable in any manner with respect to the Mining
Property or the use, occupancy, enjoyment or operation of all or
any portion thereof, unless and until such Beneficiary, in person
or by agent, assumes actual possession thereof; nor shall the
appointment of a receiver for the Mining Property by any court,
either at the request of such Beneficiary or by agreement with
Trustor, or the entering into possession of the Mining Property
or any part thereof by such receiver be deemed to make such
Beneficiary "mortgagee-in-possession" or otherwise responsible or
liable in any manner with respect to the Mining Property or the
use, occupancy, enjoyment or operation of all or any portion
thereof. Further, the entering upon and taking possession of the
Mining Property, the collection of such rents, royalties, issues
and profits, and the application thereof as aforesaid, shall not
cure or waive any default or notice of default hereunder or
invalidate any act done pursuant to such notice.
8. The following definitions shall apply for purposes
of this paragraph 8 and paragraphs 9, 10, 11 and 12 below:
(a) "Environmental Laws" shall mean and include
each and every federal, state or local statute,
regulation or ordinance or any judicial or
administrative decree or decision, whether now existing
or hereafter enacted, promulgated or issued, with
respect to any Hazardous Materials (as hereinafter
defined), drinking water, groundwater, wetlands,
landfills, open dumps, storage tanks, underground
storage tanks, solid waste, waste water, storm water
run-off, waste emissions or wells, but taking into
account exceptions and exclusions applicable to the
mining industry in general. Without limiting the
generality of the foregoing, the term shall encompass
each of the following statutes and regulations
promulgated thereunder as well as any amendments and
successors to such statutes and regulations, as may be
enacted and promulgated from time to time: (i) the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified in scattered sections
of 26 U.S.C., 33 U.S.C., 42 U.S.C. and 42 U.S.C. Sec. 9601
ET SEQ.); (ii) the Resource Conservation and Recovery
Act of 1976 (42 U.S.C. Sec. 6901 ET SEQ.); (iii) Hazardous
Materials Transportation Act (49 U.S.C. Sec. 1801 ET SEQ.);
(iv) the Toxic Substances Control Act (15 U.S.C. Sec. 2061
ET SEQ.); (v) the Clean Water Act (33 U.S.C. Sec. 1251 ET
SEQ.); (vi) the Clean Air Act (42 U.S.C. Sec. 7401 ET
SEQ.); (vii) the Safe Drinking Water Act (21 U.S.C.
Sec. 349; 42 U.S.C. Sec. 201 and Sec. 300f ET SEQ.); (viii)
the National Environmental Policy Act of 1969 (42 U.S.C.
Sec. 4321); (ix) the Superfund Amendment and
Reauthorization Act of 1986 (codified in scattered
sections of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42
U.S.C.); and (x) Title III of the Superfund Amendment
and Reauthorization Act (40 U.S.C. Sec. 1101 ET SEQ.).
-7-
<PAGE>
(b) "Hazardous Materials" shall mean each and
every element, compound, chemical mixture, contaminant,
pollutant, material, waste or other substance which is
defined, determined or identified as hazardous or toxic
under any Environmental Law but taking into account
exceptions and exclusions applicable to the mining
industry in general. Without limiting the generality
of the foregoing, the term shall mean and include:
(i) "chemical substance or mixture" as
defined in the Toxic Substances Control Act, as
amended, and regulations promulgated thereunder;
(ii) "hazardous materials" as defined in the
Hazardous Materials Transportation Act, as
amended, and regulations promulgated thereunder;
(iii) "hazardous substances" as defined in
the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the
Superfund Amendment and Reauthorization Act of
1986, or Title III of the superfund Amendment and
Reauthorization Act, each as amended, and
regulations promulgated thereunder;
(iv) "hazardous waste" as defined in the
Resource Conservation and Recovery Act of 1976, as
amended, and regulations promulgated thereunder;
(c) "Indemnified Parties" shall mean Trustee,
each Beneficiary, their respective parent, subsidiaries
and affiliates, each of their respective shareholders,
directors, officers, employees and agents, and the
successors and assigns of any of them; and "Indemnified
Party" shall mean any one of the Indemnified Parties.
(d) "Release" shall mean any reportable spilling,
leaking, pumping, pouring, emitting, emptying,
discharging, injecting, storing, escaping, leaching,
dumping, or discarding, burying, abandoning, or
disposing into the environment.
(e) "Threat of Release" shall mean a substantial
likelihood of a Release which requires action to
prevent or mitigate damage to the environment which may
result from such Release.
9. Trustor represents and warrants to Trustee and each
Beneficiary as follows:
(a) To Trustor's knowledge, no condition,
activity or conduct currently exists on or in
connection with the Mining Property which constitutes a
material violation of any Environmental Law.
-8-
<PAGE>
(b) During Trustor's ownership and, to Trustor's
knowledge prior to its ownership, there has been no
Release or Threat of Release of any Hazardous Materials
on, upon or into the Mining Property which have not
been corrected, nor, to Trustor's knowledge, has there
been any such Release or Threat of Release of any
Hazardous Materials on, upon or into any real property
in the vicinity of the Mining Property which, through
soil or groundwater migration, could reasonably be
expected to come to be located on the Mining Property.
(c) To Trustor's knowledge, there are no existing
or closed underground storage tanks on the Mining
Property.
(d) To Trustor's knowledge, none of the following
are or will be located in, on, under or constitute a
part of the Mining Property: asbestos or asbestos-
containing material in any form or condition; urea
formaldehyde insulation; transformers or other
equipment which contain dicletric fluid containing
polychlorinated biphenyls; or leaded paint.
(e) To Trustor's knowledge, there are no existing
or closed sanitary landfills (other than any existing,
licensed and active sanitary landfill on the Mining
Property), solid hazardous waste disposal sites, or
hazardous waste treatment, storage or disposal
facilities on or affecting the Mining Property.
(f) No notice has been issued to Trustor by any
agency, authority, or unit of government that Trustor
has been identified as a potentially responsible party
under any Environmental Laws with respect to the Mining
Property.
(g) There exists no investigation, action,
proceeding, or claim by any agency, authority, or unit
of government or by any third party which could result
in any material liability, penalty, sanction, or
judgment under any Environmental Law with respect to
any condition, use or operation of the Mining Property.
(h) There has been no claim by any party that any
use, operation, or condition of the Mining Property has
caused any nuisance.
10. Trustor covenants and agrees with Trustee and each
Beneficiary that Trustor shall:
(a) comply in all material respects with all
applicable Environmental Laws;
(b) not store (except in material compliance with
all applicable Environmental Laws pertaining thereto),
dispose of, Release or allow the Release of any
Hazardous Materials on the Mining Property;
-9-
<PAGE>
(c) neither directly nor indirectly transport or
arrange for the transport of any Hazardous Materials
(except in material compliance with all applicable
Environmental Laws pertaining thereto); and
(d) upon the request of Trustee or any
Beneficiary, take all reasonable action (including,
without limitation, the conducting of environmental
assessments at the sole expense of Trustor in
accordance with paragraph 12 below) to confirm that no
Hazardous Materials are or ever were stored, Released
or disposed of on the Mining Property.
11. Trustor covenants and agrees, at Trustor's sole
cost and expense, to indemnify, defend (at trial and appellate
levels, and with attorneys, consultants and experts acceptable to
Trustee and each Beneficiary) and hold each Indemnified Party
harmless from and against any and all liens, damages, losses,
liabilities, obligations, settlement payments, penalties,
assessments, citations, directives, claims, litigation, demands,
defenses, judgments, suits, proceedings, costs, disbursements or
expenses of any kind or of any nature whatsoever (including,
without limitation, attorneys', consultants' and experts' fees
and disbursements incurred in investigating, defending, settling
or prosecuting any claim, litigation or proceeding) which may at
any time be imposed upon, incurred by or asserted or awarded
against such Indemnified Party or the Mining Property and arising
directly or indirectly from or out of:
(a) the Release or Threat of Release of any
Hazardous Materials on, in, under or affecting all or
any portion of the Mining Property or any surrounding
areas, regardless of whether or not caused by or within
the control of Trustor;
(b) the violation of any Environmental Laws
relating to or affecting the Mining Property or
Trustor, whether or not caused by or within the control
of Trustor;
(c) the failure of Trustor to comply fully with
the terms and conditions of this paragraph 11;
(d) the violation of any Environmental Laws in
connection with other real property of Trustor which
gives or may give rise to any rights whatsoever in any
party with respect to the Mining Property by virtue of
any Environmental Laws;
(e) the breach of any representation or warranty
contained in this paragraph 11; or
(f) the enforcement of this paragraph 11,
including, without limitation (i) the costs of
assessment, containment and/or removal of any and all
Hazardous Materials from all or any portion of the
Mining Property or any surrounding areas, (ii) the
costs of any actions taken in response to a Release or
Threat of Release of any Hazardous Materials on, in,
under or affecting all or any portion of the Mining
Property or any surrounding areas to prevent or
minimize such Release or Threat
-10-
<PAGE>
of Release so that it does not migrate or otherwise
cause or threaten danger to present or future public
health, safety, welfare or the environment, and (iii)
costs incurred to comply with the Environmental Laws in
connection with all or any portion of the Mining
Property or any surround areas. Trustee's rights under
this paragraph shall be in addition to all other rights
of Trustee under this Deed of Trust, and the other
documents and payments by Trustor under this paragraph
shall not reduce Trustor's obligations and liabilities
under any document.
12. If Trustor receives any notice or obtains
knowledge of (i) any potential or known Release or Threat of
Release of any Hazardous Materials at or from the Mining
Property, notification of which must be given to any governmental
agency under any Environmental Law, or notification of which has,
in fact, been given to any governmental agency, or (ii) any
complaint, order, citation or notice with regard to air
emissions, water discharges, or any other environmental health or
safety matter affecting Trustor and the Mining Property (an
"Environmental Complaint") from any person or entity (including,
without limitation, the Environmental Protection Agency), which
would materially adversely affect Trustor's ability to pay the
Obligations, then Trustor promptly shall notify Trustee and each
Beneficiary orally and in writing of said Release or Threat of
Release or Environmental Complaint. Upon such notification, any
Beneficiary may, at its election without regard to whether an
Event of Default has occurred, obtain one or more environmental
assessments of the Mining Property prepared by a geohydrologist,
an independent engineer or other qualified consultant or expert
approved by each Beneficiary which evaluates or confirms (i)
whether any Hazardous Materials are present in the soil or water
at or adjacent to the Mining Property, and (ii) whether the use
and operation of the Mining Property comply in all material
respects with all applicable Environmental Laws. Environmental
assessments may include detailed visual inspections of the Mining
Property, including, without limitation, any and all storage
areas, storage tanks, drains, dry wells and leaching areas, and
the taking of soil samples, surface water samples and ground
water samples, as well as such other investigations or analyses
as are necessary or appropriate for a complete determination of
the compliance of the Mining Property and the use and operation
thereof with all applicable Environmental Laws. All such
environmental assessments shall be at the reasonable cost and
expense of Trustor.
13. The following shall be deemed to be events of
default hereunder ("Events of Default"):
(a) The occurrence of any Event of Default under
the Loan Agreement, the Refining Agreement, the Trading
Agreement or any Loan Document;
(b) Any default in the payment when due of the
principal of, or fees or interest on indebtedness
evidenced by, any Note;
(c) Failure by Trustor to timely perform, comply
with or observe any term, covenant, agreement or
provision contained in this Deed of Trust and such
failure shall continue unremedied for a period of
twenty (20) days after notice thereof to Trustee by any
Beneficiary or such longer period (but in any event not
longer than
-11-
<PAGE>
thirty (30) days) as may be required to complete
performance of such obligation (but only if such
performance is diligently commenced during such twenty
(20) day period and diligently continued during such
longer period, and provided that the delay occasioned
by such longer period would not, in the reasonable
judgment of such Beneficiary, have a material adverse
affect on the financial condition, operations or
business taken as a whole of Trustor);
(d) Any representation or warranty made by
Trustor in or in connection with the execution,
delivery or performance of this Deed of Trust, the Loan
Agreement, any Note, any Loan Document or any
agreement, deed of trust or other document referred to
herein by reference, whether specifically or generally,
shall prove to have been false or misleading in any
material respect when made;
(e) Any statement made by Trustor or in or
pursuant to this Deed of Trust, the Loan Agreement, any
Note, any Loan Document or any agreement, deed of trust
or other document referred to herein by reference,
whether specifically or generally, or in any
certificate, notification or report furnished pursuant
to said documents shall prove to have been false or
misleading in any material respect when made;
(f) Default with respect to any evidence of
indebtedness of Trustor, if the effect of such default
is to accelerate the maturity of such indebtedness;
(g) Institution of judicial or nonjudicial
foreclosure or other proceedings to enforce any other
deed of trust or any junior security interest or other
lien or encumbrance, of any kind, upon the Mining
Property or any portion thereof, including proceedings
relating to the underlying property;
(h) Entry of any judgment against Trustor upon
which execution may be entered without being stayed on
appeal or dismissed within twenty (20) days thereof on
a claim not covered by insurance in an amount which, in
the reasonable opinion of any Beneficiary, if Trustor
were required to pay such amount, would adversely
affect Trustor's ability to pay its indebtedness under
the Loan Agreement, any Note, this Deed of Trust, any
Loan Document or any other agreement, deed of trust or
other document referred to herein by reference, whether
specifically or generally, or to perform its other
material obligations thereunder;
(i) Revocation or material variance of any
government approval required for the execution and
performance of Trustor's obligations under this Deed of
Trust, the Loan Agreement, any Note, any Loan Document
or any other agreement, deed of trust or other document
referred to herein by reference, whether specifically
or generally, as determined by any Beneficiary, under
this Deed of Trust, the Loan Agreement, any Note, any
Loan Document or any other
-12-
<PAGE>
agreement, deed of trust or other document referred to
herein by reference, whether specifically or generally;
(j) This Deed of Trust, the Loan Agreement, any
Note, any Loan Document or any other agreement, deed of
trust or other document referred to herein by
reference, whether specifically or generally or whether
partially or wholly, ceases to be in full force and
effect or the validity, binding effect or
enforceability thereof or any provision thereof has
been denied or disaffirmed by any party thereto (other
than any Beneficiary) or is declared or becomes void,
voidable or unenforceable;
(k) Without the prior written consent of each
Beneficiary, Trustor ceases or threatens to cease,
except for normal shutdowns or force majeure, to carry
on business or a substantial part of Trustor's property
or assets are seized (other than with payment of fair
and adequate compensation therefor);
(l) Failure to perform or observe any material
covenant, agreement or obligation undertaken by Trustor
in any agreement, lease or license pertaining to the
business conducted on the Mining Property (including,
without limitation, mineral leases, licenses and
tenements), and such default, is not remedied to the
reasonable satisfaction of each Beneficiary within
twenty (20) days after written notice of the default is
given to Trustor by any Beneficiary;
(m) Cancellation, surrender or voiding of any
agreement, lease, license or tenements pertaining to
the business conducted on the Mining Property (except a
surrender of an agreement, lease or license conditional
upon the grant of a substitute, substantially equal and
similar document), or, in the reasonable opinion of any
Beneficiary, the terms thereof are materially varied to
the prejudice of the holders or persons (including
Trustor) entitled to the benefit thereof except in
accordance with the terms thereof;
(n) Occurrence of any change in the financial
position of Trustor which in the reasonable opinion of
any Beneficiary adversely affects in a material and
adverse way the ability of Trustor to observe and
perform its obligations under this Deed of Trust or any
other agreement, deed of trust or other document
referred to herein by reference, whether specifically
or generally;
(o) Any encumbrance, sale, lease, assignment or
other transfer of any portion of the Mining Property is
made by Trustor.
