CREDIT AGREEMENT
Between
USMX, INC.
as Borrower
and
N M ROTHSCHILD & SONS LIMITED
as Lender
Dated as of July 11, 1996
CREDIT AGREEMENT
Table of Contents
Page
ARTICLE 1 CERTAIN DEFINITIONS AND ACCOUNTING
PRINCIPLES 1
1.1 Certain Defined Terms 1
1.2 Accounting Principles 11
ARTICLE 2 COMMITMENT, FEES, USE OF PROCEEDS 11
2.1 Commitment 11
2.2 Fees 11
2.3 Use of Proceeds 12
ARTICLE 3 PROCEDURE AND PAYMENT 12
3.1 Borrowing Procedure 12
3.2 Convertible Note 12
3.3 Interest 12
3.4 Repayment of the Loan 13
3.5 Priority of Prepayments 13
3.6 Increased Costs and Reduction in Return 13
3.7 Payments and Computations 13
3.8 Payment on Non-Business Days 14
3.9 Taxes 14
ARTICLE 4 COLLATERAL SECURITY 15
4.1 Security Documents 15
4.2No Limitation on Application of
Security Interests 16
4.3Recordings and Filings of Security Documents 16
4.4 Protection of Security Document Liens 16
4.5 Right of Set-off 16
4.6 Additional Collateral 16
ARTICLE 5 CONDITIONS PRECEDENT 17
5.1 Conditions Precedent to the Advance 17
ARTICLE 6 REPRESENTATIONS AND WARRANTIES 19
6.1 Representations and Warranties of USMX 19
6.2 Representations and Warranties of Lender 25
ARTICLE 7 AFFIRMATIVE COVENANTS OF USMX 26
7.1 Compliance with Laws, Etc. 26
7.2 Reporting Requirements 26
7.3 Inspection 27
7.4 Maintenance of Insurance 27
7.5 Keeping of Records and Books of Account 27
7.6 Preservation of Existence, Etc. 27
7.7 Conduct of Business 28
7.8 Notice of Default 28
7.9 Defense of Title 28
7.10 Operations 28
7.11 Maintenance of the Mining Properties 28
ARTICLE 8 NEGATIVE COVENANTS OF USMX 29
8.1 Indebtedness 29
8.2 Liens, Etc. 29
8.3 Assumptions, Guarantees, Etc. of Indebtedness
of Other Persons 31
8.4 Investments in Other Persons 31
8.5 Mergers, Changes in Capital Structures, Etc. 31
8.6 Restriction on Dividends and Redemptions 32
8.7 Disposition of Illinois Creek Gold Property 32
8.8 Restrictive and Inconsistent Agreements 32
ARTICLE 9 CONVERSION RIGHTS 32
9.1 Lender's Loan Conversion Rights 32
9.2 USMX's Loan Conversion Rights 32
9.3 Loan Conversion Procedures 33
9.4 Lender's Registration Rights Upon Loan
Conversion 34
ARTICLE 10 EVENTS OF DEFAULT 34
10.1 Event of Default 34
10.2 Remedies Upon Event of Default 37
ARTICLE 11 MISCELLANEOUS 37
11.1 Amendments, Etc. 37
11.2 Notices, Etc. 37
11.3 No Waiver; Remedies 39
11.4 Costs, Expenses and Taxes 39
11.5 Binding Effect; Assignment 39
11.6 GOVERNING LAW 39
11.7 VENUE; SUBMISSION TO JURISDICTION 39
11.8 WAIVER OF JURY TRIAL 40
11.9 Execution in Counterparts 40
11.10 Inconsistent Provisions 40
11.11 Termination of Agreement 40
11.12Survival of Representations and Warranties 41
11.13 Concerning the Security Documents 41
11.14 No Third Party Beneficiary 41
11.15 Severability 41
11.16 Acknowledgments 41
11.17 Confidentiality 41
11.18 Entire Agreement 41
SCHEDULES
Schedule 1.1(a) Mining Properties
Schedule 6.1(a) Subsidiaries
Schedule 6.1(c) Project Permits
Schedule 6.1(e) Litigation
Schedule 6.1(f) Additional Financial Disclosures
Schedule 6.1(h) Disclosure Schedule
Schedule 6.1(i) Permitted Liens
Schedule 6.1(l) USMX's and AK's Capital Structure
Schedule 6.1(m) Hedging Contracts
Schedule 6.1(n) Material Agreements
Schedule 6.1(q) Compliance With Laws
Schedule 6.1(r) USMX's and AK's Indebtedness
Schedule 6.1(s) Employee Benefits
Schedule 7.4 Insurance Policies
EXHIBITS
Exhibit A-1 Form of Convertible Note
Exhibit A-2 Form of $2,500,000 Pledged Note
Exhibit A-2 Form of $3,400,000 Pledged Note
Exhibit B Form of Pledge Agreement
Exhibit C-1 Form of Second Mortgage
Exhibit C-2 Form of Fourth Mortgage
Exhibit C-3 Form of Assignment Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of USMX's Omnibus Certificate
Exhibit F Form of Opinion of USMX's Counsel
Exhibit G Form of Security Opinion
Exhibit H Form of Request for Advance
Exhibit I Form of Interest Period Notice
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of July 11, 1996, is by
and between USMX, INC., a Delaware corporation ("USMX"), and
N M ROTHSCHILD & SONS LIMITED, a company organized and existing
under the laws of England ("Lender").
Recitals
A. By this Credit Agreement the parties hereto desire
to set forth the terms of their agreement pursuant to which
Lender will make a $2,500,000 loan to USMX, to be used by USMX in
connection with the development of the Illinois Creek Gold
Property.
B. The Mining Properties are owned and held of record
by USMX OF ALASKA, INC. ("AK"), an Alaska corporation and wholly-
owned subsidiary of USMX.
C. Coincident herewith, Lender and AK have entered
into a separate Credit Agreement (the "AK Credit Agreement")
providing project financing for the development of the Illinois
Creek Gold Property, with payment guarantied by USMX as provided
in the guaranty executed by USMX in connection with the AK Credit
Agreement.
D. The Loan to be made pursuant hereto, on the terms
and conditions provided herein, is convertible into shares of the
Common Stock of USMX, and will be secured by the pledge by USMX
of all of the stock of AK and of the Pledged Notes.
E. The Pledged Notes are secured, respectively, by
the Second Mortgage and the Fourth Mortgage on the Mining
Properties, which mortgages shall be assigned to Lender pursuant
to the Assignment Agreement.
Agreement
NOW, THEREFORE, in consideration of the following
mutual covenants and agreements, USMX and Lender hereby agree as
follows:
ARTICLE 1
CERTAIN DEFINITIONS AND ACCOUNTING PRINCIPLES
1.1 Certain Defined Terms. As used in this Agreement
and unless otherwise expressly indicated, the following terms
shall have the following meanings:
"Advance" means a single advance of the Loan by Lender
to USMX as provided in Section 3.1.
"Advance Period" means the period during which Lender
will Advance the Loan to USMX, subject to all of the terms and
conditions hereof, which period shall commence on the date hereof
and shall continue until July 31, 1996.
"Affiliate" means any Person directly or indirectly
controlling or controlled by or under common control with another
Person, provided that, for purposes of this definition,
"control," as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by
contract or otherwise.
"Agreement" means this Credit Agreement, as it may be
amended, supplemented, or otherwise modified and in effect from
time to time.
"AK" shall have the meaning specified in Recital B.
"AK Credit Agreement" shall have the meaning specified
in Recital C.
"AK Shares" means 100,000 shares of the common stock of
the AK, par value $0.01 per share representing all of the issued
and outstanding shares of stock of AK.
"Applicable Margin" means, with respect to the rate of
interest payable by USMX on the Loan, two percent (2.0%).
"Assignment Agreement" means the agreement pursuant to
which USMX assigns the Second Mortgage and the Fourth Mortgage to
Lender, substantially in the form of Exhibit C-3.
