[DRAGON CAPITAL LOGO]
December 17, 2004
OLYMPUS PACIFIC MINERALS INC.
Suite 500
10 King Street East
Toronto, Ontario
M5C 1C3
ATTENTION: MR. JOSEPH J. BAYLIS
PRESIDENT & CHIEF EXECUTIVE OFFICER
Dear Sirs:
RE: OFFER OF EQUITY AND DEBT FINANCING
Dragon Capital Markets Limited ("Dragon") hereby submits for your review and
acceptance this offer to arrange debt financing in the amount set out in
paragraph 2 below (the "Loan") and equity financing (the "Equity Financing") of
up to 12.7 million common shares of Olympus Pacific Minerals Inc. ("Olympus") at
a price of CDN$0.40 per common share, subject to the Over-allotment Option (as
defined below) (collectively, the "Commitment"). The purpose of the Commitment
is to finance the development, including the procurement of machinery and
equipment, by Bong Mieu Gold Mining Company Ltd. ("Bogomin" or the "Borrower")
in order for Bogomin to commence commercial production of the Ho Gan deposit of
the Bong Mieu Gold Project, located some 80 kilometres south of the port city of
Danang, Vietnam ("Bong Mieu"). Bogomin is a joint venture company established
under the Foreign Investment Law of Vietnam in which Olympus owns an 80%
interest. Proceeds of the Loan will be used by Bogomin alone but proceeds of the
Equity Financing will also be used for the continued exploration and development
of Olympus's Phuoc Son and Bong Mieu properties and for general corporate
purposes.
1. BORROWER/LENDER
Bogomin will be the Borrower. Olympus will provide an unconditional guarantee of
Bogomin's obligations that is in form and substance satisfactory to the Lenders,
as defined below.
The Loan will be made by Vietnam Enterprises Investments Limited and Vietnam
Growth Fund Limited, each of which are Cayman Island companies managed by
related parties of Dragon and each of which will lend, through loan agreements
which are on substantially the same terms and conditions and in a form
acceptable to the parties (the "Loan Agreements"), half of the amount of the
Loan; provided however that if Dragon so decides, the Loan will be made by a
third party nominated by Dragon (the entities making the Loan are hereinafter
referred to as the "Lenders"). This letter binds Dragon but does not bind
Vietnam Enterprises Investments Limited or Vietnam Growth Fund Limited or any
such third party.
2. AMOUNT OF LOAN
Two million US dollars (US$2,000,000), plus an additional amount equal to the
pre-paid interest on the sum of US$2,000,000. The amount of the pre-paid
interest will be determined as soon as the repayment instalments are known and
in any event before the signing of the Loan Agreements
3. INTEREST RATE
The interest rate (the "Interest Rate") shall be set at 8.5% per annum
calculated daily on the basis of the actual number of days elapsed in a year of
360 days, as the case may be. The Borrower shall prepay on the date of
advancement of the Loan (the "Advance Date") the entire amount of interest due
on the outstanding indebtness from time to time from the Advance Date to the
Maturity Date (as defined below).
4. TERM
Two (2) years commencing on the Advance Date and ending on the final day of the
said period (the "Maturity Date").
5. REPAYMENT AND INSTALMENTS
The Loan shall be repaid in instalments of principal in amounts set out in the
Loan Agreements, with the first payment not being due prior to the sixth month
following the Advance Date. Upon the Maturity Date, the remaining principal
balance of the Loan and all other amounts due and owing by the Borrower to the
Lenders pursuant to the Loan, if any, shall become immediately due and payable.
6. METHOD OF PAYMENT OF INSTALMENTS
During the Term the Borrower shall make payment to the Lenders by wire transfer
to the bank accounts set out in the Loan Agreements.
7. SECURITY
Security for the Loan shall consist of the following:
1. Assignment or pledge in favour of the Lenders or their security agent of
Bogomin's right, title and interest in and to the Refining Contract(s) with
one or two refiners (the "Refiners") that are listed on The Good Delivery
List of Acceptable Refiners of the London Bullion Market Association
("LBMA"). Pursuant to these Refining Contracts, Bogomin will contract the
Refiners to refine the dore gold into LBMA good delivery bars ("Good
Delivery Bars") and to warehouse the Good Delivery Bars on behalf of
Bogomin until such bars are sold by instruction of the Lenders' security
agent (acting on the Borrower's instructions).