14. If any Event of Default shall have occurred and be
continuing:
(a) Any Beneficiary may execute or cause Trustee
to execute a written notice of such default and of such
Beneficiary's election to cause the Mining Property, or
any portion thereof, to be sold to satisfy all
agreements and
-13-
<PAGE>
obligations hereunder, and shall cause any such notice
to be recorded in the Office of the Recorder of each
county wherein the Mining Property or some part thereof
is situated.
(b) Notice of sale having been given as then
required by law, and not less than the time then
required by law having elapsed after recordation of
such notice of default, Trustee, without demand on
Trustor, may sell the Mining Property at the time and
place of sale fixed by it in said Notice of Sale,
either as a whole or in separate parcels and in such
order as it may determine, at public auction to the
highest bidder for cash in lawful money of the United
States of America, payable at time of sale.
(c) Trustee may postpone sale of all or any
portion of the Mining Property by public announcement
at such time and place of sale, and from time to time
thereafter may postpone such sale by public
announcement at the time fixed by the preceding
postponement.
(d) Trustee shall deliver to a purchaser its deed
conveying the property so sold, but without any
covenant or warranty, express or implied. The recitals
in such deed of any matters of facts shall be
conclusive proof of the truthfulness thereof.
(e) Any person, including Trustor, Trustee or any
Beneficiary as herein defined, may purchase at such
sale.
(f) After deducting all costs, fees and expenses
of Trustee and of this Deed of Trust, including cost of
evidence of title and reasonable counsel fees in
connection with sale, Trustee shall apply the proceeds
of sale to payment of all sums expended under the terms
hereof not then repaid with accrued interest at fifteen
percent (15%) per annum, all other sums then secured
hereby and, the remainder, if any, to the persons
entitled thereto.
(g) Notwithstanding anything to the contrary
contained herein, any default by Trustor under any of
the Loan Agreement, this Deed of Trust, any Note, any
Loan Document or any other agreement or document
referred to herein by reference, either specifically or
generally, shall constitute a default under each and
every of the other agreements or documents described
herein.
15. Upon the occurrence of an Event of Default by
Trustor as described herein and after expiration of any period of
time provided for in N.R.S. 107.080(2)(c), upon written demand by
each Beneficiary, Trustor agrees to execute and deliver within
three (3) calendar days, a Deed in Lieu of Foreclosure in a form
acceptable to each Beneficiary.
16. Trustor (as debtor) hereby grants to each
Beneficiary (as creditor and secured party) as security for the
payment of the Notes and all other sums secured by this Deed of
Trust a
-14-
<PAGE>
security interest in all of the following described property
presently owned or hereafter acquired wherever the same be
situated relating to or arising from the Mining Property: (i) all
machinery, apparatus, equipment, severed ores and minerals, dore',
slurries, ore stock piles, fittings, fixtures any and all water
rights (including, without limitation, water certificate nos.
52895 and 52896) and articles of personal property of every kind
and nature whatsoever, including consumable goods, now or
hereafter located in or upon the Mining Property or any part
thereof, and used or useable in connection with any present or
future operation of the Mining Property and now owned or
hereafter owned by Trustor or leased by Trustor; together with
all building materials, goods and personal property on or off the
Mining Property intended to be affixed to or incorporated in the
Mining Property but not yet affixed to or incorporated in the
Mining Property and any and all rights to (i) general intangibles
including all accounts now owned or hereafter acquired, wherever
the same be situated; (ii) accounts receivable, contract rights,
general intangibles, rents and profits and any other form of
obligation requiring the payment of money to Trustor, and any
claim by Trustor for any of the foregoing arising from the Mining
Property and improvements now or hereafter located thereon; (iii)
all assignable licenses, permits, registrations, and governmental
approvals; (iv) Leases and Income (as defined below) with respect
to the Mining Property; (v) all accessions, parts, attachments,
and accessories used or intended for use in connection with any
of the foregoing; (vi) proceeds, products, proceeds of hazard
insurance and eminent domain proceedings, and condemnation awards
of all of the foregoing; and (vii) all substitutions,
replacements, repossessions, returns and records of any of the
foregoing.
For the purposes of the foregoing, the following definitions
shall apply:
"Income" shall mean all rents, security or similar deposits,
revenues, issues, royalties, earnings, products or proceeds,
profits, income and other benefits from the Mining Property.
"Leases" shall mean any Lease or agreement, written or oral,
demising any portion of the Mining Property, now or hereafter
existing, and all rights of Trustor thereto or therefrom.
Trustor shall execute any and all such documents, including
without limitation, financing statements pursuant to the Uniform
Commercial Code of the State of Nevada as either Beneficiary may
request, to preserve and maintain the priority of the lien
created hereby on property which may be deemed personal property
or fixtures, and shall pay to such Beneficiary on demand any
expenses incurred by such Beneficiary in connection with the
preparation, execution and filing of documents. Trustor hereby
authorizes and empowers each Beneficiary to execute and file, on
Trustor's behalf, all financing statements and refilings and
continuations thereof as such Beneficiary deems necessary or
advisable to create, preserve and protect said lien. This Deed
of Trust shall be deemed a security agreement as defined in said
Uniform Commercial Code and the remedies for any violation of the
covenants, terms and conditions of the agreements herein
contained shall be cumulative and (i) as prescribed herein, or
(ii) by general law, or (iii) as to such part of the security
which is also reflected in said financing statements by the
specific statutory consequences now or hereafter enacted and
specified in the Uniform Commercial Code, all at either
Beneficiary's sole election.
-15-
<PAGE>
Trustor and each Beneficiary agree that the filing of
financing statements in the records normally having to do with
personal property shall never be construed as in anywise
derogating from or impairing the express declaration and
intention of the parties hereto, hereinabove stated, that
everything used in connection with the production of income from
the Mining Property and/or adapted for use therein and/or which
is described or reflected in this Deed of Trust is, and at all
times and for all purposes and in all proceedings both legal or
equitable shall be regarded as part of the real estate encumbered
by this Deed of Trust irrespective of whether (i) any such item
is physically attached to the Improvements, (ii) serial numbers
are used for the better identification of certain equipment items
capable of being thus identified in a recital contained herein or
in any list with any Beneficiary or (iii) any such item is
referred to or reflected in any such financing statement so filed
at any time. Similarly, the mention in any such financing
statement of (1) rights in or to the proceeds of any fire and/or
hazard insurance policy, or (2) any award in eminent domain
proceedings for a taking or for lessening of value or (3)
Trustor's interest as lessor in any present or future lease or
rights to income growing out of the use and/or occupancy of the
property conveyed hereby, whether pursuant to lease or otherwise,
shall never be construed as in anywise altering any of the rights
of either Beneficiary as determined by this instrument or
impugning the priority of either Beneficiary's lien granted
hereby or by any other recorded document, but such mention in a
financing statement is declared to be solely for the protection
of each Beneficiary in the event any court or judge shall at any
time hold with respect to the matters set forth in the foregoing
clauses (1), (2) and (3) that notice of either Beneficiary's
priority of interest to be effective against a particular class
of persons, including but not limited to the federal government
and any subdivisions or entity of the federal government, must be
filed in the Uniform Commercial Code records.
17. This Deed of Trust shall be effective as a
financing statement filed as a fixture filing from the date of
the recording hereof in accordance with NRS 104.9402. In
connection therewith, the addresses of the Trustor as debtor
("Trustor") and each Beneficiary as secured party (each a
"Secured Party") are as set forth on page 1 hereof. The
foregoing address of each Beneficiary, as a Secured Party, is
also the address from which information concerning the security
interest may be obtained by any interested party. Portions of
the property subject to this fixture filing as identified in (a)
above are or are to become fixtures related to the real estate
described on Exhibits A and B to this Deed of Trust.
18. Trustor will, at its expense, execute, deliver,
file and record (in such manner and form as each Beneficiary may
require), or permit each Beneficiary to file and record, any
financing statements, fixture filing, any carbon, photographic or
other reproduction of a financing statement, fixture filing or
this Deed of Trust (which shall be sufficient as a financing
statement and fixture filing hereunder), any specific assignments
or other paper that may be reasonably necessary or desirable, or
that any Beneficiary may request, in order to create, preserve,
perfect or validate any security interest hereunder or to enable
such Beneficiary to exercise and enforce its rights hereunder
with respect to all fixtures included within the Mining Property,
and is to be filed for record in the Office of the County
Recorder of each county where any part of the real property is
situated. Trustor hereby appoints each Beneficiary as Trustor's
attorney-in-fact to execute in the name and behalf of Trustor
such additional financing statements as such Beneficiary may
request. The mailing address of Trustor is set forth on Page l
hereof and the address of each
-16-
<PAGE>
Beneficiary from which information concerning the security
interest may be obtained is also set forth on Page 1 hereof.
19. Subject to the provisions of paragraph 21 below,
this Deed of Trust applies to, inures to the benefit of, and
binds all parties hereto, their heirs, legatees, devisees,
administrators, executors, successors and assigns. In this Deed
of Trust whenever the context so requires, the masculine gender
includes the feminine and/or neuter, and the singular number
includes the plural. To the extent that any provisions hereof
conflict with specific provisions of the Loan Agreement, the
provisions of the Loan Agreement shall govern.
20. Each Beneficiary may, from time to time as
provided by statute or by a writing signed and acknowledged by
such Beneficiary and recorded in the Office of the County
Recorder of the county in which the Mining Property or any part
thereof as is then affected by this Deed of Trust is situated,
appoint another Trustee in place and stead of Trustee herein
named, and thereupon, Trustee herein named shall be discharged
and Trustee so appointed shall be substituted as Trustee
hereunder, with the same effect as if originally named Trustee
herein.
21. Trustor shall not sell, assign, convey, mortgage,
pledge, hypothecate or otherwise transfer (i) all or any part of
the Mining Property or (ii) all or any part of Trustor's interest
therein. Any violation or attempted violation of the provisions
of this paragraph 19 shall permit each Beneficiary to declare, at
beneficiary's option and with notice to Trustor, a default
hereunder.
22. EACH OF THE PARTIES WAIVES TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS DEED OF TRUST OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN.
23. All notices and other communications hereunder
shall be given or made by telex, telegraph, telecopy or in
writing or delivered to the intended recipient at its address set
forth on Page 1 hereof; or, as to any party, at such other
address as shall be designated by such party in a notice to the
other parties. All such communications shall be deemed to have
been duly given when transmitted by telex or telecopy, delivered
to the telegraph office or personally delivered or, in the case
of a mailed notice, upon receipt, in each case given or addressed
as aforesaid.
-17-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Deed
of Trust and Assignment of Rents and Royalties, Security
Agreement and financing statement as of the month, day and year
first above written.
"TRUSTOR"
ALTA GOLD CO., a Nevada corporation
By_________________________________
Title______________________________
STATE OF NEVADA )
:ss.
COUNTY OF CLARK )
This instrument was acknowledged before me on April ___,
1997 by ___________________as __________________ of Alta Gold
Co., a Nevada corporation
___________________________________
(Signature of Notary)
-18-
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT B
<PAGE>
EXHIBIT C
PERMITTED LIENS
(A)Property described in the following financing statements on
file on date hereof:
<TABLE>
<CAPTION>
COLLATERAL
FILING OFFICE SECURED PARTY FILE NO. FILE DATE DESCRIPTION
<S> <C> <C> <C> <C>
Nevada Secretary NERCO Exploration Company 91-10688 11/19/91 Escrow funds
of State
Cargill Leasing 95-08576 06/19/95 Equipment
Corporation (assigned to
Cargill Leasing
Receivables, LLC)
Cargill Leasing 95-12612 09/06/95 Equipment
Corporation (assigned to
Cargill Leasing
Receivables, LLC)
First National Bank of Ely 96- 3/ /96 Mill and
equipment
Lyon Credit Corp. 96-06852 5/3/96 Equipment
Cargill Leasing 97-02722 2/18/97 Equipment
Receivables, LLC
Concord Commercial 96-09309 6/13/96 Equipment
Clark County Gerald Metals, Inc. Bk 960716 7/16/96 All assets
Recorder (assigned to BHF Bank, Inst 00621
etc.)
Gerald Metals, Inc. Bk 950727 7/16/96 Equipment
Inst 01195
Elko County Gerald Metals, Inc. 386760 6/12/96 All assets
Recorder (assigned to BHF Bank Bk 942
Akhiengelsellschaft) Pg 164
Elko County Gerald Metals, Inc. 366877 4/20/95 All assets
Recorder
<PAGE>
Washoe County Gerald Metals, Inc. 1887690 9/24/95 All assets
Recorder
White Pine Gerald Metals, Inc. Bk 235 4/21/95 All assets
County Recorder Pg 583
</TABLE>
(B) Purchase money security interests in property acquired after
the date hereof.
(C) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due.
(D) Liens with respect to the Griffon Mine securing indebtedness
not to exceed Two Million Dollars ($2,000,000) in the
aggregate at any time and incurred in connection with
equipment financing.