"Breakage Costs" means all costs and losses which
Lender may incur as a result of payment of the Principal Amount
of the Loan other than at the end of an Interest Period.
"Business Day" means a day of the year on which banks
in Denver, Colorado, New York, New York and London, England are
open for business.
"Capitalized Lease Liabilities" means all monetary
obligations of USMX under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each
other Loan Document, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP,
and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
"Collateral" means all properties, rights and interests
subject to the Security Documents or subject to the Second
Mortgage or Fourth Mortgage.
"Commitment" means the commitment of Lender set forth
in Section 2.1 to make the Loan.
"Common Stock" means the $0.001 par value common stock
of USMX.
"Conditions Precedent to USMX's Conversion Rights"
shall mean each of the following:
(i) the Principal Amount of the Loan is
outstanding and unpaid, and the due date thereof has not been
accelerated by Lender pursuant to the terms of this Agreement;
(ii) no Default exists and is continuing
hereunder;
(iii) the Daily Closing Price of the
Common Stock shall have exceeded the Minimum Stock Price for a
period of thirty (30) consecutive Trading Days; and
(iv) USMX or AK shall have obtained, and
hold free of defaults or notices of default by any Governmental
Authorities, all permits, authorizations, consents and approvals
of Governmental Authorities and other Project Permits necessary
for the Project to commence.
"Contingent Liability" means any agreement, undertaking
or arrangement by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or
indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor,
or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall (subject to any
limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby, less the
value of any bonds, letters of credit or cash collateral of such
Person securing such contingent liability.
"Conversion Date" means the date upon which conversion
of the Loan into Common Stock is effected.
"Conversion Price" means $3.40 per share of Common
Stock, or such other amount as may be established pursuant to
Section 9.3.
"Conversion Rights" means the rights of Lender and USMX
to convert the Loan into Common Stock as provided in Article 9.
"Conversion Shares" means the shares of Common Stock to
be issued to Lender upon conversion of the Loan as provided in
Article 9. The number of Conversion Shares shall be determined
by dividing the Principal Amount by the Conversion Price.
"Convertible Note" means the Convertible Promissory
Note which evidences the Loan, dated as of July 11, 1996, which
Convertible Promissory Note is made by USMX and payable to the
order of Lender, in the form of Exhibit A-1 hereto.
"Daily Closing Price" of the Common Stock means the
closing price for the Common Stock on the NASDAQ on a Trading
Day.
"Date of Default" shall have the meaning specified in
Section 10.2(a).
"Default" means any Event of Default or any condition
or event, or combination thereof, which, after notice or lapse of
time or both, could constitute an Event of Default.
"Default Rate" means the Interest Rate applicable to
the Loan during periods when amounts payable by USMX as principal
repayments, interest payments or fee or expense payments are due
and payable but unpaid by USMX, which shall be an annual rate of
interest which is equal to the Interest Rate, plus four percent
(4%).
"Development Plan" means the Development Plan for the
construction and operation of the Illinois Creek Gold Property
through Completion (which Development Plan, among other things,
sets forth a construction budget, identifies all material
construction contracts, and sets forth a master construction
schedule, indicating scheduled monthly and cumulative
expenditures), and the plan for the operation of the Illinois
Creek Gold Property after Completion through the life of the
mine, as amended from time to time by AK and USMX with the
written approval of Lender, which approval Lender may withhold in
its sole discretion reasonably exercised. The Development Plan
is appended to the AK Credit Agreement as Exhibit F.
"Dollars" and the symbol "$" each mean lawful money of
the United States of America.
"Environmental Laws" means federal, state, local and
foreign laws or regulations, codes, orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder
relating to pollution or protection of the environment,
including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes.
"Establishment Fee" shall have the meaning specified in
Section 2.2(a).
"Event of Default" has the meaning set forth in
Section 10.1.
"Feasibility Study" means the Illinois Creek Gold
Feasibility Study Mine Plan (and associated documents) dated
February 22, 1996 prepared by USMX pertaining to the construction
and operation of a commercial gold mining facility on the
Illinois Creek Gold Property, a complete and accurate copy of
which has been provided by USMX to Lender.
"Fourth Mortgage" means the Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement, dated as
of July 11, 1996, made by AK in favor of USMX covering all the
right, title and interest of AK in the Mining Properties and in
production therefrom and personal property associated therewith,
in the form of Exhibit C-2 hereto, assigned to Lender pursuant to
the Assignment Agreement and securing the $3,400,000 Pledged
Note. The Fourth Mortgage is subordinated to Lender's security
interests in the Mining Properties created pursuant to the AK
Credit Agreement, the Second Mortgage, and the NPMC Mortgage (as
defined in the AK Credit Agreement).
"GAAP" means generally accepted accounting principles
in the United States of America, consistently applied.
"Governmental Acts" has the meaning set forth in
Section 3.6.
"Governmental Authority" means any federal, state,
county, city or local government or political subdivision or
authority in which any property of USMX is located or which
exercises valid jurisdiction over any such property, or in which
USMX conducts business or is otherwise present, and any agency,
department, commission, board, bureau or instrumentality of any
of them which exercises valid jurisdiction over USMX.
"Governmental Requirement" means any law, statute,
code, ordinance, order, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authoriza
tion or other direction or requirement (including, without
limitation, Environmental Laws, energy regulations and occupa
tional, safety and health standards or controls) of any
Governmental Authority.
"guarantee" shall mean any obligation, contingent or
otherwise, of any Person guaranteeing any Indebtedness or obliga
tion of any other Person in any manner, whether directly or
indirectly, and including, without limitation, any obligation of
such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such
Indebtedness or obligation, or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of
such Indebtedness or obligation, (b) to purchase property,
securities or services for the purpose of assuring the owner of
such Indebtedness or obligation of the payment of such
Indebtedness or obligation, or (c) to maintain working capital,
equity capital or any other financial statement condition of the
primary obligor so as to enable the primary obligor to pay such
Indebtedness or obligation; provided, however, that the term
guarantee shall not include endorsements for collection or
deposit, in either case in the ordinary course of business.
"Guaranty" means the guaranty of USMX issued to Lender
pursuant to the AK Credit Agreement on even date herewith whereby
USMX guaranties all of the obligations of AK under the AK Credit
Agreement until Completion (as defined in the AK Credit
Agreement), and certain obligations of AK thereafter.
"Hedging Contracts" means any agreement, facility,
contract or other transaction entered into relating to forward
contracts or hedging (including but not limited to forward sales,
which include spot deferred sales, options, swaps and price
protection and floor price arrangements) for the management
and/or protection of gold and other metals price risk, entered
into with Lender or with other counterparties acceptable to
Lender; and the proceeds of and all benefit and advantage derived
in respect of the foregoing or any dealings therewith (including
the closing out of any contracts or transactions).
"Holder" means a holder in due course of the
Convertible Note.
"Illinois Creek Loan Acceleration Date" means the date
on which USMX or AK either (a) sells or otherwise transfers any
interest in the Illinois Creek Gold Property to any other Person
except as required or permitted by this Agreement or the AK
Credit Agreement or (b) enters into a joint venture agreement,
partnership, operating agreement or any other similar kind of
agreement with any other Person pursuant to which such other
Person has a direct or indirect interest in any portion of the
Illinois Creek Gold Property or in the production therefrom or
the proceeds thereof, and USMX or AK and such other Person have
agreed to the shared, cooperative or joint maintenance,
exploration, development or exploitation of such portion of the
Illinois Creek Gold Property; provided that the election of NPMC
pursuant to the NPMC Agreement to participate for a 25% working
interest in Mining Properties other than the Illinois Creek Gold
Property shall not, in and of itself, constitute an Illinois
Creek Loan Acceleration Date.
"Illinois Creek Gold Property" means the Mining
Properties identified as the Illinois Creek Upland Mining Lease
in Schedule 1.1(a) hereto.