2. Notice of Assignment or Pledge issued by Bogomin to the refiner(s), duly
acknowledged in writing by such refiner(s).
3. Charge executed by Bogomin in favour of the Lenders and their security
agent over an offshore Collection Account (as defined below), or, if State
Bank of Vietnam approval for such offshore bank account is not received by
before a date determined by the Lenders in their discretion, then a pledge
over an onshore Collection Account.
4. Pledge over Bogomin's inventory and equipment and, if so requested by the
Lenders' security agent (the "Security Agent"). Bogomin shall also provide
floating charges in respect of the dore shipped to the Refiners and the
Good Delivery Bars.
5. Agency Agreement between Bogomin and the Security Agent. In this agreement,
Bogomin shall, during the Term, (i) direct the Security Agent on when and
to whom to sell the Good Delivery Bars, (ii) empower the Security Agent to
enter into the contract for sale, which shall contain a clause that
requires all invoices raised under such contract to be expressed to be
payable into a designated US dollar bank account (the "Collection
Account"); and (iii) to take such other steps as may be necessary or
desirable to ensure the deposit of the proceeds from all sales of Good
Delivery Bars into the Collection Account. At this point in time, we would
expect a Dragon Capital company to act as the Security Agent.
6. Bank accounts:
(a) The Lenders, Bogomin and the bank holding the Collection Account will
enter into a trustee paying agreement or similar agreement pursuant to
which the bank, out of the revenues received form the sale of the Good
Delivery Bars, will make payments in the following order: (i) the bank will
first pay Bogomin's operating costs at the following rates: (A) during the
first month after the commencement of the sale of the Good Delivery
Bars, operating costs (including royalties and taxes) shall be paid at the
rates provided in the technical report dated November 30, 2004 prepared by
Micon International Limited ("Operating Costs"); and (B) after the first
month following the commencement of the sale of the Good Delivery Bars,
Bogomin's actual Operating Costs provided, however that if an amount will
remain in the Collection Account sufficient to pay the next principal;
repayment instalment under the Loan, then funds not to exceed $560,000 U.S.
may be withdrawn by Bogomin to fund the expansion from 500 to 800 tonnes
per day; (ii) 100% of the remainder shall remain in the Collection Account
until there are sufficient amounts in the Collection Account to make the
next scheduled payment; (iii) 70% of the remainder shall remain in the
Collection Account up until the point at which the amount in the Collection
Account equals he remaining outstanding principal amount of the Loan; (iv)
the balance shall be paid to the Lenders out of the Collection Account, any
money remaining in the Collection Account shall be paid to Bogomin.
(b) Any funds in the Collection Account that exceed the remaining
outstanding principal amount of the Loan shall be promptly paid to Bogomin.
(c) In the event that Bogomin cannot obtain State Bank approval of the
offshore account on a timely basis (as determined by the Lenders in their
discretion) then the Collection Account shall be in Vietnam.
(d) Each amount form time to time standing to the credit of Collection
Account shall bear interest at the rate offered by the bank, and such
interest shall be for the account of Bogomin.