-2-
<PAGE>
10.03
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made as of the 10th day of April,
1997, between ALTA GOLD CO., a Nevada corporation ("Debtor"),BHF-
BANK AKTIENGESELLSCHAFT, NEW YORK BRANCH ("BHF"), and GERALD
METALS, INC., a Delaware corporation ("Gerald" and together with
BHF, each a "Secured Party" and collectively the "Secured
Parties"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed thereto in the
"Loan Agreement" (as defined below).
W I T N E S S E T H T H A T:
WHEREAS, Debtor seeks to induce each Secured Party to extend
or continue to extend credit to Debtor from time to time; and
WHEREAS, Debtor has agreed to enter into this Security
Agreement in order to induce each Secured Party, INTER ALIA, to
extend credit to Debtor;
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. THE SECURITY INTERESTS. (a) In order to secure
the due and punctual payment and performance of (i) all
obligations of Debtor contained herein; (ii) all indebtedness,
liabilities and obligations of Debtor to each Secured Party under
a certain Loan Agreement of even date herewith among Debtor and
each Secured Party (hereinafter referred to as the "Loan
Agreement") and under those certain Secured Promissory Notes of
even date herewith of Debtor issued in favor of Secured Parties
pursuant to the Loan Agreement (the "Notes"); and (iii) all
indebtedness, liabilities and obligations of Debtor to each
Secured Party of every kind and description, whether direct,
indirect or contingent, whether now existing or hereafter arising
or incurred, whether due or to become due, whether otherwise
secured or unsecured and howsoever evidenced, incurred or
arising, including, without limitation, all indebtedness,
liabilities and obligations evidenced or arising pursuant to any
promissory note, loan agreement, equipment lease, conditional
sales agreement, refining agreement, trading agreement, financing
agreement, purchase contract, guaranty, forward contract, option
agreement, foreign exchange contract, or any other agreement or
instrument which may at any time be executed or issued for
Debtor's account or to which Debtor is now or hereafter may
become a party (all of the foregoing are hereinafter collectively
called the "Obligations"), Debtor hereby grants to each Secured
Party a continuing security interest in the following described
fixtures and personal property, whether now existing or hereafter
arising (hereinafter collectively called the "Collateral"):
All fixtures and all tangible and intangible
personal property of Debtor of every kind and
description and wherever located, in each case whether
now owned or hereafter acquired by Debtor, or in which
Debtor may now have or hereafter acquire an interest,
including, without limitation:
<PAGE>
(1) all equipment (as such term is defined
in the Uniform Commercial Code the "UCC"),
machinery and fixtures, including, without
limitation, all data processing and computer
equipment and all property and equipment listed on
EXHIBIT A hereto, in each case whether now owned
or hereafter acquired by Debtor, or in which
Debtor may now have or hereafter acquire an
interest but specifically excluding crushing
equipment and all mobile equipment, haultrucks and
other items shown on EXHIBIT B hereto and any
replacements thereof;
(2) all products, goods and inventory (as
such terms are defined in the UCC), including,
without limitation, all ore (in whatever form),
merchandise, raw materials, work in process,
parts, components, dies, molds, finished goods and
all product inventory returned to or repossessed
by Debtor, in each case whether now owned or
hereafter acquired by Debtor, or in which Debtor
may now have or hereafter acquire an interest;
(3) all instruments (as such term is defined
in the UCC), documents of title, general
intangibles, contract rights and policies and
certificates of insurance, in each case whether
now owned or hereafter acquired by Debtor, or in
which Debtor may now have or hereafter acquire an
interest;
(4) all accessions, additions and
improvements to, and all proceeds and products of,
all of the foregoing included collateral,
including proceeds of insurance, whether now owned
or hereafter acquired by Debtor, or in which
Debtor may now have or hereafter acquire an
interest; and
(5) all books, records, documents, computer
tapes and discs relating to all of the foregoing
included collateral, whether now owned or
hereafter acquired by Debtor, or in which Debtor
may now have or hereafter acquire an interest.
(b) All of Debtor's equipment, fixtures and product
inventory included in the foregoing are sometimes hereinafter
collectively called the "Tangible Collateral".
(c) The security interests granted pursuant to this
Section 1 (the "Security Interests") are granted as security only
and shall not subject any Secured Party to, or transfer to any
Secured Party, or in any way affect or modify, any obligation or
liability of Debtor under any of the Collateral or any
transaction which gave rise thereto.
SECTION 2. FILING; FURTHER ASSURANCES. Debtor will, at its
expense, execute, deliver, file and record (in such manner and
form as any Secured Party may require), or permit any Secured
Party to file and record, any financing statements, any carbon,
photographic or other reproduction of a financing statement
or this Security Agreement ( which the parties hereto agree
shall be sufficient as a financing statement hereunder),
any specific assignments or other paper that may be
reasonably necessary or desirable, or that any Secured Party
may request, in order to create,
-2-
<PAGE>
confirm, preserve, perfect or validate any Security Interest or
to enable such Secured Party to exercise and enforce its rights
and remedies hereunder or under applicable law with respect to
any of the Collateral. Debtor hereby appoints each Secured Party
as Debtor's attorney-in-fact to execute in the name and on behalf
of Debtor such additional financing statements as such Secured
Party may at any time request or require in respect of the
Collateral.
SECTION 3. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor
hereby represents and warrants to each Secured Party as follows:
(a) Debtor is, or to the extent that certain of
the Collateral is to be acquired after the date hereof,
will be, the owner of the Collateral free from any
adverse lien, security interest or encumbrance other
than as listed on EXHIBIT C hereto.
(b) No financing statement covering the
Collateral is on file in any public office, other than
the financing statements filed pursuant to this
Security Agreement or as listed on said EXHIBIT C.
(c) All additional information, representations
and warranties contained in EXHIBIT D hereto and made a
part hereof, and any Schedules attached to said EXHIBIT
D, are true, accurate and complete in all material
respects on the date hereof.
SECTION 4. DEBTOR'S COVENANTS. Debtor hereby covenants and
agrees with each Secured Party that Debtor will:
(a) Defend the Collateral against all material
adverse claims and demands of all persons at any time
claiming any interest therein, other than permitted
liens listed on EXHIBIT C hereto.
(b) Provide each Secured Party, at least fifteen
(15) business days prior to occurrence, with written
notice of (i) any change in location of Debtor's chief
executive office or the office where Debtor maintains
its books and records, (ii) the movement or location of
Collateral to or at any address other than as set forth
in said EXHIBIT D and (iii) any event or occurrence
which would render any warranty or information
contained in EXHIBIT D hereto inaccurate or incomplete
in any material adverse respect.
(c) Immediately notify Secured Party of any event
causing a substantial loss or diminution in the value
of all or any material part of the Collateral and the
amount or an estimate of the amount of such loss or
diminution.
(d) Not sell or offer to sell or otherwise
assign, transfer or dispose of the Collateral or any
interest therein, without each Secured Party's prior
written consent (such consent not to be unreasonably
withheld) other than in the ordinary
-3-
<PAGE>
course of business or except for Collateral no longer
required for its business or Collateral that is
replaced by collateral of equivalent or greater value.
(e) Except as for permitted liens listed on
EXHIBIT C attached hereto, keep the Collateral free
from any material adverse lien, security interest or
encumbrance and in good order and repair, reasonable
wear and tear excepted, and not waste or destroy the
Collateral or any part thereof, except in the normal
course of business.
(f) Not use the Collateral in violation of
applicable law (except that, in the case of any
violation of health and safety laws or environmental
laws, the violation shall not be a default so long as
Debtor is diligently effecting a cure of the same) or
of any policy of insurance applicable thereto.
(g) Not change its corporate name, identity or
structure without each Secured Party's prior written
consent (such consent not to be unreasonably withheld).
(h) At any Secured Party's request, execute,
acknowledge and deliver such further documents and
instruments as such Secured Party may from time to time
reasonably request or require to confirm such Secured
Party's Security Interests in and to any patent,
trademark or servicemark, and any registrations or
applications for same.
(i) Promptly pay any and all taxes, assessments
and governmental charges upon the Collateral prior to
the date penalties are attached thereto, provided that
Debtor shall have the right to contest the same in good
faith.
(j) Have and maintain insurance at all times with
respect to the Tangible Collateral against risks of
fire (including so-called extended coverage) and theft,
and such other risks as any Secured Party may
reasonably require in writing, containing such terms,
in such form, in such amounts, for such periods, and
written by such companies as may be reasonably
satisfactory to such Secured Party, such insurance to
name each Secured Party as "additional insured" and
"mortgagee" thereunder and to be payable to each
Secured Party and Debtor as their respective interests
may appear pursuant to Loss Payable Endorsements in
form acceptable to Secured Parties. All policies of
insurance shall provide for thirty (30) days' prior
written notice to each Secured Party of cancellation or
material amendment of the policies, and Debtor shall
furnish each Secured Party with certificates or other
evidence satisfactory to each Secured Party of
compliance with the foregoing insurance provisions.
Debtor shall notify each Secured Party of any material
change in the insurance maintained with respect to the
Tangible Collateral and shall furnish each Secured
Party satisfactory evidence of any such change.
Without limiting any other remedies available to any
Secured Party, in the event Debtor shall default in the
performance of its obligations under this paragraph
(j), any Secured Party, at its option, may effect
such insurance coverage with an insurer
-4-
<PAGE>
acceptable to such Secured Party and add the premium(s)
paid therefor to the Obligations secured hereby, and
the amount of such premium(s) shall be payable by
Debtor on demand with interest thereon at the highest
rate payable under the agreements evidencing the
Obligations.
SECTION 5. RECORDS RELATING TO COLLATERAL. Debtor will
keep its records concerning the Collateral at its offices in
Henderson, Nevada and/or the locations shown on EXHIBIT D hereto
or at such other place or places of business as each Secured
Party may approve in writing (such approval not to be
unreasonably withheld). Debtor will hold and preserve such
records and will permit each Secured Party's representatives at
any time during normal business hours to examine and inspect the
Collateral and to make abstracts from such records, and will
furnish to each Secured Party such information and reports
regarding the Collateral as each Secured Party may from time to
time reasonably request, but, unless an Event of Default has
occurred, each Secured Party shall maintain the confidentiality
thereof.
SECTION 6. GENERAL AUTHORITY. Debtor hereby irrevocably,
during the term of this Agreement, appoints each Secured Party
Debtor's true and lawful attorney, with full power of
substitution, in the name of Debtor, any Secured Party or
otherwise, for the sole use and benefit of each Secured Party,
but at Debtor's expense, to the extent permitted by law to
exercise, at any time and from time to time after any Event of
Default has occurred and is continuing, all or any of the
following powers with respect to all or any of the Collateral
(which power shall be in addition and supplemental to any powers,
rights and remedies of each Secured Party described herein or
otherwise available to any Secured Party under applicable law):
(i) to demand, sue for, collect, receive and give
acquittance for any and all moneys due or to become due
upon or by virtue thereof,
(ii) to receive, take, endorse, assign and
deliver any and all checks, notes, drafts, documents
and other negotiable and non-negotiable instruments and
chattel paper taken or received by any Secured Party in
connection therewith,
(iii) to settle, compromise, compound, prosecute
or defend any action or proceeding with respect
thereto,
(iv) to sell, transfer, assign or otherwise deal
in or with the same or the proceeds or avails thereof
as fully and effectually as if each Secured Party were
the absolute owner thereof,
(v) to extend the time of payment of any or all
thereof and to make any allowance and other adjustments
with reference thereto, and
(vi) to discharge any taxes, liens, security
interests or other encumbrances at any time placed
thereon.
-5-
<PAGE>
The powers conferred on each Secured Party under this Section 6
are solely to protect, realize upon and enforce each Secured
Party's Security Interests and rights and remedies in respect to
the Collateral and shall not impose any duty upon any Secured
Party to exercise such power.
SECTION 7. EVENTS OF DEFAULT. Debtor shall be in default
under this Security Agreement upon the occurrence of any one or
more of the following events (each such event is herein referred
to as an "Event of Default"):
(a) failure of Debtor to pay (i) any amount of
principal or interest under any Note or (ii) any other
Obligations, when the same shall become due and
payable, whether at the due date thereof or at a date
fixed for prepayment or by acceleration or otherwise;
(b) occurrence of any Event of Default under the
Loan Agreement;
(c) failure of Debtor to timely perform, comply
with or observe any other term, covenant, agreement or
provision in this Security Agreement and such failure
shall continue unremedied for a period of twenty (20)
days after notice thereof to Debtor by any Secured
Party or such longer period (but in any event not
longer than thirty (30) days) as may be required to
complete performance of such obligation (but only if
such performance is diligently commenced during such
twenty (20) day period and diligently continued during
such longer period, and provided that the delay
occasioned by such longer period would not, in the
reasonable judgment of any Secured Party, have a
material adverse affect on the financial condition,
operations or business taken as a whole of Debtor);
(c) any representation or warranty made by or on
behalf of Debtor pursuant to this Agreement, any Note,
the Loan Agreement or any other agreement, document,
instrument or certificate executed by Debtor in favor
of any Secured Party shall be untrue or misleading in
any material respect as of the date such representation
or warranty was made or is deemed to have been made; or
(d) Debtor shall (i) discontinue or abandon
operation of its business, except for normal shutdown
periods, (ii) apply for or consent to or suffer the
appointment of a receiver, trustee, custodian or
liquidator of it or any of its property, (iii) admit in
writing its inability to pay its debts as they mature,
(iv) make a general assignment for the benefit of
creditors, (v) file, or have filed against it, a
petition for relief under Title 11 of the United States
Code, (vi) file, or have filed against it, a petition
in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or to
take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or
liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in
any proceeding under any such law, or if corporate
action shall be taken for the purpose of effecting
any of the foregoing, (vii) become
-6-
<PAGE>
insolvent, (viii) fail to generally pay its debts as
they mature or (ix) have liabilities which exceed the
fair value of its assets.
SECTION 8. REMEDIES UPON EVENT OF DEFAULT. (a) If any
Event of Default shall have occurred, any Secured Party may
exercise all the rights and remedies of a secured party under the
UCC (whether or not the UCC is in effect in the jurisdiction
where such rights and remedies are exercised) and, in addition,
any Secured Party may, without being required to give any notice,
except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as
Collateral in the manner specified in Section 10 hereof, and (ii)
if there shall be no such cash or if such cash shall be
insufficient to pay all the Obligations in full, sell the
Collateral, or any part thereof, at public or private sale for
cash, upon credit or for future delivery, and at such price or
prices as such Secured Party may deem satisfactory.