"Indebtedness" means, for any Person, without
duplication:
(a) all obligations of such Person for borrowed
money or metals (including (i) in the case of such obligations,
all notes payable and drafts accepted representing extensions of
credit; (ii) in the case of USMX, USMX's Obligations; and
(iii) in the case of such metals, gold and silver) and all
obligations evidenced by bonds, debentures, notes, or other
similar Instruments on which interest charges are customarily
paid;
(b) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether or
not drawn, and bankers' acceptances issued for the account of
such Person;
(c) all obligations of such Person as lessee
under leases which have been or should be, in accordance with
GAAP, recorded as Capitalized Lease Liabilities;
(d) all other items which, in accordance with
GAAP, would be included as liabilities on the liability side of
the balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) net liabilities of such Person under Hedging
Contracts;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay the
deferred purchase price of property or services, and indebtedness
(excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse; and
(g) all Contingent Liabilities of such Person in
respect of any of the foregoing.
"Instrument" means any contract, agreement, indenture,
mortgage, document or writing (whether formal agreement, letter
or otherwise) under which any obligation is evidenced, assumed or
undertaken, or any Lien (or right or interest therein) is granted
or perfected.
"Interest Period" has the meaning set forth in
Section 3.3(b).
"Interest Period Notice" means a notice from USMX to
Lender from time to time regarding USMX's election of an Interest
Period for a Loan to take effect on the completion of a current
Interest Period, substantially in the form of Exhibit I hereto.
"Interest Rate" means the interest rate applicable to
the Loan from time to time when the Default Rate is not
applicable with respect to each Interest Period for the Loan,
which is an interest rate per annum equal to the sum of (y) LIBOR
in effect on the first day of the Interest Period, plus (z) the
Applicable Margin.
"Lien" means, as to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance in or on,
or any interest or title of any vendor, lessor, lender or other
secured party to, or of such Person under any conditional sale or
other title retention agreement or capital lease with respect to,
any property or asset owned or held by such Person, or the
signing or filing of a financing statement which names such
Person as debtor, or the signing of any security agreement
authorizing any other party as the secured party thereunder to
file any financing statement. A Person shall be deemed to be the
owner of any assets that it has placed in trust for the benefit
of the holders of its indebtedness, which indebtedness is deemed
to be extinguished under GAAP but for which such Person remains
legally liable, and such trust shall be deemed to be a Lien.
"LIBOR" means, relative to any Interest Period for the
Loans, the rate of interest equal to the average (rounded
upwards, if necessary, to the nearest 1/16 of 1%) of the rates
per annum quoted by the Reuter Monitor Money Rates Service at
which Dollar deposits in immediately available funds are offered
in the London interbank market as at or about 11:00 a.m., London
time, two Business Days prior to the beginning of such Interest
Period for delivery on the first day of such Interest Period, and
in an amount approximately equal to the Loan amount outstanding
to which the rate will apply and for a period approximately equal
to such Interest Period.
"Loan" means the loan of $2,500,000 of funds by Lender
to USMX hereunder pursuant to the Commitment and the terms and
conditions of this Agreement.
"Loan Documents" means this Agreement, the Convertible
Note, the Registration Rights Agreement, the Request for Advance,
the Interest Period Notices, the Security Documents, all Hedging
Contracts entered into by USMX or AK with Lender related in the
Project, the Second Mortgage, the Fourth Mortgage and each other
Instrument executed by USMX and delivered to Lender in connection
with this Agreement, or any of the foregoing Instruments, whether
or not specifically identified in this paragraph.
"Material Agreements" means the contracts, agreements,
leases and other binding commitments and undertakings of USMX and
AK, the performance or breach of which could have a Material
Adverse Effect on USMX or AK, which Instruments are identified in
Schedule 6.1(n).
"Material Adverse Effect" means, with respect to USMX,
AK or any Person, an effect, resulting from any occurrence of
whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or
proceeding), which is materially adverse to:
(a) the consolidated business, assets, revenues,
financial condition, operations or prospects of such Person;
(b) the ability of such Person to make any
payment or perform any other material obligation required under
any material agreement (including, with respect to USMX, this
Agreement or any of the Loan Documents); or
(c) USMX, AK or the Project, or involves a
liability or obligation (other than contractual commitments
entered into by USMX or AK in the ordinary course of business
which are not in default) of $100,000 or more.
"Minimum Stock Price" means $4.75 per share of Common
Stock.
"Mining Properties" means the patented and unpatented
mining and millsite claims, leases and other property interests
owned, or in which USMX directly or indirectly holds an interest
(including by its ownership of the stock of AK), related to the
mining leases listed on Schedule 1.1(a), and all facilities
situated thereon, together with all real and personal property
and assets associated with such property.
"month" means a calendar month.
"NASDAQ" means the NASDAQ National Market of listed
stocks.
"NPMC" means North Pacific Mining Corporation, an
Alaska corporation.
"NPMC Agreement" means the agreement, as amended, dated
effective December 16, 1994, by and between NPMC and USMX
pursuant to which USMX acquired the Mining Properties, all of
which Mining Properties have been conveyed by USMX to AK.
"Obligations" means all obligations of USMX (monetary
or otherwise) arising under or in connection with this Agreement
and each other Loan Document.
"Omnibus Certificate" means a certificate from USMX,
substantially in the form of Exhibit E hereto.
"Opinion of USMX's Counsel" means the legal opinion of
counsel to USMX acceptable to Lender, substantially in the form
of Exhibit F hereto.
"Other Taxes" shall have the meaning specified in
Section 3.9(b).
"Permitted Liens" means the Liens identified in
Schedule 6.1(i) and the Liens permitted by clauses (i) through
(vi) of Section 8.2.
"Person" means an individual, partnership, corporation
(including a business trust), joint venture, limited liability
company or partnership, or other entity, or a foreign state or
political subdivision thereof or any agency of such state or
subdivision.
"Plan" means a pension plan providing benefits for
employees of USMX or any Affiliate and covered by Title IV of
ERISA.
"Pledge Agreement" means the Pledge and Security
Agreement providing for the pledge by USMX of (i) all of the AK
Shares owned by USMX, and (ii) the Pledged Notes, such agreement
substantially in the form of Exhibit B hereto.
"Pledged Notes" means the Promissory Notes, each dated
July 11, 1996, made by AK to the order of USMX in the principal
amounts of $2,500,000 and $3,400,000, respectively, the former
being secured by the Second Mortgage and the latter by the Fourth
Mortgage.
"Pre-Establishment Fee" shall have the meaning
specified in Section 2.2(a).
"Principal Amount" means, as of any date, with respect
to the Loan, the aggregate outstanding principal amount in
Dollars of the Loan at such date.
"Proceeds Account" means the "Proceeds Account" as
defined by Section 3.14 of the AK Credit Agreement.
"Project" means the business and operations of the
Illinois Creek Gold Property and related assets in accordance
with the Development Plan.
"Project Permits" means all permits, consents and
agreements necessary to commence the Project and the production
of valuable minerals from the Illinois Creek Gold Property in a
manner consistent with the Development Plan. Project Permits are
listed in Schedule 6.1(c).
"quarter" means a calendar quarter.
"Request for Advance" means the irrevocable request for
the Advance of the Loan by USMX, in the form set forth in
Exhibit H hereto, signed by an authorized officer of USMX.
"Registration Rights Agreement" means the agreement in
the form of Exhibit D of USMX to register the sale or exchange of
the Conversion Shares by the Lender with the Securities and
Exchange Commission.
"Scheduled Maturity Date" means June 30, 2000.
"Second Mortgage" means the Mortgage, Deed of Trust,
Assignment, Security Agreement and Financing Statement, dated as
of July 11, 1996, made by AK in favor of USMX covering all the
right, title and interest of AK in the Mining Properties and in
production therefrom and personal property associated therewith,
in the form of Exhibit C-1 hereto, assigned to Lender pursuant to
the Assignment Agreement and securing the $2,500,000 Pledged
Note. The Second Mortgage is subordinated to Lender's security
interests in the Mining Properties created pursuant to the AK
Credit Agreement.