8. CONDITIONS FOR ADVANCE
Subject to the other provisions of this Commitment, the obligation to advance
the Loan (by way of single advance unless otherwise indicated, such advance
hereinafter the "Advance") shall be conditional upon the following:
(a) execution by the Borrower and the Lenders of the Loan Agreements;
(b) execution by the Borrower and delivery to the Lenders of the promissory
notes (the "Notes) in the total amount of the Loan, which Notes shall
substantially be in the form set out as Schedule "A" to the Loan
Agreements;
(c) the delivery to the Lenders of a document describing the Borrower's
Environmental and Social Management System, which condition will be
satisfied by the delivery of the Lenders of the EIA completed by Kingett
Mitchell Limited;
(d) Olympus and Bogomin having received all necessary regulatory approvals
for the Loan and Guarantee and the Equity Financing and the transaction
contemplated therein including, without limitation, registration of the
Loan with the State Bank of Vietnam;
(e) Bogomin having received all necessary regulatory approvals, licenses
and consents for the Loan, including, without limitation, registration of
the Loan with the State Bank of Vietnam;
(f) Bogomin having received State Bank approval to open the Collection
Account outside Vietnam. In the event that Bogomin cannot obtain State Bank
approval of the off-shore account on a timely basis (as determined by the
Lenders in their discretion), then the Collection Account shall be in
Vietnam;
(g) Execution by the Borrower, the Lenders and the appointed bank of the
Trustee Paying Agreement (or onshore equivalent);
(h) Bogomin having opened the Collection Account pursuant to an agreement
satisfactory to the Lenders;
(i) A Charge or Pledge has been granted over Bogomin's inventory and
equipment, the Collection Account, and, if requested by the Lenders, the
dore and the Good Delivery Bars in favour of the Lenders;
(j) Bogomin shall have entered into an Agency Agreement with the Security
Agent in form and substance satisfactory to the Lenders;
(k) Certified copies of appropriate board resolutions, powers of attorney
or other empowering authority of Bogomin to enter into and perform its
obligations under all the financing documents;
(l) Olympus will have provided a guarantee of Bogomin's obligations that is
in form and substance satisfactory to the Lenders;
(m) All representations and warranties contained in the Loan Agreements
shall be true on and as of the Advance Date with the same effect as if such
representations and warranties had been made on and as of the Advance Date;
and
(n) Neither Olympus nor the Borrower shall be in default of any provisions
of this Commitment. Without limiting the preceding sentence, Olympus shall
have sold at least 12.7 million common shares pursuant to the Equity
Financing.
In addition, the Borrower undertakes to (i) enter into an assignment or pledge
in favour of the Lenders or their security agent of its right, title and
interest in and to the Refining Contract(s), in a form acceptable to the
Lenders, within 14 days after the date of such contract; and (ii) to obtain an
acknowledgement of the same from the refiners as soon as possible thereafter.
For greater certainty, in the even that one or more of the above conditions are
not satisfied n or before 1 April 2005, for reasons caused by the act or
omission of the Borrower, then the Lenders may, in their sole and absolute
discretion, either waive such condition or terminate their obligations pursuant
to their respective Loan Agreements. Notwithstanding the preceding sentence,
neither Lender shall be entitled to terminate its obligations pursuant to its
Loan Agreement until it has given notice to the Borrower indicating the
reason(s) for termination and afforded the Borrower ten (10) days within which
to address and eliminate such reason(s), failing which such Lender's obligations
pursuant to its Loan Agreement shall be terminated. In the event that one or
more of the above conditions are not satisfied on or before 1 April 2005, for
reasons not caused by the act or omission of the Borrower, then either Lender
may, in its sole and absolute discretion, terminate its Loan Agreement. The
Borrower's obligation to draw down the Loan shall be subject to satisfaction of
the conditions set out in paragraphs (a) and (d) above, and the prior closing by
Olympus and Dragons of the Equity Financing for not less than 12.7 million
common shares of Olympus.
9. DISBURSEMENT DATE
It is currently anticipated that the Advance will occur on April 1, 2005. In any
case, the Advance will not occur prior to February 1, 2005. In the event that
funding conditions under the Loan Agreements have not been satisfied, for any
reason whatsoever (except for a reason caused by the act or omission of the
Lenders), on or before April 1, 2005, then either Lender may, at any time
thereafter, in its sole and absolute discretion, terminate its obligations
pursuant to its Loan Agreement. Either Lender may, in its sole and absolute
discretion and from time to time, extend the last-mentioned date but not beyond
April 30, 2005. Notwithstanding any such extension(s) time shall continue to
remain of the essence pursuant to this Commitment and all other terms and
conditions hereunder shall remain unamended.
10. PREPAYMENT PRIOR TO MATURITY
The Borrower shall have the right at any time to prepay the Loan, in whole or in
part, without the Lender's consent and without notice, penalty or bonus (except
that there shall be no reimbursement of any pre-paid interest).
11. COSTS, FEES AND EXPENSES
The Borrower shall have the right at any time to prepay the Loan, in whole or in
part, without the Lender's consent and without notice, penalty or bonus (except
that there shall be no reimbursement of any pre-paid interest).