(b) Any Secured Party may require Debtor to assemble
all or any part of the Collateral and make it available to such
Secured Party at a place to be designated by such Secured Party
which is reasonably convenient. Any holder of an Obligation may
be the purchaser of any or all of the Collateral so sold at any
public sale (and, if the Collateral is of a type customarily sold
in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private
sale) and thereafter hold the same absolutely, free from any
right or claim of whatsoever kind. Upon any such sale such
Secured Party shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each
purchaser at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of Debtor.
(c) Unless the Collateral to be sold is perishable or
threatens to decline speedily in value or is of a type
customarily sold on a recognized market, the applicable Secured
Party shall give Debtor at least thirty (30) days' prior written
notice of its intention to make any such public or private sale.
Each Secured Party and Debtor agree that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3)
of the UCC. Such notice, in case of a public sale, shall state
the time and place fixed for such sale. Such notice, in case of
a private sale or disposition, shall state the time after which
any private sale or other intended disposition is to be made.
(d) Any such public sale shall be held at such time or
times within ordinary business hours and at public or private
place or places as the applicable Secured Party may fix in the
notice of such sale. At any public or private sale, the
Collateral may be sold in one lot as an entirety or in separate
parcels, as the applicable Secured Party may determine. No
Secured Party shall be obligated to make such sale pursuant to
any such notice. The applicable Secured Party may, without notice
or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at
any time or place to which the same may be adjourned. In case of
any sale of all or any part of the Collateral on credit or for
future delivery, the Collateral so sold may be retained by any
Secured Party until the selling price is paid by the purchaser
thereof, but such Secured Party shall not incur any liability in
case of the failure of such purchaser to take up and
-7-
<PAGE>
pay for the Collateral so sold and, in case of any such failure,
such Collateral may again be sold upon like notice.
(e) Any Secured Party, instead of exercising the power
of sale herein conferred upon it, may proceed by a suit or suits
at law or in equity to foreclose the Security Interests and sell
the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(f) All rights and remedies contained herein shall be
separate and cumulative and in addition to all other rights and
remedies available to a secured party under applicable law, and
the exercise of one shall not in any way limit or prejudice the
exercise of any other such rights or remedies.
SECTION 9. RIGHT OF ANY SECURED PARTY TO USE AND OPERATE
TANGIBLE COLLATERAL, ETC. Upon the occurrence of an Event of
Default, to the extent permitted by law, any Secured Party shall
have the right and power to take possession of all or any part of
the Tangible Collateral, and to exclude Debtor and all persons
claiming under Debtor wholly or partly therefrom, and thereafter
to hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, such Secured Party may, from
time to time, at Debtor's expense, make all such repairs,
replacements, alterations, additions and improvements to and of
the Tangible Collateral as such Secured Party may deem proper.
In such case, such Secured Party shall have the right to manage
and control the Tangible Collateral and to exercise all rights
and powers of Debtor in respect thereto as such Secured Party
shall deem best, including the right to enter into any and all
such agreements with respect to the leasing and/or operation of
the Tangible Collateral or any part thereof as such Secured Party
may deem fit; and such Secured Party shall be entitled to collect
and receive all rents, issues, profits, fees, revenues and other
income of the same and every part thereof. Such rents, issues,
profits, fees, revenues and other income shall be applied to pay
the expenses of holding and operating the Tangible Collateral and
of conducting the business thereof, and of all maintenance,
repairs, replacements, alterations, additions and improvements,
and to make all payments which such Secured Party may be required
or may elect to make, if any, for taxes, assessments, insurance
and other charges upon the Tangible Collateral or any part
thereof, and all other payments which such Secured Party may be
required or authorized to make under any provision of this
Security Agreement (including legal costs and attorney's fees).
The remainder of such rents, issues, profits, fees, revenues and
other income shall be applied to the payment of the Obligations
in such order or priority as such Secured Party shall determine
(subject to the provisions of Section 10 hereof) and, unless
otherwise provided by law or by a court of competent
jurisdiction, any surplus shall be paid over to Debtor.
SECTION 10. APPLICATION OF COLLATERAL AND PROCEEDS. The
proceeds of any sale of, or other realization upon, all or any
part of the Collateral shall be applied in the following order of
priorities:
(a) first, to pay the expenses of such sale or
other realization, including reasonable commission to
such Secured Party's agent, and all expenses,
liabilities and advances incurred or made by such
Secured Party in connection therewith, and
-8-
<PAGE>
any other unreimbursed expenses for which such Secured
Party is to be reimbursed pursuant to Section 11
hereof;
(b) second, to the payment of the Obligations in
such order and manner as each Secured Party, in their
sole discretion, shall determine; and
(c) finally, unless applicable law otherwise
provides, to pay to Debtor, or its successors or
assigns, or as a court of competent jurisdiction may
direct, any surplus then remaining from such proceeds.
SECTION 11. EXPENSES; EACH SECURED PARTY'S LIEN. Debtor
will forthwith upon demand pay to each Secured Party:
(a) the amount of any taxes (except income taxes)
which any Secured Party may at any time be required to
pay by reason of the Security Interests (including any
applicable transfer taxes and taxes payable in
connection with the filing of financing statements to
perfect the Security Interests) or to free any of the
Collateral from any lien thereon, and
(b) the amount of any and all reasonable out-of-
pocket expenses, including reasonable attorneys' fees
and the reasonable fees and disbursements of any agents
not regularly in its employ, which any Secured Party
may incur in connection with (i) the preparation and
administration of this Security Agreement, (ii) the
collection, sale or other disposition of any of the
Collateral, (iii) the exercise by any Secured Party of
any of the powers, rights or remedies conferred upon it
hereunder, or (iv) any default on Debtor's part
hereunder.
SECTION 12. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. Upon the repayment and performance in full of all
obligations of Debtor contained in this Security Agreement and
all indebtedness, liabilities and obligations of Debtor to each
Secured Party under the Loan Agreement and each Note, the
Security Interests shall terminate and all rights to the
Collateral shall revert to Debtor. Upon any such termination of
the Security Interests or release of Collateral, each Secured
Party will, at Debtor's expense to the extent permitted by law,
execute and deliver to Debtor such documents as Debtor shall
reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
SECTION 13. NOTICES. All notices, communications and
demands hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight
delivery service, with all charges prepaid, to the applicable
party or parties at the addresses set forth below, or by
facsimile transmission (including, without limitation, computer
generated facsimile), promptly confirmed in writing sent by first
class mail, to the FAX numbers and addresses set forth below:
-9-
<PAGE>
(i) If to Debtor, to it at:
Alta Gold Co.
601 Whitney Ranch Drive
Suite 10
Henderson, Nevada 89014
Attention: Robert N. Pratt, President
FAX No.: (702) 433-1547
Telex No.:
ANSWERBACK:
(ii) If to any Secured Party, to each Secured Party at:
BHF-BANK Aktiengesellschaft
590 Madison Avenue
30th Floor
New York, New York 10022-2540
FAX No.: (212) 756-5536
Telex No.:
ANSWERBACK:
and Gerald Metals, Inc.
6 High Ridge Park,
Stamford, Connecticut 06905
Attention: Robert Kaeser
FAX No.: (203) 609-8301
Telex No.:
ANSWERBACK:
or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties
complying as to delivery with the terms of this Section. All
such notices and correspondence shall be deemed given upon the
earliest to occur of (i) actual receipt, (ii) if sent by
certified or registered mail, three (3) business days after being
postmarked, (iii) if sent by overnight delivery service, when
received or when delivery is refused, or (iv) if sent by
facsimile or telex, when receipt of such transmission is
acknowledged.
SECTION 14. WAIVERS; NON-EXCLUSIVE REMEDIES. (a) Except
as otherwise specifically provided herein, Debtor hereby waives
demand, notice, protest, notice of acceptance of this Security
Agreement, notice of loans made, credit extended, collateral
received or delivered or other action taken in reliance hereon
(and all other demands and notice of any description). With
respect to both the Obligations and the Collateral, Debtor hereby
assents to any extension or postponement of the time of payment
or any other indulgence, to any substitution, exchange
or release of Collateral, to the addition or release of
any party or person primarily or secondarily
-10-
<PAGE>
liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such
manner and at such time or times as each Secured Party may deem
advisable.
(b) Except as otherwise provided by applicable law, no
Secured Party shall have any duty as to the collection or
protection of the Collateral or any income thereon, nor as to the
preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto beyond the safe
custody of any Collateral in its possession. Except as otherwise
provided by applicable law, each Secured Party may exercise its
rights with respect to the Collateral without resorting or regard
to other collateral or sources of reimbursement for liability.
Except as otherwise provided by applicable law, no Secured Party
shall be required to marshal any present or future security for
(including, but not limited to, this Security Agreement and the
Collateral subject to the Security Interests created hereby), or
guaranties of, the Obligations or any of them, or to resort to
such security or guarantees in any particular order; and all of
its rights hereunder and in respect of such security and
guarantees shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that it
lawfully may do so, Debtor hereby agrees that it will not invoke
any law relating to the marshalling of collateral which might
cause delay in or impede the enforcement of any Secured Party's
rights under this Security Agreement or under any other
instrument evidencing any of the Obligations or under which any
of the Obligations is outstanding or by which any of the
Obligations is secured or guaranteed, and to the extent that it
lawfully may do so, Debtor hereby irrevocably waives the benefits
of all such laws.
(c) No failure on the part of any Secured Party to
exercise, and no delay in exercising, and no course of dealing
with respect to, any right, power or remedy under this Security
Agreement shall operate as a waiver thereof; nor shall any single
or partial exercise by any Secured Party of any right, power or
remedy under this Security Agreement preclude any other right,
power or remedy. The remedies in this Security Agreement are
cumulative and are not exclusive of any other remedies provided
by law, including any rights of setoff in favor of any Secured
Party.
(d) Debtor, to the extent it may lawfully do so,
hereby consents to the jurisdiction of the courts of the State of
New York and the United States District Court for the Southern
District of New York for the purpose of any suit or proceeding
brought in connection with or with respect to this Security
Agreement.
SECTION 15. WAIVER OF JURY TRIAL. EACH OF DEBTOR AND
SECURED PARTY HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION
BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT.
SECTION 16. CHANGES IN WRITING. Neither this Security
Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally but only by a statement in
writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
-11-
<PAGE>
SECTION 17. NEW YORK LAW; MEANING OF TERMS. THIS SECURITY
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SAID STATE AND WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS, EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY
THE LAWS OF ANY STATE OTHER THAN NEW YORK ARE GOVERNED BY THE
LAWS OF SUCH STATE. Unless otherwise defined herein, or unless
the context otherwise requires, all terms used herein which are
defined in the UCC as in effect in the State of New York have the
meanings therein stated.
SECTION 18. SEPARABILITY. If any provision hereof is
invalid or unenforceable in any jurisdiction, the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of each
Secured Party.
SECTION 19. SUCCESSORS AND ASSIGNS. This Security
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns,
including, without limitation, any subsequent holders of any Note
or any of the Obligations, each of whom shall, without further
act, become a party hereto by becoming a holder of any Note or
such Obligations.
SECTION 20. HEADINGS. The headings in this Security
Agreement are for the purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
SECTION 21. COUNTERPARTS. This Security Agreement may be
executed in any number of counterparts and by the different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same agreement.
SECTION 22. AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT.
The provisions contained herein shall, effective the date hereof,
be deemed to amend and restate the terms of a certain Security
Agreement dated as of May 31, 1996 between Debtor and Gerald in
its entirety.
IN WITNESS WHEREOF, this Security Agreement has been
executed by the parties hereto all as of the day and year first
above written.
WITNESS: ALTA GOLD CO.
________________________ By_______________________________
Title____________________________
BHF-BANK AKTIENGESELLSCHAFT, NEW
YORK BRANCH
________________________ By_______________________________
Title____________________________
(signatures continued on page 13)
-12-
<PAGE>
________________________ By_______________________________
Title____________________________
GERALD METALS, INC.
________________________ By_______________________________
Title____________________________
________________________ By_______________________________
Title____________________________
-13-
<PAGE>
EXHIBIT A
LIST OF PROPERTY AND EQUIPMENT
SCHEDULE A
LIST OF PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
EQUIPMENT YEAR MANUFACTURER MODEL SERIAL #
<S> <C> <C> <C> <C>
Wheel Loader 1988 Caterpillar 988 Series B 50W9142
Wheel Loader 1988 Caterpillar 988 Series B 50W8918
Wheel Loader 1988 Caterpillar 988 Series B 50W8583
Dozer 1987 Komatsu D155A-1 29126
Dozer 1989 Komatsu D155A-1 29691
Haul Truck 1987 Wabco Dresser 50 Ton PCF23273BFA39Q
Haul Truck 1987 Wabco Dresser 50 Ton PCF23279BFA39Q
Haul Truck 1987 Wabco Dresser 50 Ton PCF23159BFA39H
Haul Truck 1987 Wabco Dresser 50 Ton PCF23160BFA39H
Haul Truck 1987 Wabco Dresser 50 Ton PCF23280BFA39S
Haul Truck 1987 Wabco Dresser 50 Ton PCF23281BFA39S
Haul Truck 1981 Wabco Dresser 50 Ton PCF21464BFA9CV
Haul Truck 1980 Wabco Dresser 50 Ton PCF21852BFA9DH
Grader 1972 Caterpillar 14E 72G895
Grader 1983 Caterpillar 14G 96U6084
Crawler Mounted Drill Rig 1988 Reichdrill C-650-C 650CBB40048
Water Truck 1979 Terex 40 Ton/ 86030
10,000 Gallon
Crawler Mounted Drill Rig 1988 Ingersoll Rand DM30 2934
Generator Set 1989 Caterpillar 3412 6FA5578
Generator Set 1988 Caterpillar 3412 6FA04887
Underground Drill Rig 1990 Dateline --- 500-0009
</TABLE>
CRUSHING PLANT #1
1989 Cedar Rapids jaw crusher, model #3648, mounted on a 3-axle
trailer; driven by a 200 hp/480v/1780 rpm electric motor, serial
#41263; with Erieg Magnetics hanging belt magnet, model #7335,
s/n #50847-2.