"Security Documents" means the Pledge Agreement, the
Assignment Agreement, the Second Mortgage, the Fourth Mortgage
and all modifications and amendments thereof, and all financing
statements or other instruments required to be filed or notices
required to be given in order to perfect the Liens created by any
of the foregoing on property of USMX described therein, wherever
located and of whatever nature, associated therewith.
"Security Opinion" means the legal opinion of Guess &
Rudd P.C. concerning the Security Documents, the Second Mortgage
and the Fourth Mortgage and Liens created thereby, the nature and
quality of AK's title to the Mining Properties and certain other
matters, substantially in the form of Exhibit G hereto.
"Subsidiary" means any corporation, association or
other business entity more than 50% of each class of equity or
voting securities of which is owned, directly or indirectly, by
USMX.
"Taxes" shall have the meaning specified in
Section 3.9.
"Trading Day" means, so long as the Common Stock is
listed on the NASDAQ, a day on which the NASDAQ is open for the
transaction of business, or, if the Common Stock is not listed or
admitted to trading on the NASDAQ, a day on which the securities
exchange on which the Common Stock is traded is open for the
transaction of business, or, if the Common Stock is not so listed
or admitted for trading on any securities exchange, a Business
Day.
"year" means a calendar year.
1.2 Accounting Principles. All accounting terms not
otherwise defined herein shall be construed, all financial
computations required under this Agreement shall be made, and all
financial information required under this Agreement shall be
prepared, in accordance with GAAP applied on a basis consistent
with the financial statements referred to in Section 6.1(f)
except as specifically provided herein.
ARTICLE 2
COMMITMENT, FEES, USE OF PROCEEDS
2.1 Commitment. Subject to all of the terms and
conditions of this Agreement, Lender agrees to Advance the Loan
to USMX in a single Advance during the Advance Period.
2.2 Fees.
(a) Establishment Fee. USMX agrees to pay Lender
a fee (the "Establishment Fee") in the amount of $37,500 in
connection with the credit facility provided for in this
Agreement, which will be payable by USMX concurrently with USMX's
execution hereof. Lender and USMX acknowledge that USMX has
previously paid Lender $37,500 (the "Pre-Establishment Fee") at
the time of Lender's written commitment to USMX to make the Loan
contemplated by this Agreement. Neither the Establishment Fee
nor the Pre-Establishment Fee is refundable by Lender, in whole
or in part, under any circumstances.
(b) Fee Payments. Payment of the Establishment
Fee shall be made in Dollars, as provided in Section 3.7.
2.3 Use of Proceeds. USMX will utilize the proceeds
of the Loan exclusively to fund capital costs and other expenses
of the Project.
ARTICLE 3
PROCEDURE AND PAYMENT
3.1 Borrowing Procedure. Not less than two Business
Days prior to the desired date of the Advance of the Loan, USMX
will submit the Request for Advance to Lender. The Request for
Advance, which will be effective only upon actual receipt by
Lender, will specify an initial Interest Period for the Loan and
the Business Day on which USMX wishes to have the Advance made.
The Advance of the Loan will be made by deposit thereof in the
Proceeds Account.
3.2 Convertible Note. The Loan and all rights of
Lender concerning conversion of the Loan into Common Stock, and
concerning Lender's rights to have the Common Stock registered
shall be evidenced by the Convertible Note.
3.3 Interest
(a) General. USMX shall pay interest on the
outstanding Principal Amount of the Loan calculated on a 360-day
year basis, at the Interest Rate or the Default Rate, as
applicable.
(b) Interest Periods. USMX may select an
interest period with respect to the Loan ("Interest Period") of
30, 90 or 180 days, or of such other period of days as may be
agreed to by Lender in its sole discretion, on a 360-day year
basis. USMX will select Interest Periods by giving notice to
Lender in the Request for Advance and thereafter at least three
Business Days prior to the expiration of the Interest Period then
in effect by an Interest Period Notice. If at any time USMX
fails to give timely notice of its Interest Period selection,
then USMX shall be deemed to have selected an Interest Period of
30 days. No Interest Period shall end after the Scheduled
Maturity Date. Interest will be payable in full at the end of
each Interest Period.
(c) Default Interest. Interest on the Loan shall
accrue and shall be payable by USMX at the Default Rate during
all periods when any amounts payable by USMX as principal repay
ments, interest payments or fee or expense payments are due and
payable hereunder, whether by acceleration or otherwise, but
remain unpaid by USMX; provided the Default Rate shall not apply
to past-due fees and expenses unless Lender has provided written
notice to USMX pursuant to Section 11.2, and such fees and
expenses remain due and unpaid for five (5) Business Days after
the giving of such notice. Without prejudice to the rights of
Lender under the preceding sentence, USMX shall indemnify Lender
against any direct loss or expense (not including lost profits on
re-employment of capital) which Lender may sustain or incur as a
result of the failure by USMX to pay when due the Principal
Amount of the Loan. A certificate or other notice of Lender
submitted to USMX setting forth the basis for the determination
of Default Rate interest due and of the amounts necessary to
indemnify Lender in respect of such loss or expense, shall
constitute evidence of the accuracy of the information contained
therein in the absence of error and, absent notice from USMX of
such error, shall be conclusive and binding for all purposes.
Interest accruing at the Default Rate shall be payable on demand.
3.4 Repayment of the Loan.
(a) Principal Repayment Generally. USMX agrees
to repay the Loan as provided herein. Except as provided by
Section 3.4(c) or Article 9, USMX may not prepay the Principal
Amount of the Loan prior to the Scheduled Maturity Date.
(b) Scheduled Principal Payment. Subject to the
other terms hereof pertaining to mandatory prepayments of the
Loan, USMX will make payment in full of the unpaid Principal
Amount of the Loan not later than the Scheduled Maturity Date.
(c) Mandatory Prepayment Upon Loan Acceleration.
USMX will repay the Loan in full, together with accrued interest
thereon, Breakage Costs and fees, upon acceleration of the
Scheduled Maturity Date of the Loan by Lender pursuant to Section
10.2.
3.5 Priority of Prepayments. All prepayments made by
USMX pursuant to Section 3.4(c) shall be accompanied by payment
of Lender's Breakage Costs, and shall be applied first to accrued
and unpaid interest on the Loan as of the end of the most recent
Interest Period, then to any other amounts then payable by USMX
hereunder including Breakage Costs and fees, then to the
Principal Amount.
3.6 Increased Costs and Reduction in Return. If due
to (a) the introduction of, or any change (including, without
limitation, any change by way of imposition or increase of
reserve requirements) in, or in the interpretation of, any law or
regulation or (b) the compliance by Lender with any guideline or
request from any central bank or other governmental agency having
jurisdiction over Lender (whether or not having the force of
law), collectively referred to as "Governmental Acts," there
shall be any increase in the cost or reduction in return to
Lender of agreeing to make or making, funding or maintaining the
Loan, then USMX shall from time to time, upon demand by Lender,
pay to Lender additional amounts sufficient to indemnify it
against such increased costs or reduction in return; provided
that Lender agrees to use reasonable efforts to mitigate the
increased cost or reduction in return to the extent reasonably
practicable. A certificate as to the amount of such increased
cost or reduced return, submitted to USMX by Lender, shall be
conclusive absent manifest error.
3.7 Payments and Computations. USMX shall make each
payment due hereunder and under the Convertible Note in
immediately available funds not later than 5:00 p.m. (New York
City time) on the day before the day when due Lender as follows
(or as Lender shall otherwise advise USMX by notice as provided
herein):
to: Chase Manhattan Bank N.A.
1 Chase Manhattan Plaza
New York, New York
ABA No. 02100021
for the account of:
N M Rothschild & Sons Limited
A/C No.: 001-1-948262
USMX hereby authorizes Lender, if and to the extent payment of
money owed to it is not made when due hereunder or under the
Convertible Note, to charge from time to time against USMX's
accounts with Lender any amount so due. All computations of
interest hereunder shall be made on the basis of a year of 360
days for the actual number of days elapsed (including the first
day but excluding the last day).