12. ARRANGEMENT OF EQUITY FINANCING
Dragon shall use its best efforts to arrange an equity financing of 12.7 million
common shares of Olympus at a price of CDN$0.40 per common share, which
financing shall close on or about December 31, 2004 or such other date or dates
as may be agreed between the parties Vietnam Enterprise Investments Limited, a
fund managed by an affiliate of Dragon, and Vietnam Growth Fund Limited, another
fund managed by a separate affiliate of Dragon, have executed subscription
agreements to subscribe for a total of 10.7 million common shares of the 12.7
million being offered, provided that the 10.7 million common shares contemplated
above will be reduced to the extent necessary to ensure that Dragon, Vietnam
Enterprise Investments Limited, Vietnam Growth Fund Limited and any other Dragon
affiliates (as defined under the applicable securities law of Canada) do not as
a group hold more than 19.9% of the issued and outstanding shares of Olympus on
completion of the equity financing.
The parties agree that the equity financing for the above 12.7 million common
shares will be completed at one closing, which is expected to be on or about
December 31, 2004, subject to agreement between the parties to extend such date,
if necessary.
13. OVER-ALLOTMENT OPTION
Dragon shall have the option, exercisable at any time up to 30 days following
the closing date of the Equity Financing, contemplated in paragraph 12 above,
expected to be not later than December 31, 2004, to arrange for the sale of up
to an additional 3 million common shares of Olympus at a price of CDN$0.40 per
common share (the "Over-allotment Option"). The Over-Allotment is subject to
regulatory approval.
14. ARRANGEMENT FEE
Subject to Olympus having received all necessary regulatory approvals, including
without limitation, the requisite TSX Venture Exchange approval, in
consideration of the services of Dragon arranging the Loan and the Equity
Financing, Olympus agrees to remunerate Dragon as follows:
(a) to pay to Dragon on the closing date of the Equity Financing a cash
commission (the "Cash Commission") of US$350,000 (provided that Dragon
exercises the Over-allotment Option and arranges for the sale of
17,000,000 common shares of Olympus), which Commission is in
consideration for Dragon arranging the Loan and the Equity Financing;
and
(b) To issue to Dragon or is nominee one non-transferable share purchase
warrant for every 10 common shares sold pursuant to the Equity
Financing, with each Warrant entitling Dragon or such nominee to
purchase an additional common share of Olympus at an exercise price of
CDN$0.40 per share for a period of one year from the date of closing
of the Equity Financing. The Warrants are issuable as partial
consideration fro Dragon arranging the Equity Financing.
If less than 17,000,000 common shares of Olympus are sold pursuant to the Equity
Financing, including the Over-Allotment Option, the Cash Commission shall be
reduced to a product derived from multiplying 350,000 by a fraction having the
number of Olympus common shares subscribed for pursuant to the Equity Financing
as the numerator and the 17,000,000 as the denominator.
15. LIMITED LIABILITY
This Commitment shall not be personally binding upon and resort shall not be had
to, nor shall recourse or satisfaction be sought from the private property of
any of the directors of Dragon, the Lenders, the Borrower to Olympus,
shareholders of Dragon, the Lenders, the Borrower or Olympus, the holders of
securities exchangeable into common shares of Dragon, he Lenders, the Borrower
or Olympus or the officers, employees or agents of Dragon, the Lenders, the
Borrower or Olympus.
16. TIME FOR ACCEPTANCE
This Commitment shall be accepted by Olympus and returned to Dragon not later
than December 22, 2004, failing which this Commitment shall become null and
void, without further notice.
DRAGON CAPITAL MARKETS LIMITED
/s/ Dominic Scijven
- -------------------------------------
Dominic Scijven
Title: Director
I have the authority to bind Dragon.
ACCEPTANCE
We hereby accept and agree to be bound by the terms and conditions set out in
this Commitment on this 20 day of December, 2004
OLYMPUS PACIFIC MINERALS INC.
Per: /s/ Joseph J Baylis
--------------------------------
Name: Joseph J Baylis
Title: Director, President & CEO
Per:
--------------------------------
Name:
Title:
[I][We] have the authority to bind Olympus