100 Eljoy 66" cone crusher, model #1220, mounted on a 5th wheel
with three axles, serial #1E0589; driven by a 300 hp electric
induction motor, model #B300, s/n #6FKF4BD; with a 42" delivery
belt.
1990 Cedar Rapids 8' x 20' triple deck screen, serial #41998.
CRUSHING PLANT #2
1989 Cedar Rapids jaw crusher, model #3648; driven by a 250
hp/480v/1185 rpm electric motor, serial #41793; with Erieg
Magnetics hanging belt magnet, model #7335, serial #50847.
<PAGE>
1986 Eljoy 54" cone crusher, model #1140; driven by a Caterpillar
diesel engine, model #3406, serial #90U1469.
1989 Cedar Rapids 16' x 16' deck screen, serial #41452.
-2-
<PAGE>
EXHIBIT B
EXCLUDED PROPERTY AND EQUIPMENT
Equipment described in EXHIBIT C hereto as to which Cargill
Leasing Corporation, First National Bank of Ely, Lyon Credit
Corp. or Concord Commercial has filed UCC financing statements
listed on such EXHIBIT C.
<PAGE>
EXHIBIT C
PERMITTED LIENS
(A)Property described in the following financing statements on
file on date hereof:
<TABLE>
<CAPTION>
COLLATERAL
FILING OFFICE SECURED PARTY FILE NO. FILE DATE DESCRIPTION
<S> <C> <C> <C> <C>
Nevada Secretary NERCO Exploration Company 91-10688 11/19/91 Escrow funds
of State
Cargill Leasing 95-08576 06/19/95 Equipment
Corporation (assigned to
Cargill Leasing
Receivables, LLC)
Cargill Leasing 95-12612 09/06/95 Equipment
Corporation (assigned to
Cargill Leasing
Receivables, LLC)
First National Bank of Ely 96- 3/ /96 Mill and
equipment
Lyon Credit Corp. 96-06852 5/3/96 Equipment
Cargill Leasing 97-02722 2/18/97 Equipment
Receivables, LLC
Concord Commercial 96-09309 6/13/96 Equipment
Clark County Gerald Metals, Inc. Bk 960716 7/16/96 All assets
Recorder (assigned to BHF Bank, Inst 00621
etc.)
Gerald Metals, Inc. Bk 950727 7/16/96 Equipment
Inst 01195
Elko County Gerald Metals, Inc. 386760 6/12/96 All assets
Recorder (assigned to BHF Bank Bk 942
Akhiengelsellschaft) Pg 164
Elko County Gerald Metals, Inc. 366877 4/20/95 All assets
Recorder
<PAGE>
Washoe County Gerald Metals, Inc. 1887690 9/24/95 All assets
Recorder
White Pine Gerald Metals, Inc. Bk 235 4/21/95 All assets
County Recorder Pg 583
</TABLE>
(B) Purchase money security interests in property acquired after
the date hereof.
(C) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due.
(D) Liens with respect to the Griffon Mine securing indebtedness
not to exceed Two Million Dollars ($2,000,000) in the
aggregate at any time and incurred in connection with
equipment financing.
-2-
<PAGE>
EXHIBIT D
ADDITIONAL REPRESENTATIONS AND WARRANTIES
1. Debtor's exact name is: Alta Gold Co. Debtor has not
used any other name within the previous five (5) years.
2. Debtor's Federal Tax Identification Number is: #87-
0259249.
3. Debtor uses in its business and owns the following trade
names: None
4. Debtor's chief executive office is: 601 Whitney Ranch
Drive, Suite 10, Henderson, Nevada 89014.
5. Debtor's other places of business are:
778 South Pioche Highway
HC10
Box 10050
Ely, NV 89301
1525 East Newlands Drive No. 1
Fernley, NV 89401
<PAGE>
10.04
<PAGE>
SECURED PROMISSORY NOTE
U.S. $4,250,000 April 10, 1997
FOR VALUE RECEIVED, ALTA GOLD CO., a Nevada corporation
whose mailing address is 601 Whitney Ranch Drive, Suite 10,
Henderson, Nevada 89014 ("Borrower"), promises to pay to GERALD
METALS, INC., a Delaware corporation with its principal office at
6 High Ridge Park, Stamford, Connecticut 06905 ("Lender"), or to
its order, the principal sum of Four Million Two Hundred Fifty
Thousand Dollars ($4,250,0003) or the aggregate unpaid principal
amount of advances made by Lender to Borrower pursuant to that
certain Loan Agreement of even date herewith among Borrower,
Lender and BHF-Bank Aktiengesellschaft, New York Branch ("BHF")
(hereinafter, as amended or otherwise modified from time to time,
the "Loan Agreement"), whichever amount is less, together with
interest on the unpaid principal amount hereof from the date
hereof until paid in full at the rates per annum and payable at
the times specified in this Note. Capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed
thereto in the Loan Agreement.
Unless the Default Rate shall apply, this Note shall bear
interest (computed on the basis of a year of three hundred sixty
(360) days and applicable days elapsed) on the unpaid principal
amount hereof at a rate per annum equal to the sum of LIBOR plus
two percent (2%), payable monthly in arrears on the last Business
Day of each month for the month then ending, commencing April 30,
1997, during which any principal amount under this Note remains
outstanding and at maturity (whether by acceleration or
otherwise). Borrower will remit to Lender all principal amounts
outstanding under this Note in fifteen (15) consecutive equal
monthly installments of principal each in an aggregate amount
equal to one-fifteenth (1/15th) of the aggregate principal amount
outstanding under the Notes on December 31, 1997, with payments
commencing January 31, 1998 and continuing on the last Business
Day of each month thereafter. If any payment of principal
hereunder is not made when due, such amount shall bear interest
from the date such payment was due until paid in full, payable on
demand, at a rate per annum equal to the Prime Rate plus three
percent (3%).
As used herein, certain defined terms shall have the
following meanings:
"Interest Period" shall mean a period quoted by
Telerate or other organization and agreed upon in
writing from time to time by Lender, BHF and Borrower
and used for the computation of interest commencing on
___________, 1997; PROVIDED, HOWEVER, that (i) no
Interest Period for the loan evidenced hereby may
extend beyond March 31, 1999 and (ii) if any Interest
Period ends on a non-Business Day it shall extend to
the next Business Day. For purposes of determining an
Interest Period, a month means a period starting on one
(1) day in a calendar month and ending on a numerically
corresponding day in the next calendar month.
"LIBOR" shall mean, the one month London Interbank
Offered Rate for Dollars quoted by Telerate, as of
11:00 a.m. London time, two ( 2) Business Days
<PAGE>
prior to the commencement of each calendar month, or as
otherwise mutually agreed.
"Prime Rate" shall mean the rate which The Chase
Manhattan Bank, N.A. announces from time to time at its
principal office in New York, New York as its prime
lending rate, as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to
any customer.
If, with respect to any Interest Period, Lender is unable to
determine the LIBOR rate relating thereto, or adverse or unusual
conditions in or changes in applicable law relating to the
applicable London interbank market make it illegal or, in the
sole judgment of Lender, impracticable, to fund or make the
projected LIBOR rate unreflective of the actual costs of funds
therefor to Lender, or if it shall become unlawful for Lender to
charge interest on this Note on a LIBOR basis, then in any of the
foregoing events Lender shall so notify Borrower and interest
shall be calculated and payable in respect of such projected
Interest Period (and thereafter for so long as the conditions
referred to in this sentence shall continue) by reference to an
agreed upon rate.
Payments of both principal and interest as required
hereunder shall be made in lawful money of the United States of
America in immediately available funds to Lender or Lender's
account (as Lender may specify from time to time). If any
payment of principal or interest shall become due on a Saturday,
Sunday, public holiday under the laws of the State of New York or
on any other day on which banking institutions are authorized or
obligated by law to close in New York, New York, such payment
shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in computing
interest in connection with such payment.
This Note is referred to in, made pursuant to the terms of,
and governed by the Loan Agreement, which Loan Agreement is
hereby incorporated herein as if set forth at length. This Note
is entitled to all of the benefits of the Loan Agreement,
including provisions governing the payment and the acceleration
of maturity hereof. This Note is secured, INTER ALIA, by certain
Collateral pursuant to the terms of the Loan Documents and is
entitled to the benefits thereof.
If an Event of Default has occurred and is continuing, the
entire unpaid principal balance hereunder, and all other sums
paid by Lender to or on behalf of Borrower pursuant to the terms
of this Note, the Loan Agreement, the Security Documents or any
of the other Loan Documents, together with accrued and unpaid
interest thereon, shall at the option of Lender become
immediately due and payable without further notice or demand and
Lender may forthwith exercise the remedies available to Lender at
law or in equity as well as those remedies set forth in this
Note, the Loan Agreement and the other Loan Documents and one or
more executions may forthwith issue on any judgment or judgments
obtained by virtue thereof; and no failure on the part of Lender
to exercise any of Lender's rights hereunder or under any other
Loan Document shall be deemed a waiver of any such rights or of
any default.
-2-
<PAGE>
If any Event of Default has occurred and is continuing,
Borrower will pay on each date that a payment on this Note is due
during the continuation of any such default, interest on the
principal balance of this Note then outstanding at a rate (the
"Default Rate") equal to the Prime Rate plus three percent (3%)
per annum, until such Event of Default is cured to the reasonable
satisfaction of Lender, provided that any additional interest
which has accrued pursuant to the Default Rate shall be paid at
the time of and as a condition precedent to the curing of any
Event of Default.
Borrower hereby waives presentment for payment, protest and
demand, and notice of protest, demand and/or dishonor and
nonpayment of this Note, notice of any Event of Default under any
of the Loan Documents except as specifically provided therein,
and all other notices or demands otherwise required by law that
Borrower may lawfully waive. Borrower expressly agrees that this
Note, or any payment hereunder, may be extended from time to
time, without in any way affecting the liability of Borrower. No
unilateral consent or waiver by Lender with respect to any action
or failure to act which, without consent, would constitute a
breach of any provision of this Note shall be valid and binding
unless in writing and signed by Lender.
The rights and obligations of Borrower and all provisions
hereof shall be governed by and construed in accordance with the
internal laws (as opposed to the conflicts of laws provisions)
and decisions of the State of New York, except to the extent that
such laws are superseded by federal enactments.
Borrower hereby submits to the jurisdiction of the state and
federal courts located in New York, New York, as well as to the
jurisdiction of all courts to which an appeal may be taken or
other review sought from the aforesaid courts, for the purpose of
any suit, action or other proceeding arising out of Borrower's
obligations under or with respect to this Note, and expressly
waives any and all objections it may have as to venue in any of
such courts. Borrower and Lender each hereby waives trial by
jury in any action, proceeding or counterclaim brought by either
of them against the other on any matters whatsoever (including,
without limitation, any action, proceeding or counterclaim
arising out of or in any way connected with this Note, the Loan
Agreement, the Loan Documents or any other agreements executed in
connection herewith or any of the transactions contemplated
herein or therein). No party to this Note, including BUT NOT
LIMITED TO any assignee of or successor to Borrower or Lender,
shall seek a jury trial in any lawsuit, proceeding, counterclaim,
or any other litigation procedure based upon, or arising out of,
this Note, the Loan Agreement, the Loan Documents or any related
instruments or the relationship between the parties. No party
will seek to consolidate any such action, in which a jury trial
cannot be or has not been waived. The provisions of this
paragraph have been fully discussed by Borrower and Lender, and
these provisions shall be subject to no exceptions. No party has
in any way agreed with or represented to any other party that the
provisions of this paragraph will not be fully enforced in all
instances.
All agreements between Borrower and Lender are hereby
expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to
be paid to Lender for the use, forbearance or detention
of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in
-3-
<PAGE>
effect as of the date hereof, provided, however, that in the
event there is a change in the law which results in a higher
permissible rate of interest, then this Note shall be governed by
such new law as of its effective date. In this regard, it is
expressly agreed that it is the intent of Borrower and Lender in
the execution, delivery and acceptance of this Note to contract
in strict compliance with the laws of the State of New York from
time to time in effect. If, from any circumstance whatsoever,
fulfillment of any provision hereof or of the Loan Agreement or
the Loan Documents at the time performance of such provision
shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled shall
automatically be reduced to the limit of such validity, and if
from any circumstances Lender should ever receive as interest an
amount which would exceed the highest lawful rate, such amount
which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to
the payment of interest. This provision shall control every
other provision of all agreements between Borrower and Lender in
connection with the transactions provided for in the Loan
Agreement.
If this Note shall not be paid when due and shall be placed
by the holder hereof in the hands of any attorney for collection,
through legal proceedings or otherwise, Borrower will pay a
reasonable attorney's fee to the holder hereof together with
reasonable costs and expenses of collection.
Borrower shall remain primarily liable on this Note and the
Loan Documents until full payment, unaffected by any agreement or
transaction between Lender and any subsequent borrower as to
payment of principal, interest or other monies, by any
forbearance or extension of time, guaranty or assumption by
others, or by any other matter, as to all of which notice is
hereby waived by Borrower.
IN WITNESS WHEREOF, Borrower has caused this Note to be
executed by its duly authorized officer as of the day and year
first above written.
ALTA GOLD CO.
By_________________________________
Title______________________________
By_________________________________
Title______________________________
-4-
<PAGE>
10.05
<PAGE>
SECURED PROMISSORY NOTE
U.S. $4,250,000 April 10, 1997
FOR VALUE RECEIVED, ALTA GOLD CO., a Nevada corporation
whose mailing address is 601 Whitney Ranch Drive, Suite 10,
Henderson, Nevada 89014 ("Borrower"), promises to pay BHF-BANK
AKTIENGESELLSCHAFT, NEW YORK BRANCH with its principal office at
590 Madison Avenue, New York, New York 10022-2540 ("Lender"), or
to its order, the principal sum of Four Million Two Hundred Fifty
Thousand Dollars ($4,250,0003) or the aggregate unpaid principal
amount of advances made by Lender to Borrower pursuant to that
certain Loan Agreement of even date herewith among Borrower,
Lender and GERALD METALS, INC., a Delaware corporation with its
principal office at 6 High Ridge Park, Stamford, Connecticut
06905 ("GERALD") (hereinafter, as amended or otherwise modified
from time to time, the "Loan Agreement"), whichever amount is
less, together with interest on the unpaid principal amount
hereof from the date hereof until paid in full at the rates per
annum and payable at the times specified in this Note.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed thereto in the Loan Agreement.