3.8 Payment on Non-Business Days. Whenever any
payments to be made hereunder or under the Convertible Note shall
be stated to be due on a day which is not a Business Day, such
payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the
computation of payment of interest or fees, as the case may be,
unless such next succeeding Business Day is after the end of the
Interest Period, in which case the payment will be made on the
next preceding Business Day and such payment shall not reflect
the actual payment date in the computation of interest or fees
due and payable.
3.9 Taxes.
(a) General. Any and all payments by USMX
hereunder shall be made free and clear of and without deduction
for any and all present or future taxes, levies, duties, imposts,
deductions, charges or withholdings, and all liabilities with
respect thereto (excluding taxes imposed on Lender's income and
franchise taxes imposed on Lender) imposed by the jurisdiction
under the laws of which Lender is organized, or the United States
of America or any other jurisdiction under the laws of which
Lender is otherwise subject to tax, or any political subdivision
thereof (all such non-excluded taxes, levies, duties, imposts,
deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If USMX shall be required
by law to deduct any Taxes from or in respect of any sum payable
hereunder to Lender, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under
this Section 3.9) Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) USMX
shall make such deductions and (iii) USMX shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable law. The foregoing
obligation of USMX will apply with respect to any assignee of
Lender.
(b) Other Taxes. In addition, USMX agrees to pay
any present or future stamp, sales, use or documentary taxes or
any other excise or property taxes, charges, duties or similar
levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect
to, this Agreement, any of the Loan Documents, or any Instrument
contemplated thereby (hereinafter referred to as "Other Taxes").
To Lender's knowledge, no Other Taxes will be applicable to the
transactions contemplated by this Agreement.
(c) Tax Indemnity. USMX hereby indemnifies
Lender for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 3.9) paid by
Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. Lender
shall use commercially reasonable efforts to mitigate any Taxes
or Other Taxes to the extent practicable, and to refund to USMX
its proportionate share of any Taxes or Other Taxes paid by USMX
pursuant hereto ultimately refunded to Lender.
(d) Payment of Taxes. Within 30 days after the
date of any payment of Taxes or Other Taxes withheld by USMX in
respect of any payment to Lender, USMX will furnish to Lender the
original or a certified copy of a receipt evidencing payment
thereof.
(e) Lender's Taxes. To Lender's knowledge, under
applicable law and treaties in effect as of the date hereof
between the United States and the United Kingdom, no United
States federal taxes will be required to be withheld by USMX with
respect to any payment to be made to Lender in respect of this
Agreement. Lender agrees upon written request of USMX to deliver
to USMX, in duplicate, duly completed and signed copies of either
Form 1001 (relating to Lender and entitling Lender to a complete
exemption from withholding on all amounts to be received by
Lender pursuant to this Agreement, the Loans and Notes as a
result of a tax treaty concluded with the United States) or Form
4224 (relating to all amounts to be received by Lender pursuant
to this Agreement, the Loan and the Convertible Note) of the
Internal Revenue Service.
(f) Survival. Without prejudice to the survival
of any other agreement hereunder, the agreements and obligations
contained in this Section 3.9 shall survive the payment in full
of the Loan and interest hereunder.
ARTICLE 4
COLLATERAL SECURITY
4.1 Security Documents. As security for the due
repayment of the Loan, for the payment of all moneys due
hereunder, for the performance of all Obligations of USMX
hereunder and under the other Loan Documents to which it is a
party, USMX shall, contemporaneously with the execution of this
Agreement, execute and deliver to Lender the Security Documents,
including amendments or assignments thereof and notices to third
Persons as Lender may require in connection with the perfection
of its security interests in the property and interests in the
property of USMX subject to the Security Documents.
4.2 No Limitation on Application of Security
Interests. USMX and Lender agree that notwithstanding any
provision of any Security Document to the contrary, all Liens on
property of USMX created and perfected pursuant to the Security
Documents executed by USMX shall secure all Obligations of USMX
hereunder and under the other Loan Documents.
4.3 Recordings and Filings of Security Documents.
Lender will record, file or deliver to account debtors as
necessary the Security Documents, as appropriate, at USMX's
expense, promptly after execution and delivery thereof by USMX.
4.4 Protection of Security Document Liens. As and
when requested to do so by Lender, USMX will deliver to Lender
from time to time any financing statements, continuation
statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by USMX
in form and substance satisfactory to Lender, for the purpose of
perfecting or protecting Lender's Liens on the property and
interests subject to the Security Documents.
4.5 Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default, Lender is hereby
authorized at any time and from time to time, without notice to
USMX (any such notice being expressly waived by USMX), to set off
and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other
indebtedness at any time owing by Lender to or for the credit or
the account of USMX against any and all of the Obligations of
USMX now or hereafter existing, although such Obligations may be
contingent and unmatured. Lender agrees promptly to notify USMX
after any such set-off and application, provided that the failure
to give such notice shall not affect the validity of such set-off
and application. The rights of Lender under this Section 4.5 are
in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Lender may have.
4.6 Additional Collateral. USMX and Lender intend
that the Security Documents cover and extend to all property
rights and interests of USMX, real or personal, tangible or
intangible, presently held or hereafter acquired which are
related to the Mining Properties, the production therefrom,
Hedging Contracts related to the Project and the proceeds of all
of the foregoing. In the event that USMX acquires any additional
property right or interest related to the Mining Properties, the
production therefrom or Hedging Contracts related to the Project
which is not subject to the Lien of the Security Documents, upon
request therefor from Lender, USMX shall promptly execute, and
deliver such Instruments and take such actions as Lender may
reasonably request in order to perfect a first and prior Lien
(subject to Permitted Liens) on such right or interest. Whether
or not Lender requests that any such right or interest be
subjected to the Security Documents, USMX agrees to keep such
rights or interests free and clear of all Liens other than
Permitted Liens.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 Conditions Precedent to the Advance. The obliga
tion of Lender to Advance the Loan, and to perform its other
obligations hereunder, are subject to satisfaction of the
following conditions precedent.
(a) Lender or its counsel shall have received the
following on or before the date of the Advance of Loan, with each
Instrument dated on or no more than five days prior to such date
(except for item (xiii) below which shall be of the dates
specified in Section 6.1(f) and except as otherwise agreed by
Lender), and in form and substance as shall be satisfactory to
Lender:
(i) this Agreement, duly executed by USMX;
(ii) the Convertible Note, duly executed by
USMX;
(iii) the Establishment Fee;
(iv) the Registration Rights Agreement, duly
executed by USMX;
(v) the Security Documents, duly executed by
USMX and AK, as required, together with any financing statements
or similar evidences of Liens, amendments thereto, notices or
other Instruments determined by Lender to be necessary or
desirable to perfect the Liens established pursuant to the
Security Documents;
(vi) the Opinion of USMX's Counsel;
(vii) the Security Opinion;
(viii) the Request for Advance, duly
executed by USMX;
(ix) USMX's Omnibus Certificate, duly
executed by an officer of USMX;
(x) a Certificate from the Alaska Department
of Commerce and Economic Development, confirming the due
organization and good standing of AK in such state;
(xi) a Certificate from the Delaware
Secretary of State, confirming the due organization and good
standing of USMX in such state;
(xii) a Certificate from the Alaska
Department of Commerce and Economic Development, confirming that
USMX is duly qualified to transact business in such state as a
foreign corporation;
(xiii) accurate and complete copies of the
financial statements referred to in Section 6.1(f);
(xiv) evidence reasonably satisfactory to
Lender that the Convertible Note has been issued in accordance
with applicable federal and state law, and the rules and
regulations of the NASDAQ and the Toronto Stock Exchange;
(xv) certificates of issuing insurance
companies, confirming compliance by USMX with the insurance
requirements set forth in Section 7.4 or other evidence
concerning insurance satisfactory to Lender; and
(xvi) such other approvals, opinions or
documents as Lender may reasonably request.