Unless the Default Rate shall apply, this Note shall bear
interest (computed on the basis of a year of three hundred sixty
(360) days and applicable days elapsed) on the unpaid principal
amount hereof at a rate per annum equal to the sum of LIBOR plus
two percent (2%), payable monthly in arrears on the last Business
Day of each month for the month then ending, commencing April 30,
1997, during which any principal amount under this Note remains
outstanding and at maturity (whether by acceleration or
otherwise). Borrower will remit to Lender all principal amounts
outstanding under this Note in fifteen (15) consecutive equal
monthly installments of principal each in an aggregate amount
equal to one-fifteenth (1/15th) of the aggregate principal amount
outstanding under the Notes on December 31, 1997, with payments
commencing January 31, 1998 and continuing on the last Business
Day of each month thereafter. If any payment of principal
hereunder is not made when due, such amount shall bear interest
from the date such payment was due until paid in full, payable on
demand, at a rate per annum equal to the Prime Rate plus three
percent (3%).
As used herein, certain defined terms shall have the
following meanings:
"Interest Period" shall mean a period quoted by
Telerate or other organization and agreed upon in
writing from time to time by Lender, GERALD and
Borrower and used for the computation of interest
commencing on ___________, 1997; PROVIDED, HOWEVER,
that (i) no Interest Period for the loan evidenced
hereby may extend beyond March 31, 1999 and (ii) if
any Interest Period ends on a non-Business Day it shall
extend to the next Business Day. For purposes of
determining an Interest Period, a month means a period
starting on one (1) day in a calendar month and ending
on a numerically corresponding day in the next calendar
month.
<PAGE>
"LIBOR" shall mean, the one month London Interbank
Offered Rate for Dollars quoted by Telerate, as of
11:00 a.m. London time, two (2) Business Days prior to
the commencement of each calendar month, or as
otherwise mutually agreed.
"Prime Rate" shall mean the rate which The Chase
Manhattan Bank, N.A. announces from time to time at its
principal office in New York, New York as its prime
lending rate, as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to
any customer.
If, with respect to any Interest Period, Lender is unable to
determine the LIBOR rate relating thereto, or adverse or unusual
conditions in or changes in applicable law relating to the
applicable London interbank market make it illegal or, in the
sole judgment of Lender, impracticable, to fund or make the
projected LIBOR rate unreflective of the actual costs of funds
therefor to Lender, or if it shall become unlawful for Lender to
charge interest on this Note on a LIBOR basis, then in any of the
foregoing events Lender shall so notify Borrower and interest
shall be calculated and payable in respect of such projected
Interest Period (and thereafter for so long as the conditions
referred to in this sentence shall continue) by reference to an
agreed upon rate.
Payments of both principal and interest as required
hereunder shall be made in lawful money of the United States of
America in immediately available funds to Lender or Lender's
account (as Lender may specify from time to time). If any
payment of principal or interest shall become due on a Saturday,
Sunday, public holiday under the laws of the State of New York or
on any other day on which banking institutions are authorized or
obligated by law to close in New York, New York, such payment
shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in computing
interest in connection with such payment.
This Note is referred to in, made pursuant to the terms of,
and governed by the Loan Agreement, which Loan Agreement is
hereby incorporated herein as if set forth at length. This Note
is entitled to all of the benefits of the Loan Agreement,
including provisions governing the payment and the acceleration
of maturity hereof. This Note is secured, INTER ALIA, by certain
Collateral pursuant to the terms of the Loan Documents and is
entitled to the benefits thereof.
If an Event of Default has occurred and is continuing, the
entire unpaid principal balance hereunder, and all other sums
paid by Lender to or on behalf of Borrower pursuant to the terms
of this Note, the Loan Agreement, the Security Documents or any
of the other Loan Documents, together with accrued and unpaid
interest thereon, shall at the option of Lender become
immediately due and payable without further notice or demand and
Lender may forthwith exercise the remedies available to Lender at
law or in equity as well as those remedies set forth in this
Note, the Loan Agreement and the other Loan Documents and one or
more executions may forthwith issue on any judgment or judgments
obtained by virtue thereof; and no failure on the part of Lender
to exercise any of Lender's rights hereunder or under any other
Loan Document shall be deemed a waiver of any such rights or of
any default.
2
<PAGE>
If any Event of Default has occurred and is continuing,
Borrower will pay on each date that a payment on this Note is due
during the continuation of any such default, interest on the
principal balance of this Note then outstanding at a rate (the
"Default Rate") equal to the Prime Rate plus three percent (3%)
per annum, until such Event of Default is cured to the reasonable
satisfaction of Lender, provided that any additional interest
which has accrued pursuant to the Default Rate shall be paid at
the time of and as a condition precedent to the curing of any
Event of Default.
Borrower hereby waives presentment for payment, protest and
demand, and notice of protest, demand and/or dishonor and
nonpayment of this Note, notice of any Event of Default under any
of the Loan Documents except as specifically provided therein,
and all other notices or demands otherwise required by law that
Borrower may lawfully waive. Borrower expressly agrees that this
Note, or any payment hereunder, may be extended from time to
time, without in any way affecting the liability of Borrower. No
unilateral consent or waiver by Lender with respect to any action
or failure to act which, without consent, would constitute a
breach of any provision of this Note shall be valid and binding
unless in writing and signed by Lender.
The rights and obligations of Borrower and all provisions
hereof shall be governed by and construed in accordance with the
internal laws (as opposed to the conflicts of laws provisions)
and decisions of the State of New York, except to the extent that
such laws are superseded by federal enactments.
Borrower hereby submits to the jurisdiction of the state and
federal courts located in New York, New York, as well as to the
jurisdiction of all courts to which an appeal may be taken or
other review sought from the aforesaid courts, for the purpose of
any suit, action or other proceeding arising out of Borrower's
obligations under or with respect to this Note, and expressly
waives any and all objections it may have as to venue in any of
such courts. Borrower and Lender each hereby waives trial by
jury in any action, proceeding or counterclaim brought by either
of them against the other on any matters whatsoever (including,
without limitation, any action, proceeding or counterclaim
arising out of or in any way connected with this Note, the Loan
Agreement, the Loan Documents or any other agreements executed in
connection herewith or any of the transactions contemplated
herein or therein). No party to this Note, including BUT NOT
LIMITED TO any assignee of or successor to Borrower or Lender,
shall seek a jury trial in any lawsuit, proceeding, counterclaim,
or any other litigation procedure based upon, or arising out of,
this Note, the Loan Agreement, the Loan Documents or any related
instruments or the relationship between the parties. No party
will seek to consolidate any such action, in which a jury trial
cannot be or has not been waived. The provisions of this
paragraph have been fully discussed by Borrower and Lender, and
these provisions shall be subject to no exceptions. No party has
in any way agreed with or represented to any other party that the
provisions of this paragraph will not be fully enforced in all
instances.
All agreements between Borrower and Lender are hereby
expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or
agreed to be paid to Lender for the use, forbearance or
detention of the indebtedness evidenced hereby exceed the
maximum permissible under applicable law. As used herein,
the term "applicable law" shall mean the law in
3
<PAGE>
effect as of the date hereof, provided, however, that in the
event there is a change in the law which results in a higher
permissible rate of interest, then this Note shall be governed by
such new law as of its effective date. In this regard, it is
expressly agreed that it is the intent of Borrower and Lender in
the execution, delivery and acceptance of this Note to contract
in strict compliance with the laws of the State of New York from
time to time in effect. If, from any circumstance whatsoever,
fulfillment of any provision hereof or of the Loan Agreement or
the Loan Documents at the time performance of such provision
shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled shall
automatically be reduced to the limit of such validity, and if
from any circumstances Lender should ever receive as interest an
amount which would exceed the highest lawful rate, such amount
which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to
the payment of interest. This provision shall control every
other provision of all agreements between Borrower and Lender in
connection with the transactions provided for in the Loan
Agreement.
If this Note shall not be paid when due and shall be placed
by the holder hereof in the hands of any attorney for collection,
through legal proceedings or otherwise, Borrower will pay a
reasonable attorney's fee to the holder hereof together with
reasonable costs and expenses of collection.
Borrower shall remain primarily liable on this Note and the
Loan Documents until full payment, unaffected by any agreement or
transaction between Lender and any subsequent borrower as to
payment of principal, interest or other monies, by any
forbearance or extension of time, guaranty or assumption by
others, or by any other matter, as to all of which notice is
hereby waived by Borrower.
IN WITNESS WHEREOF, Borrower has caused this Note to be
executed by its duly authorized officer as of the day and year
first above written.
ALTA GOLD CO.
By_________________________________
Title______________________________
By_________________________________
Title______________________________
4
<PAGE>
10.06
<PAGE>
[GERALD METALS, INC. LETTERHEAD]
April 10, 1997
Alta Gold Co.
601 Whitney Ranch Drive
Suite 10
Henderson, NV 89014
ATTN: Mr. Robert N. Pratt
Gentlemen:
This Agreement sets forth the provisions in fulfillment of margin
obligations by Alta Gold Co. in connection with presently
outstanding and future contracts entered into from time to time
between Alta Gold Co. ("Alta Gold") and Gerald Metals, Inc.
("Gerald") for the purchase and sale of gold and gold options.
1. DEFINITIONS
A. "Forward Contract" means any contract between the
parties for the purchase or sale of gold having a
maturity date more than two (2) business days forward.
A Forward Contract is outstanding until payment and
performance are completed in accordance with its terms.
B. "Contract Value" of any Forward Contract means the
product obtained by multiplying (i) the number of fine
troy ounces of gold covered by that Forward Contract by
(ii) the price per troy ounce specified in that Forward
Contract.
C. "Market Value" for margin purposes of any Forward
Contract means the product obtained by multiplying
(i) the number of fine troy ounces of gold covered by
that Forward Contract by (ii) the settlement quotation
of gold on the commodity Exchange, Inc. ("Comex")
corresponding to the delivery month specified in the
contract or if no such quotation is available then the
settlement quotation of gold for such month shall be
determined in good faith by Gerald. However, in the
event the spot quotation of gold on the Comex changes
more than the limit change allowed for the forward
quotations then the settlement quotation of the forward
months shall be adjusted to reflect the excess market
move.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 2
D. "Business Day" shall mean a day on which banks in New
York City and the Comex are open for business.
E. "Metal" shall mean gold in the form of 400 fine troy
ounce (minimum .995 fine) bars, subject to variations
permitted in the trade.
F. "Call Option" shall mean that the purchaser has the
right but not the obligation to purchase Metal.
G. "Put Option" shall mean that the purchaser has the
right but not the obligation to sell Metal.
H. "Option" or "Options" shall mean Put and Call Options
collectively.
I. "Metal Quantity" for any Option means the number of
troy ounces of Metal covered by that Option as stated
in the confirming telex, as defined in paragraph 2.
J. The term "Metal Value" of any Option on any day, shall
mean the value of Metal for delivery on the expiration
date as extrapolated from Comex gold futures
settlements per troy ounce multiplied by the Metal
Quantity of that option.
K. "Strike Price" of any Option means the price fixed by
the Option for the purchase (in the case of a Call
Option) or the sale (in the case of a Put Option) of
the Metal Quantity covered thereby. "Strike Value" of
any Option shall mean an amount equal to its Strike
Price multiplied by its Metal Quantity.
L. "Intrinsic Value" at any time shall mean, (i) in the
case of a Call Option, an amount in U.S. Dollars equal
to the amount, if any, by which its Metal Value exceeds
its Strike Value and (ii) in the case of a Put Option,
an amount in U.S. Dollars equal to the amount, if any,
by which its Strike Value exceeds its Metal Value.
M. "Time Value" at any time shall mean the theoretical
value as calculated using a standard formula accepted
in the industry, using as volatility input Gerald's
best estimate of appropriate volatility. Whenever
appropriate, volatility will be calculated so as to be
in line with the volatility of respective Comex gold
option contracts.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 3
N. "Option Value" shall mean the sum of Intrinsic Value,
if any, plus Time Value.
O. "Funds" shall mean U.S. Dollars paid by wire transfer
in immediately available funds to the bank account
designated by the party receiving payment.
P. "Grantor" shall mean the party writing an Option.
Q. "Holder" shall mean the party to which an Option is
granted.
R. "Expiration Date" shall mean 9:30 a.m. (New York Time)
on the date agreed to by the Grantor and the Holder and
set forth in the confirmation of the transaction, at
which time the Option shall expire worthless unless
previously exercised in accordance herewith.
S. "Premium Amount" shall mean the consideration for an
Option paid by the Holder to the Grantor.
T. "European Option" shall mean an option which may be
exercised only on the agreed Expiration Date of the
option, although irrevocable notice of intent to
exercise a European Option may be given prior to
Expiration Date.
2. OPTION CONFIRMATION
Each Option purchased and sold hereunder shall be evidenced by a
written or telex confirmation listing:
a) trade date e) metal type (gold)
b) premium payment due date f) metal quantity
c) premium amount g) option type (European)
d) strike price h) option expiration date and time
3. OPTION TERMS AND CONDITIONS
A. The Premium Amount for any Option granted hereunder
shall be paid by the Holder of such Option to the
Grantor two Business Days after the date such Option is
entered into.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 4
B. In the event an Option is exercised, on the second
Business Day after the date of exercise, (i) in the
case of a Put Option, the Grantor shall pay the Strike
Value of that Option to the Holder and the Holder shall
deliver the Metal Quantity of that Option to the
Grantor and (ii) in the case of a Call Option, the
Grantor shall deliver to the Holder the Metal Quantity
of that Option, and the Holder shall pay the Strike
Value of that Option to the Grantor; except that at the
Holder's option, expressed by irrevocable notice to the
Grantor at the time the Option is entered into, or at
any other time by mutual agreement of the parties, the
Option may be settled in cash (and thus no delivery of
Metal will take place) by the Grantor transferring to
the Holder on such second Business Day after the date
of exercise an amount equal to the Option Value of such
Option at the time of exercise adjusted for any margin
advances, if any, for the specific Option.
4. PAYMENT AND DELIVERY
A. All amounts payable hereunder and under any Forward
Contract or Option shall be paid in Funds.
B. Delivery of Metal under any Forward Contract or Option
shall be effected by credit of the appropriate type of
Metal (in form and purity qualifying as such) to the
unallocated account specified in the Forward Contract
or Option, or such other location as mutually agreed.
5. MARGIN
In order to secure Alta Gold's obligations to Gerald under this
Agreement and any outstanding Forward Contracts and Options, Alta
Gold agrees to margin its obligations under Forward Contracts and
Options in the following manner:
A. The amount of exposure under all Options outstanding
between Gerald and Alta Gold shall be the sum of the
Option Value of all outstanding options granted by Alta
Gold less the sum of the Option Value of all
outstanding Options granted by Gerald, hereafter
referred to as the "Option Exposure".
<PAGE>
Alta Gold Co.
April 10, 1997
Page 5
B. It is agreed that the purchaser under a Forward
Contract, has an unrealized gain if the Market Value of
such contract exceeds its Contract Value and that the
seller under a Forward Contract, has a unrealized gain
if the Contract Value of such contract exceeds its
Market Value. At the close of business on each
Business Day, the net unrealized gain of all Forward
Contracts then outstanding shall be calculated by
(i) determining the difference between the Market Value
and Contract Value of each Forward Contract and
(ii) netting these amounts against each other. The net
unrealized gain is referred to herein as the "Market
Exposure", and the party having the net unrealized gain
is referred to as the party then "Market Exposed".
C. For purposes of all margin calculations under this
Agreement, all purchase and sales of Forward Contracts
shall be netted. Furthermore, the combination of the
Option Exposure and the Market Exposure is referred to
as the "Total Exposure".
D. During the period that any Forward Contracts are
outstanding and Gerald's Total Exposure equals or
exceeds US $1,500,000 (One Million Five Hundred
Thousand U.S. Dollars) (the "Margin Line") Gerald shall
receive a margin deposit from Alta Gold for amounts in
excess of US $1,500,000 (One Million Five Hundred
Thousand U.S. Dollars) in the form of Funds, or other
mutually agreed upon forms of margin. Thereafter,
margin cover shall be deposited or returned whenever
Gerald's Total Exposure, less margin already deposited
increases or decreases by US $150,000 (One Hundred
Fifty Thousand U.S. Dollars). All margin deposits or
returns shall be made by the close of business on the
business day following notification. In no event shall
Gerald return funds greater than the total funds
received from Alta Gold.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 6
E. Margin received in the form of cash shall be credited
with interest at a rate equal to the overnight federal
funds rate as published by the New York Federal Reserve
Bank, basis a 360 day year. Interest charges shall be
credited and paid monthly by wire transfer to the
account of Alta Gold.
6. SECURITY INTEREST
Each party hereby represents that it is now, and will at all
times during the continuance of this Agreement be, the sole
and absolute owner of any property delivered by such party
as margin hereunder, free and clear of any and all charges,
liens, encumbrances or security interests of any kind other
than the interest of the other party provided for in this
paragraph 6. Without prejudice to any other rights which a
party may have hereunder, any margin delivered to a party
hereunder shall be and hereby is pledged to such party by
way of a first priority security interest as security for
all obligations of the party delivering such margin under
all contracts and transactions relating or pursuant thereto.
The security interest provided for herein is to be a
continuing security interest, notwithstanding any
intermediate payment or settlement of any such obligations.
Neither this Agreement nor the security interest provided
for herein shall be terminated, affected or prejudiced by
any bankruptcy, liquidation, amalgamation, reorganization or
reconstruction of, or merger involving, the party delivering
margin to which such security interest attaches.
7. NON-PERFORMANCE
Notwithstanding any other provisions hereof or any Forward
Contract or Option, in the event Alta Gold (a) defaults in
the payment or performance of any obligation to Gerald
hereunder or under any other agreements with Gerald
including any loan agreements, (b) filed a petition or
otherwise commences or authorizes the commencement of a
proceeding under any bankruptcy or similar law or have any
such petition filed or proceeding commenced against it,
(c) discontinues operation of a material portion of its
business for any reason, (d) is unable to pay its debts as
they fall due; then in any such event Gerald shall have the
right at any time:
<PAGE>
Alta Gold Co.
April 10, 1997
Page 7
A. To reduce the Margin Line as specified herein to U.S.
$1.00 (One U.S. Dollar) (the "Reduced Margin Line") and
thereby accelerate any and all of Gerald's Total
Exposure as margin due and payable to Gerald by Alta
Gold, by the close of business in New York on the next
Business Day. Margin cover shall be deposited in the
form of cash or other mutually acceptable form of
margin. Thereafter, the Reduced Margin Line shall be
effective until Gerald notifies Alta Gold, in writing,
as to otherwise;
B. To liquidate any or all Forward Contracts and Options
then outstanding by:
(i) Closing out each Forward Contract and Option at
the time of liquidation so that each such Forward
Contract and Option is canceled and market damages
equal to their then Total Exposure is calculated
and a settlement payment in an amount equal to
such Total Exposure, if any, less any margin held,
is then due the party then Market Exposed.
(ii) Setting off against each other all settlement
payments which Gerald owes to Alta Gold as a
result of such liquidation and all settlement
payments which Alta Gold owes to Gerald as a
result thereof, and all other settlements or
payments due or payable under any other Agreements
including any margin deposits or other collateral,
so that all such amounts are netted to a single
liquidated amount payable by one party to the
other party. The net amount so determined shall
be paid by the close of business in New York on
the next Business Day. Gerald's rights under this
paragraph 6 shall be in addition to, and not in
limitation or exclusion of, any other rights which
Gerald may have, whether by agreement, operation
of law or otherwise;
C. To terminate performance of any or all of its
obligations to Alta Gold;
D. To draw on any Letter of Credit or otherwise convert to
cash any margin deposits and set off such amounts in
accordance with paragraph 7 B. (ii);
E. Claim and receive payment from Alta Gold for all
expenses including reasonable legal expenses incurred
in the exercise of the foregoing and any other
remedies.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 8
8. MISCELLANEOUS
A. Each Forward Contract shall be governed by the "terms
and conditions" set forth on the reverse side of
Gerald's "Confirmation of Contract" annexed hereto as
an exhibit. In case of conflict with this Agreement,
this Agreement will prevail.
B. This Agreement and each Forward Contract and Option is
for the benefit of the parties and their respective
successors and permitted assigns. No other person or
entity (including without limitation any customer of
either party) shall have any rights hereunder or
thereunder. This Agreement and each Forward Contract
and Option and the rights and duties under this
Agreement or any Forward Contract or Option may not be
assigned by either party (in whole or in part) without
the written consent of the other party, except that
Gerald may assign this agreement and any or all Forward
Contracts and Options entered into between the parties
for financing purposes.
C. Neither this Agreement nor any Forward Contract or
Option may be amended except by a writing signed by
both parties or by a telex sent by each party to the
other. The paragraph headings are for convenience and
reference only and shall not affect the confirmation or
interpretation of any provisions hereunder.
D. This Agreement shall be governed by the laws of the
State of New York without giving effect to principles
of conflict of laws. Each party hereto consents to the
exclusive jurisdiction of the courts of the State of
New York and/or of any U.S. Federal Court located in
the City of New York over any disputes arising in
connection with the transaction contemplated hereby and
thereby. Final judgment in any action shall be binding
upon the parties hereto and may be enforced in such
courts or in the courts of any country to which
jurisdiction the party against whom the action is
brought is subject. ALTA GOLD AND GERALD EACH WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE
OTHER ON ANY MATTER WHATSOEVER ARISING HEREUNDER
(INCLUDING, WITHOUT LIMITATION, ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY CONNECTED
WITH THIS AGREEMENT, ANY OTHER DOCUMENTS EXECUTED IN
CONNECTION HEREWITH OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THEREIN).
<PAGE>
Alta Gold Co.
April 10, 1997
Page 9
E. This Agreement, together with all Forward Contracts and
Options entered into, shall be considered one
integrated contract. Performance by any party on any
day hereunder or under any Forward Contract or Option
is conditional on performance then due by the other
party hereunder or thereunder. The parties hereby
acknowledge that all transactions under these
Agreements are commercial transactions.
F. Each party hereto represents and warrants to the other
that it possesses all necessary power, authority and,
to the extent applicable, approvals necessary to enter
into this Agreement and any Forward Contracts or
Options it enters into, that the execution and
implementation hereof or thereof will not cause such
party to be in violation of any other agreement or law,
regulation, order or court process or decision to which
it is a party or to which it is in any way subject, and
that this Agreement and each Forward Contract and
Option constitutes its valid and binding agreement
enforceable against it in accordance with its terms.
G. Each party hereto represents and warrants to the other
that, on the date hereof, and at the time any Forward
Contract or Option is entered into, it is a producer,
processor or commercial user of, or a merchant handling
gold or the products or by-products thereof, and is
entering into this Agreement and any Forward Contract
or Option solely for the purpose of its business as
such.
H. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions
contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good
faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable
provisions.
I. Each party reserves the right to review and/or withdraw
this Agreement in accordance with changing market
and/or financial conditions. In no event will such
withdrawal of this Agreement affect outstanding
transactions or obligations.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 10
J. Neither a failure nor a delay on the part of either
party in exercising any right, power or privilege,
hereunder, shall operate as a waiver thereof, nor shall
a single or partial exercise thereof preclude any other
or future exercise, or the exercise of any other right,
power or privilege.
9. NOTICES
All notices hereunder shall be in writing or by telex or
telefax and deemed given when received at the respective
party's address set forth below unless sent by telex or
telefax in which case the same shall be deemed given when
sent to the telex or telefax address of the respective party
set forth below and for telex confirmed by the respective
answerback specified below, and for telefax confirmed as
being received by the respective party.
If to Gerald: If to Alta Gold:
Gerald Metals, Inc. Alta Gold Co.
P.O. Box 10134 601 Whitney Ranch Drive
High-Ridge Park Suite 10
Stamford, CT 06904 Henderson, NV 89014
ATTN: Susan A. Scoggins ATTN: Robert N. Pratt
Telefax: (203) 609-8301 Telefax:
cc: Treasurer
ACCEPTED BY:
ALTA GOLD CO. GERALD METALS, INC.
By: By:
Robert C. Kaeser
Vice President
Date: By:
Mark A. Edelstein
Director, Structured Finance
<PAGE>
10.07
<PAGE>
[GERALD METALS, INC. LETTERHEAD]
PURCHASE/REFINING AGREEMENT
April 10, 1997
Alta Gold Co.
601 Whitney Ranch Drive, Suite 10
Henderson, NV 89014
Ladies and Gentlemen:
This letter will confirm our agreement pursuant to which Alta
Gold Co., a Nevada corporation ("Alta"), shall deliver and sell
to Gerald Metals, Inc., a Delaware corporation ("Gerald''), the
gold and silver contained in the Dore ("Dore") produced by Alta
in accordance with the following terms:
1. MATERIAL/REFINER/QUANTITY
(a) The Dore covered by this agreement is Dore bullion (the
"Dore") assaying approximately as follows:
Gold: Per Addendum
Silver: Per Addendum
No deleterious elements above levels acceptable to
refiner shall be contained in the Dore.
(b) The Payable Gold and Payable Silver (as defined in
Paragraph 5 hereof) contained in the Dore to be
purchased by Gerald hereunder shall be recovered for
its account by Johnson Matthey, Inc., 4601 West 2100
South, Salt Lake City, Utah ("Refiner" or "Refinery"),
and Alta consents to the refining of the Dore at the
Refinery.
(c) The annual quantity under this agreement is 100% of the
gold and silver Dore produced by Alta.
2. DELIVERY
Delivery shall be made to Gerald's account at the Refinery.
Upon receipt, Gerald shall take full responsibility for risk
of loss or damage to the Dore.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 2
3. WEIGHING AND SAMPLING
Weighing and sampling shall be accomplished at the Refinery
using industry accepted practices. Alta, at its expense,
shall have the right to have its representative at the
weighing and sampling. If Alta is not represented at the
weighing and sampling, and the weights are at variance by
more than .2%, then each lot will be held pending agreement
of weights by Alta. In the event that the weights between
Alta and the Refiner vary by less than .2 percent, Refinery
weights shall govern. Sampling shall always be determined
in accordance with the Refiner standard procedures. Refiner
shall take four (4) representative samples from each sample
lot. The samples will be obtained by melting the dore in an
induction furnace and vacuum dip tube sampling when the lot
is fully molten and turbulent. Each sample will be marked
Umpire/Alta/Refiner as taken and the weights recorded. All
samples except those labeled "Refiner" shall be sealed. Two
samples shall remain with the Refiner, the Alta sample will
be sent to Alta's designated location by the following day
and the umpire sample shall be held in reserve. The
refiner, reserve, and umpire samples, if not used, shall be
included in the settlement weight.
Immediately upon signature of the weighing report (except as
provided above when Alta is not represented), the Refiner
may treat the Dore. A dedicated crucible will be used for
all melting, and slag will be retained for Alta's account.
4. ASSAYS AND SPLITTING LIMITS
Assays shall be made independently by each party by
corrected fire assay techniques. The results of such assays
shall be exchanged within fifteen (15) business days from
the date of sampling by letters crossing simultaneously by
mail on a date to be agreed upon in advance. Should the
difference between the results of the parties be not more
than:
Gold: Per Addendum
Silver: Per Addendum
<PAGE>
Alta Gold Co.
April 10, 1997
Page 3
then the exact mean of the two results shall be taken as the
Agreed Assay for all purposes and the assay shall be deemed
finally determined not later than seven (7) days subsequent
to the mailing of the assays. In the event of a greater
difference, an umpire assay shall be made. The party's
assay closer to the umpire assay will be the Agreed Assay.
Should the umpire assay be the exact mean of the parties'
assay, then the umpire assay shall be the Agreed Assay. The
cost of the umpire assay shall be borne by the party whose
result is further from the umpire's. The cost of the umpire
assay shall be borne equally by the parties in the event the
umpire assay shall be the exact mean of the exchanged
assays. In the event an umpire assay should be required,
the assay shall be deemed finally determined not later than
seven (7) days subsequent to the mailing of the assay by the
umpire (or other written transmission to the parties). For
the purposes of this agreement, the umpire shall be one of
the following:
(1) ALEX STEWART ASSAYERS, LTD.
KNOWSLEY INDUSTRIAL ESTATE
KNOWSLEY,
MERSEYSIDE L34 9ER
UNITED KINGDOM
(2) INSPECTORATE GRIFFITH USA, INC.