(b) The following shall be correct as of the date
of the Advance of the Loan by Lender:
(i) all conditions precedent to the advance
of funds pursuant to the AK Credit Agreement shall be satisfied
in form and substance satisfactory to Lender;
(ii) since the date of the financial
statements of USMX most recently delivered to Lender (referred to
in Section 6.1(f)), there has been no material adverse change in
the financial condition, operations or business of USMX or AK;
(iii) there is no pending or threatened
action or proceeding affecting USMX, AK or the Mining Properties
before any court, Governmental Authority or arbitrator, including
any matter involving Environmental Laws, which could be
reasonably expected to have a Material Adverse Effect upon the
financial condition, operations or business of USMX or AK;
(iv) there shall exist no Default under this
Agreement or the AK Credit Agreement;
(v) all representations and warranties made
by USMX herein or made by AK in the AK Credit Agreement shall be
true and correct on the date of the Advance, except for such
changes therein as shall be acceptable to Lender;
(vi) all approvals and authorizations of
Governmental Authorities or other Persons, if any, required in
connection with the Advance of the Loan or exercise of rights by
Lender under the Convertible Note or any advance of loaned funds
by Lender to AK pursuant to the AK Credit Agreement, shall have
been obtained and remain in effect;
(vii) Lender shall have approved USMX's
and AK's title to the Mining Properties and the Liens established
by the Security Documents shall be in full force and effect as
valid, enforceable first priority Liens on the Collateral, except
for Permitted Liens;
(viii) no event shall have occurred or
condition exist which could have a Material Adverse Effect on
USMX or AK;
(ix) USMX or AK shall have established a
hedging program that is reasonably acceptable to Lender to
provide the Project with protection from declines in the price of
gold;
(x) Lender shall have completed and, in its
sole discretion, be satisfied with its due diligence
investigations of USMX, AK and the Project, including technical,
legal, financial and permitting matters;
(xi) USMX shall be in compliance with
relevant securities regulations, and all information concerning
USMX required to be publicly disclosed shall have been so
disclosed; and
(xii) AK shall have executed and
delivered to USMX the Second and Fourth Mortgages, and the Liens
on Mining Properties established thereby shall be in full force
and effect as valid, enforceable Liens on the Mining Properties.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of USMX. USMX
represents and warrants as follows:
(a) Organization, Qualification and Subsidiaries.
USMX is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and AK is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Alaska. Each of USMX and
AK has all requisite corporate power and authority to enter into
the Loan Documents to which it is a party and to carry out the
transactions contemplated thereby. Each of USMX and AK is duly
qualified to do business as a foreign corporation in each
jurisdiction where the nature of its business or properties
requires such qualification. Neither USMX nor AK has any
Subsidiaries, except as listed on Schedule 6.1(a).
(b) Authorization; No Conflict. The execution,
delivery and performance by USMX and AK of the Loan Documents to
which they are respectively party have been duly authorized by
all necessary corporate action on the part of USMX and AK, and do
not and will not (i) require any consent or approval of the
stockholders of USMX or AK which have not been obtained;
(ii) contravene USMX's or AK's articles of incorporation,
charter, bylaws or other such constituent document; (iii) violate
any provision of any law, rule, regulation (including, without
limitation, Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award presently in effect
having applicability to USMX or AK; (iv) result in a breach of or
constitute a default under or require the consent of any party
which has not been obtained pursuant to any indenture or loan or
credit agreement or any other agreement, lease or instrument to
which USMX or AK is a party or by which either of them or their
properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than Liens
arising under the Security Documents) upon or with respect to any
of the properties now owned by USMX or AK; and, to the best
knowledge of USMX, neither USMX nor AK is in breach or default in
any material respect under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any
such indenture, agreement, lease or instrument.
(c) Governmental Consents. No authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority is required (i) for the due execution and
delivery of, and due performance of, the financial obligations of
USMX or AK under any Loan Document, or (ii) for the due
performance of all other obligations of USMX or AK under any of
the Loan Documents (other than registrations or filings to
perfect the liens created by the Security Documents and to
register the Conversion Shares pursuant to the Registration
Rights Agreement) except such authorizations, approvals or other
actions as have been obtained or notices or filings as have been
made. All material Project Permits are identified in Schedule
6.1(c). All Project Permits have been duly issued to or are held
by USMX or AK, are valid and in good standing and free of any
violation thereof by USMX and AK that upon disclosure, notice or
the passage of time could result in a delay in the commencement
of the Project or otherwise have a Material Adverse Effect on the
Project, and neither USMX nor AK have received any notice of an
asserted violation or proposed revocation, withdrawal or material
modification thereof.
(d) Binding Obligations. Each of the Loan
Documents when delivered hereunder will be the legal, valid and
binding obligations of USMX or AK, as the case may be,
enforceable against USMX and AK in accordance with such documents
respective terms (except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws or
equitable principles affecting enforcement of creditors' rights
generally at the time in effect).
(e) Litigation. Except as indicated in
Schedule 6.1(e), there is no action, proceeding or investigation
pending or threatened in writing against or involving USMX or AK
which alleges the violation of any laws, including Environmental
Laws, or which questions the validity of this Agreement, or any
of the Loan Documents, or any action taken or to be taken
pursuant to this Agreement, or any of the Loan Documents, or
which questions the nature or extent of USMX's or AK's equitable
or record title to the Mining Properties or assets related
thereto, or to the AK Shares, or which might result, either in
any case or in the aggregate, in any Material Adverse Effect on
the business, operations, condition (financial or otherwise),
aggregate properties or aggregate assets of USMX or AK, or in any
material liability on the part of USMX or AK.
(f) Financial Statements; No Material Adverse
Change. The audited consolidated balance sheet of USMX
(including AK) as of December 31, 1995, and the related
consolidated statements of income, cash flow and stockholders'
equity of USMX (including AK) for the year then ended, audited by
KPMG Peat Marwick LLP, and the unaudited consolidating balance
sheet of USMX (including AK) as of March 31, 1996, and the
related unaudited consolidating statement of income, cash flow
and stockholders' equity of USMX for the period then ended
certified by the chief financial officer of USMX, copies of which
have been furnished to Lender, fairly present the financial
condition of USMX as at such date and the results of the
operations of USMX for the period ended on such date, all in
accordance with GAAP consistently applied. Neither USMX nor AK
have on the date hereof any material Contingent Liability or
liability for taxes, long-term leases or unusual forward or long-
term commitments which are not reflected in such financial
statements or listed in Schedule 6.1(f). Since December 31,
1995, except as previously disclosed in writing to Lender,
neither the business, operations or prospects of USMX, nor any of
its properties or assets, have been affected by any occurrence or
development (whether or not insured against) which would result,
either in any case or in the aggregate, in a Material Adverse
Effect on USMX. The unaudited consolidating balance sheet and
statement of cash flow of AK as of March 31, 1996, and the
related unaudited consolidating statement of income and retained
earnings of AK for the period then ended, copies of which have
been furnished to Lender, fairly present the financial condition
of AK as at such date and the results of the operations of AK for
the period ended on such date, all in accordance with GAAP
consistently applied. AK has on the date hereof no material
Contingent Liability or liability for taxes, long-term leases or
unusual forward or long-term commitments which are not reflected
in such financial statements or listed in Schedule 6.1(f). Since
December 31, 1995, except as previously disclosed in writing to
Lender, neither the business, operations or prospects of AK, nor
any of its properties or assets, have been affected by any
occurrence or development (whether or not insured against) which
would result, either in any case or in the aggregate, in a
Material Adverse Effect on AK.
(g) Other Agreements. Neither USMX nor AK is a
party to any indenture, loan or credit agreement or any lease or
other agreement or instrument (other than the Material
Agreements) or subject to any charter or other corporate
restriction which would, upon a default thereunder or otherwise,
result in a Material Adverse Effect on USMX or AK, or materially
impair the ability of USMX or AK to carry out their respective
Obligations under this Agreement, or any of the Loan Documents.