180 SOUTH MAIN STREET
P.O. BOX 558
AUBLER, PA 19002
(3) LEDOUX & COMPANY
359 ALTREO AVENUE
TEANECK, NJ 07668
The employment of a firm as a representative or to perform
the initial assay shall automatically disqualify that firm
for umpire work for that lot.
5. SALE OF PAYABLE GOLD AND PAYABLE SILVER
Alta hereby agrees to sell to Gerald and Gerald hereby
agrees to purchase from Alta the Payable Gold and Payable
Silver contained in the Dore under the terms and conditions
set forth herein.
"Payable Gold" shall be defined as (per Addendum)
<PAGE>
Alta Gold Co.
April 10, 1997
Page 4
of the gold content of the Dore as determined by the
Agreed Assay.
"Payable Silver" shall be defined as (per Addendum) of
the silver content of the Dore as determined by the
Agreed Assay.
6. TERM
Subject to Paragraph 13 hereof, this agreement shall be for
the term of two (2) years. All obligations of the parties
existing at the expiration of this agreement shall be
governed by the terms hereof.
7. PRICING
For all gold and silver not sold under Forward and Option
Contracts shall be sold to Gerald as follows:
A. Spot Pricing
At spot market bid price for gold and silver, or gold
and silver contained in Dore at any time during normal
business hours in New York. In addition, Gerald will
accept firm offers at specific prices and maturity
dates to work on behalf of Alta during our business
hours in New York or overnight in Gerald's European or
Far East offices.
B. Forward Pricing
Gerald may provide Alta with a forward pricing
facility, subject to forward term, quantity and margin
facility.
C. Options
Gerald may provide Alta with physical bullion options
for both puts and calls for gold and silver. Alta will
have the ability to buy or write such option
instruments at its strike price and for any odd day
maturity for an agreed upon term. In the case where
Alta is a seller of an option instrument, a mutually
agreed margin facility will be required. Gerald may
make: available to Alta a strategy whereby Alta will be
able to simultaneously buy puts and write calls in
order to establish a minimum and maximum price band on
production or portions thereof, without any cash flow
effect.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 5
8. CHARGES
Treatment Charges: (Per Addendum)
Transportation Charges: (Per Addendum)
9. REJECTION OF MATERIAL
The Dore shall be free of any elements above levels deemed
by the Refiner to impair the Refiner's ability to refine the
Dore. If a shipment of the Dore contains any elements that
the Refiner deems to impair its ability to refine the Dore,
the Refiner shall have the right to reject such shipment,
and shall have no liability for such rejection, provided the
Refiner clearly determines the reason(s) for rejecting such
shipment. However, Gerald shall use its best efforts to
have such rejected Dore treated elsewhere.
If the Refiner rejects any shipment of Dore, Gerald shall
have the right to liquidate the forward contracts for priced
estimated Payable Gold and Payable Silver with respect to
such shipment by selling back such estimated Payable Gold
and Payable Silver to Alta at a price per troy ounce equal
to the next available London P.M. Gold Fixing and London
Silver Fixing after notice from Gerald of its intent to sell
back such gold and silver to Alta. The net amount due one
party to the other as a result of such liquidation shall be
paid within two (2) business days after such liquidation and
thereafter Alta shall remove such Dore at its risk and
expense from the Refinery.
10. SETTLEMENT DIFFERENCES
In the event the quantity of priced estimated Payable Gold
and estimated Payable Silver in the shipment does not
exactly equal the quantity of the Payable Gold and Payable
Silver in such shipment, Alta and Gerald shall settle the
difference by Gerald purchasing any amount by which Payable
Gold and Payable Silver exceeds such quantity of priced
estimated Payable Gold and/or estimated Payable Silver or by
Alta repurchasing any amount by which priced estimated
Payable Gold and/or estimated Payable Silver exceeds Payable
Gold and/or Payable Silver.
In either case, pricing shall be at the open market bid or
<PAGE>
Alta Gold Co.
April 10, 1997
Page 6
offer price as appropriate for gold and for silver
subsequent to the day Gerald receives the final assays of
such shipment or when such differences become known.
Alternatively, in the event the priced estimated Payable
Gold and/or estimated Payable Silver is greater than the
Payable Gold or Payable Silver, Alta, at its option, may
settle the differences by delivering the shortfall of
Payable Gold and/or Payable Silver in the next shipment. In
the event the priced estimated Payable Gold and/or estimated
Payable Silver is less than the Payable Gold or Payable
Silver, Alta can settle the differences by selling the
Payable Gold or Payable Silver as described above or by
accumulating such gold and/or silver to be priced at a later
date.
In the event that the provisional payment for a shipment is
in excess of the final payment, Alta will promptly return
such excess to Gerald by wire transfer of funds to Gerald's
designated bank account.
11. PAYMENT
(a) Provisional Payment
One hundred percent (100%) provisional payment for the
priced estimated Payable Gold based upon mine weights
and assays less estimated charges will be made on the
second business day after pricing and shipment. The
provisional payment will incur interest at the Gold
Loan rate from the date of the advance until the date
of outturn. Outturn is estimated to be (See Addendum)
working days after delivery to the Refinery. The
provisional payment interest rate is subject to change
at any time to reflect current gold borrowing rates,
calculated as is customary in the industry. Payment
shall be made in U.S. dollars by electronic transfer in
same day funds to Alta's designated bank account.
(b) Final Payment
On the second business day following finalization of
assays and agreement of settlement details, Gerald
shall make a final payment to Alta for the Payable Gold
and Payable Silver, if priced, in such shipment of Dore
in an amount equal to:
<PAGE>
Alta Gold Co.
April 10, 1997
Page 7
(i) the value of the estimated Payable Gold and
Payable Silver, if priced, of the shipment as
determined pursuant to Paragraph 7 hereof,
ADJUSTED BY
(ii) the settlement of differences determined in
accordance with Paragraph 10 hereof; LESS
(iii)the charges set forth in Paragraph 8 hereof
with respect to such shipment; less
(iv) the provisional payment made pursuant to paragraph
11(a).
(c) All payments shall be made by electronic transfer of
funds in U.S. dollars to Alta's designated bank
account.
(d) In the event that Alta elects to price the Payable
Silver subsequent to payment for Payable Gold, in
accordance with this paragraph 11, then payment for
such priced silver shall be made on the second business
day following such pricing.
12. TITLE
Title to all shipments of Dore and the gold and silver
therein contained, free and clear of any lien or
encumbrance, shall pass to Gerald upon delivery of the Dore
to Gerald in accordance with Paragraph 2 hereof.
13. FORCE MAJEURE
Notwithstanding anything to the contrary herein contained,
any delay or failure in the production and/or refining of
the Dore or the release of the gold and silver contained
therein to Gerald caused by any factors outside the
reasonable control of Alta, the Refiner or Gerald shall be
deemed to be an event of force majeure and shall permit the
delay of performance hereunder for the duration of the force
majeure. In the event force majeure is declared, upon
Gerald's direction, (a) no further shipments shall be made
by Alta during the force majeure period, (b) the term of
this
<PAGE>
Alta Gold Co.
April 10, 1997
Page 8
agreement shall be extended for a period equal to the force
majeure period and (c) Gerald and Alta shall agree on an
alternate refinery within five (5) business days.
Notwithstanding the foregoing, if a shipment of Dore fails
to be delivered to Gerald pursuant to paragraph 2 for any
reason on or before the 60th day after the scheduled
delivery of the gold or silver estimated to be contained
therein, Gerald shall have the right to cancel such shipment
and liquidate the forward contracts for priced gold or
silver estimated to be contained in such shipment by selling
back such gold and silver to Alta at a price equal to the
next available London P.M. Gold Fixing and the London Silver
Fixing. The net amount due one party to the other party as
a result of such liquidation shall be made within two (2)
business days thereafter.
14. EVENTS OF DEFAULT
Alta shall be in default under this agreement upon the
occurrence of any one or more of the following events (each
such event is herein referred to as an "Event of Default"):
A. failure of Alta to pay (i) any amount of principal or
interest under the Notes (as hereinafter defined) or
(ii) any other indebtedness, obligations or liabilities
of Alta to Lenders (as hereinafter defined), when the
same shall become due and Payable, whether at the due
date thereof or at a date fixed for prepayment or by
acceleration or otherwise which is not cured within two
days;
B. failure of Alta to perform, comply with or observe any
other term, covenant or agreement applicable to Alta
pursuant to this agreement, a certain loan agreement of
even date herewith between Alta and BHF Bank
Aktiengesellshaft, New York Branch and Gerald Metals,
Inc. (Gerald and BHF each a "Lender" and collectively
the "Lenders") and hereinafter referred to as the "Loan
Agreement", each promissory note of Debtor issued
pursuant to such Loan Agreement (collectively, the
"Notes") or any other agreements between Alta and the
Lenders;
C. any representation or warranty made by or on behalf of
Alta pursuant to this agreement, the Notes, the Loan
Agreement or any other agreement, document, instrument
<PAGE>
Alta Gold Co.
April 10, 1997
Page 9
or certificate executed by Alta in favor of the Lenders
shall be untrue or misleading in any material respect
as of the date such representation or warranty was made
or is deemed to have been made;
D. Alta shall (i) discontinue or abandon operation of its
businesses (ii) apply for or consent to or suffer the
appointment of a receiver, trustee, custodian or
liquidator of it or any of its property, (iii) admit in
writing its inability to pay its debts as they mature,
(iv) make a general assignment for the benefit of
creditors, (v) file, or have filed against it, a
petition for relief under Title 11 of the United States
Code, (vi) file, or have filed against it, a petition
in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors or to
take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or
liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in
any proceeding under any such law, or if corporate
action shall be taken for the purpose of effecting any
of the foregoing, (vii) become insolvent, (viii) fail
to generally pay its debts as they mature or (ix) have
liabilities which exceed the fair value of its assets;
15. REMEDIES UPON EVENT OF DEFAULT
Upon or at any time after the occurrence of any Event of
Default, Lenders may (i) terminate performance of any or all
of its obligations to Lenders, (ii) treat as immediately due
and payable any or all of Alta's obligations to Lenders,
(iii) sell any or all collateral in such manner as Lender
determines to be commercially reasonable, (iv) exercise any
or all of the remedies set forth in Section 8 of the
Security Agreement of even date herewith between Alta and
Lender, as the same may be amended or modified from time to
time, and (v) close out in whole or in part the priced
quantities of gold and/or silver which have not been
delivered at market prices therefor as determined in good
faith by Gerald (upon any close out, either party shall pay
to the other the net amount due hereunder, within two (2)
business days).
<PAGE>
Alta Gold Co.
April 10, 1997
Page 10
16. GOVERNING LAW
This agreement shall be governed by and construed in
accordance with the laws of the State of New York without
giving effect to principles of conflict of laws. Each party
hereto consents to the exclusive jurisdiction of the courts
of the State of New York and/or of any U.S. Federal Court
located in the Borough of Manhattan in the City of New York
over any disputes arising in connection with the transaction
contemplated hereby. Final judgment in any action shall be
binding upon the parties hereto and may be enforced in such
courts or in the courts of any country to which jurisdiction
the party against whom the action is brought is subject.
ALTA AND GERALD EACH WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM
AGAINST THE OTHER ON ANY MATTER WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT,
ANY OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN).
17. NOTICES
All notices hereunder shall be in writing and shall be sent
by telex, telecopy transmission or by certified mail to the
attention of the respective parties at the addresses set
forth below:
Alta Gold Co. Gerald Metals, Inc.
601 Whitney Ranch Drive, Suite P.O. Box 10134
Henderson, NV 89014 High Ridge Park
Stamford, CT 06904
Attn: Robert Pratt Attn: Susan A. Scoggins
Telefax: (702) 443-1547 Telefax: (203) 609-8459
CC: Treasurer
Notices shall be deemed to have been given when received at
the respective party's address set forth above unless sent
by telefax, in which case the same shall be deemed given
when sent to the telefax address of the respective party set
forth above and confirmed as being received by the
respective party.
<PAGE>
Alta Gold Co.
April 10, 1997
Page 11
18. MISCELLANEOUS
This agreement constitutes the entire agreement between the
parties relating to the subject matter hereof, superseding
all prior agreements and understandings with respect thereto
(either oral or written) and may not be amended except by
writing signed by both parties.
This agreement may not be assigned by either party without
the written consent of the other parties (such consent not
to be unreasonably withheld), except that Gerald may assign
it's rights hereunder for financing purposes.
To signify your agreement to these terms, will you kindly sign
the attached copy of this letter and return it to the undersigned
for our records.
ALTA GOLD CO. GERALD METALS, INC.
By: By:
John A. Bielun Robert C. Kaeser
Senior Vice President/ Vice President
Chief Financial Officer
Date:
<PAGE>
[GERALD METALS, INC. LETTERHEAD]
April 10, 1997
Alta Gold Co.
601 Whitney Ranch Drive, Suite 10
Henderson, NV 89014
Ladies and Gentlemen:
ADDENDUM 1 TO PURCHASE/REFINING AGREEMENT DATED APRIL 10, 1997
RE: KINSLEY MINE
1. MATERIAL/REFINER/QUANTITY
(a) The Dore covered by this agreement is Dore bullion
produced by the Kinsley mine (the "Dore") assaying
approximately as follows:
Gold: 80%
Silver: 20%
4. ASSAY AND SPLITTING LIMITS
Gold: 1.0 parts per thousand
Silver: 2.5 parts per thousand
5. SALE OF PAYABLE GOLD AND PAYABLE SILVER
"Payable Gold" shall be defined as 99.875% of the gold
content of the Dore as determined by the Agreed Assay.
"Payable Silver" shall be defined as 98.00% of the
silver content of the Dore as determined by the Agreed
Assay.
<PAGE>
GERALD METALS, INC.
-2-
8. CHARGES
Treatment Charges:
U.S. $0.65 per troy ounce of Dore received.
Minimum charge $350.00 per lot.
Transportation Charges: None.
11. OUTTURN
Outturn is fifteen (15) working days after delivery to
the Refinery.
To signify your agreement to these terms, will you kindly sign
below and return it to the undersigned for our records.
ALTA GOLD CO. GERALD METALS, INC.
By: By:
John A. Bielun Robert C. Kaeser
Senior Vice President/ Vice President
Chief Financial Officer
Date:
<PAGE>