(h) Information Accurate. Except as disclosed to
Lender on Schedule 6.1(h) hereto, none of the information
delivered to Lender by USMX or AK in connection with the
transactions contemplated by this Agreement and the AK Credit
Agreement, including all representations and warranties, contains
any material misstatement of fact or omits to state a material
fact, and all projections contained in any such information,
exhibits or reports (including in particular the Feasibility
Study and the Development Plan), were based on information which
when delivered was, to the best knowledge of USMX, true and
correct, and to the best knowledge of USMX all calculations
contained in such projections were accurate, and such projections
presented USMX's then-current estimate of its future business,
operations and affairs and, since the date of the delivery of
such projections, to the best knowledge of USMX, there has been
no material change in the assumptions underlying such
projections, or the basis therefor or the accuracy thereof.
(i) Title to Properties; Liens.
(i) With respect to the Mining Properties
owned by USMX and AK which are subject to any of the Security
Documents, the Second Mortgage or the Fourth Mortgage, USMX and
AK are in exclusive possession of and own such properties free
and clear of all material defects of title, burdens on production
or Liens, except Liens disclosed in Schedule 6.1(i) and
specifically identified in the Security Opinion delivered by USMX
pursuant hereto.
(ii) With respect to the Mining Properties
held under leases or other contracts which are subject to any of
the Security Documents: (A) USMX and AK are in exclusive
possession of such properties other than the airstrip located on
those properties and any navigable waters; (B) neither USMX nor
AK has received any notice of, and has no knowledge of any facts
or circumstances that, with the passage of time or notice, or
both, could result in default of any of the terms or provisions
of such leases or contracts; (C) under such leases and contracts
USMX or AK (as the case may be) has the authority to perform
fully, and no provision of any such lease prohibits or would be
breached by USMX's or AK's performance of, their respective
obligations under this Agreement and the other Loan Documents;
(D) to the best of USMX's knowledge and belief, such leases and
contracts are valid and are in good standing; and (E) to the best
of USMX's knowledge and belief, the properties covered thereby
are free and clear of all defects of title or Liens, except for
those specifically identified in the Security Opinion or
disclosed in Schedule 6.1(i) hereto. USMX has delivered or will
make available to Lender all information concerning title to the
properties in USMX's or AK's possession or control, or to which
USMX or AK has access, which Lender requests.
(iii) With respect to mining claims,
leases and other property interests (for purposes of this Section
6.1(i)(iii), "Claims") which are subject to any of the Security
Documents, except as provided in the Security Opinion: (A) the
Claims are free of Liens, except as disclosed in Schedule 6.1(i);
(B) to the best of USMX's knowledge (w) the Claims were properly
located and monumented; (x) all required location and validation
work was properly performed; (y) location notices and
certificates were properly recorded and filed with appropriate
Government Authority; and (z) all assessment work or fees, or
both, required to hold the Claims have been paid or performed in
a manner consistent with generally accepted standards of major
companies in the mining industry through the assessment year
ending August 31, 1996; (C) all maintenance fee or rental
payments have been duly and timely made in order to maintain such
Claims through August 31, 1996; (D) all affidavits of assessment
work or other filings required to maintain the Claims in good
standing have been timely recorded or filed with the appropriate
Governmental Authorities; and (E) USMX has no knowledge of
conflicting claims, except overlaps to avoid gaps or to maintain
parallel end lines, or inadvertent overstakings which do not
impair USMX's property position.
(iv) Except as disclosed on Schedule 6.1(i),
no approval or consent of any Governmental Authority or any other
party is necessary to authorize the execution and delivery of any
Loan Document or any other Instrument constituting or evidencing
obligations under this Agreement or the AK Credit Agreement.
(j) Securities Activities. The proceeds of the
Loan hereunder will not be used to acquire any security in any
transaction which is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended. USMX is not engaged
in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation X of
the Federal Reserve Board) or carrying any margin stock.
(k) Solvency. USMX is not entering into the
arrangements contemplated by this Agreement or any of the other
Loan Documents with actual intent to hinder, delay or defraud
either present or future creditors. On and as of the date
hereof, and thereafter on and as of the date of the undertaking
of any actions contemplated by this Agreement, including, without
limitation, the Advance of the Loan, after giving effect to the
Loan, and all such Instruments, and to any fees and expenses in
connection with such undertaking, (i) USMX's property at a fair
valuation, is, and will be, greater than the sum of its
Indebtedness (including its Contingent Liabilities); (ii) the
present fair salable value of USMX's assets exceeds, and will
exceed, the probable liability of USMX on its Indebtedness
(including its Contingent Liabilities) as they become absolute
and mature; (iii) USMX has not, and will not have, incurred, and
does not intend to, or believe that it will, incur debts
(including its Contingent Liabilities) beyond its ability to pay
such debts as such debts mature (taking into account the timing
and amounts of cash to be received by USMX from any source, and
of amounts to be payable on or in respect of its debts), and the
cash available to USMX after taking into account all other
anticipated uses of the cash, is, and is anticipated to be,
sufficient to pay all such amounts on or in respect of such debts
(including its Contingent Liabilities), when such amounts are
required to be paid; and (iv) subject to receipt of the Loan,
USMX has sufficient capital with which to conduct its business
and USMX's capital does not constitute unreasonably small capital
with which to conduct its business. As used in
clauses (i) through (iv) above, the terms therein shall have the
meanings as used in Section 548 of the United States Bankruptcy
Code, the Uniform Fraudulent Conveyance Act and any applicable
state law concerning fraudulent conveyances as such may from time
to time have been amended or developed by judicial interpretation
to the date the representations herein are made.
(l) USMX's and AK's Capital Structure. USMX and
AK have the number of authorized, issued and outstanding shares
specified in Schedule 6.1(l). All shares of stock and other
shares or interests identified in such Schedule were duly and
validly issued and are non-assessable. Except as indicated in
Schedule 6.1(l), USMX and AK have no outstanding warrants or
other obligations to issue additional shares or other equity
interests, including any stock or securities convertible into or
exercisable or exchangeable for any shares of their respective
capital stock or any rights or options to purchase any of the
foregoing, or to convert any existing Indebtedness to equity
interests in USMX or AK.
(m) Hedging Contract Obligations. Except as set
forth in Schedule 6.1(m), USMX has no Hedging Contracts currently
in effect for Gold.
(n) Material Agreements; Absence of Default. All
of USMX's and AK's Material Agreements are identified in
Schedule 6.1(n). Neither USMX nor AK is in default under any of
the Material Agreements and has not received any notice of an
asserted default thereunder from any other Person that is a party
to any such agreement.
(o) Taxes and Other Payments. USMX and AK have
filed all tax returns (including all property tax returns and
other similar tax returns applicable to the Mining Properties)
and reports required by law to have been filed by either of them
and have paid all taxes and governmental charges thereby shown to
be owing and due, and all claims for sums due for labor,
material, supplies, personal property and services of every kind
and character provided with respect to, or used in connection
with the Mining Properties and no claim for the same exists
except as permitted hereunder, except any such taxes, charges or
amounts which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside on the books of USMX or
AK, or for which failure to file any return or pay any tax or
charge could not have a Material Adverse Effect on the Project or
materially delay commencement of the Project.
(p) Development Plan. The Development Plan has
been prepared in accordance with prudent mining practices and
after diligent inquiry by USMX, and USMX is not aware of any
facts or state of affairs which would materially hinder or
prevent USMX or AK from operating the Mining Properties in
accordance with the Development Plan and achieving, after
allowance for existing royalty burdens, the net gold production
provided for therein.
(q) Compliance With Laws. Except as set forth in
Schedule 6.1(q):
(i) USMX and AK are in compliance with all
laws, regulations and rules of federal, state and local
Governmental Authorities and, in the case of USMX, of the NASDAQ,
including in particular, all requirements for public disclosure
of information concerning USMX, AK, their properties, business
and prospects.
(ii) all facilities and property (including
underlying groundwater) comprising the Mining Properties have
been, and continue to be, owned, operated, leased or utilized by
USMX and AK in material compliance with all applicable laws,
including Environmental Laws; and
(iii) with respect to the Mining
Properties, there have been no past, and there are no pending or
threatened claims, complaints, notices or requests for
information received by USMX or AK with respect to any alleged
violation of any law, including Environmental Laws.
(r) USMX's and AK's Indebtedness. Except as
disclosed on Schedule 6.1(r) or specifically identified in the
financial statements of USMX and AK identified in Section 6.1(f),
USMX and AK have no existing Indebtedness which is not in the
ordinary course of business.
(s) Employee Benefit Plans. Except as disclosed
on Schedule 6.1(s), USMX has not established, does not maintain
and has made no contributions to, nor has any liability with
respect to, any Plan
(t) Insurance. USMX maintains in effect the
insurance identified in Schedule 7.4, and such insurance is with
responsible and reputable insurance companies or associations in
such amounts and covering such risks as is prudent and consistent
with good operating practices.
6.2 Representations and Warranties of Lender. Lender
represents and warrants as follows:
(a) Authorization. Lender has full power and
authority to enter into this Agreement and each of the Loan
Documents when delivered hereunder will be the legal, valid and
binding obligations of the Lender enforceable against the Lender
in accordance with such documents' respective terms (except as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws generally at the time in effect).
(b) Purchase Entirely for Own Account. This
Agreement is made with the Lender in reliance upon the Lender's
representation to USMX, which by the Lender's execution of this
Agreement Lender hereby confirms, that the Convertible Note to be
received by Lender and the Common Stock issuable upon conversion
thereof (collectively, the "Securities") will be acquired for
investment for Lender's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part
thereof, and that Lender has no present intention of selling,
granting any participation in, or otherwise distributing the
Securities. By executing this Agreement, Lender further
represents that Lender does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer, or
grant participation to such person or any third party with
respect to any of the Securities.
(c) Disclosure of Information. Lender believes
it has received all the information it considers necessary or
appropriate for deciding whether to enter into this Agreement and
acquire the Convertible Note. Lender further represents that it
has had an opportunity to ask questions and receive answers from
USMX regarding the terms and conditions of the Convertible Note
and the business, properties, prospects and financial condition
of USMX.
(d) Investment Experience. Lender is an investor
in securities of companies which can be considered speculative in
nature and acknowledges that it is able to fend for itself, can
bear the economic risk of its investment, and has such knowledge
and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment in
the Securities.
(e) Restricted Securities. Lender understands
that the Securities it is purchasing are characterized as
"restricted securities" under the federal securities laws
inasmuch as they are being acquired from USMX in a transaction
not involving a public offering and that under such laws and
applicable regulations, such securities may be resold without
registration under the Securities Act of 1933, as amended, only
in certain limited circumstances.
ARTICLE 7
AFFIRMATIVE COVENANTS OF USMX
So long as the Loan or the Convertible Note shall
remain unpaid, or any other Obligation of USMX hereunder or under
the Guaranty shall not have been fully performed or waived by
Lender, USMX shall, unless Lender otherwise consents in writing
(which consent Lender may grant or withhold in its sole
discretion), perform all covenants in this Article 7.
7.1 Compliance with Laws, Etc. USMX shall comply in
all material respects with all applicable laws (including without
limitation Environmental Laws), rules, regulations and orders,
such compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments, and governmental
charges imposed upon its property, except to the extent contested
in good faith and adequately reserved for in accordance with
GAAP.
7.2 Reporting Requirements. USMX shall deliver to
Lender the reports, information and certificates set forth below:
(a) Quarterly Financial Information. As soon as
available and in any event within 60 days after the end of each
of the first three quarters of each year, a consolidated balance
sheet of USMX, and consolidated statements of income, cash flow
and retained earnings of USMX for such quarter and for the period
commencing at the end of the previous year and ending with the
end of such quarter.
(b) Annual Financial Information. As soon as
available and in any event within 105 days after the end of each
year, a consolidated balance sheet of USMX, as of the end of such
year and consolidated statements of income, cash flow and
retained earnings of USMX for such year, certified in a manner
acceptable to Lender by KPMG Peat Marwick LLP, or other certified
public accountants reasonably acceptable to Lender.
(c) Litigation. Promptly after initiation
thereof, notice of any litigation by or against USMX, AK or the
Illinois Creek Gold Property, or litigation against USMX's or
AK's other properties which could have a Material Adverse Effect
on USMX or AK.
(d) Other Information. Such other information
concerning the condition or operations, financial or otherwise,
of USMX and AK as Lender may from time to time reasonably
request. USMX shall keep Lender informed regarding all material
developments concerning the Illinois Creek Gold Property,
including all developments concerning Project Permits.
7.3 Inspection. At any reasonable time during normal
business hours and from time to time, on reasonable notice, USMX
shall permit Lender or its agents or representatives to examine
and make copies of and abstracts from the records and books of
account of, and visit the properties of, USMX and to discuss the
affairs, finances and accounts of USMX with any of its officers,
directors, employees or agents. USMX will not be responsible for
injuries to or damages suffered by agents or representatives of
Lender while visiting the properties of USMX unless such injuries
or damage are caused or contributed to by the negligence or
willful misconduct of USMX or its employees or agents in which
event USMX shall indemnify Lender proportionally to the extent
such injuries or damages are directly or indirectly attributable
to such negligence or misconduct. Lender shall be entitled to
conduct a technical due diligence review of the Project at any
time, and will be entitled to be reimbursed by USMX for the
reasonable costs thereof.
7.4 Maintenance of Insurance. USMX shall maintain,
with respect to its assets and its business generally (or, with
respect to the Mining Properties, cause AK to maintain),
insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is
prudent and consistent with good operating practices, with such
insurance listed in Schedule 7.4. All such insurance shall name
Lender as an additional insured or loss payee, as the case may
be, and shall contain an endorsement providing that such
insurance cannot be terminated without at least ten days' prior
notice to Lender.
7.5 Keeping of Records and Books of Account. USMX
shall keep adequate records and books of account, in which
complete entries shall be made in accordance with GAAP
consistently applied, reflecting all financial transactions of
USMX.
7.6 Preservation of Existence, Etc. USMX shall
preserve and maintain, and shall cause AK to preserve and
maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and will,
and will cause AK to, qualify and remain qualified as a foreign
corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or
the ownership of its properties. USMX will comply with all
requirements of applicable law and all rules, regulations and
requirements of stock exchanges on which the Common Stock is
traded concerning disclosure of matters relevant to USMX and its
properties, and will timely file full and complete reports
concerning its business and operations as required by such laws,
rules, regulations and requirements.
7.7 Conduct of Business. USMX shall engage
principally in the business of exploring for, developing and
operating mining properties, and in activities incident thereto,
in accordance with generally accepted industry practices. USMX
shall cause AK to comply with all of its obligations, agreements
and covenants under the AK Credit Agreement and documents and
other Instruments entered into by AK pursuant thereto.
7.8 Notice of Default. USMX shall furnish to Lender
as soon as possible and in any event within five Business Days
after the occurrence of each Event of Default or each event or
condition which with the giving of notice or lapse of time, or
both, would constitute an Event of Default, continuing on the
date of such statement, a statement of the president or chief
financial officer of USMX setting forth the details of such Event
of Default or event or condition, and the action which USMX
proposes to take with respect thereto.
7.9 Defense of Title. USMX shall, or shall cause AK
to, defend, at its expense, title to the Mining Properties, as
such title is represented and warranted in Section 6.1(i), and
the Liens in favor of Lender under the Security Documents, and
maintain and preserve such Liens as first Liens upon the
properties and interests subject to the Security Documents,
subject only to Permitted Liens.
7.10 Operations. USMX agrees to use, or cause AK to
use, all commercially reasonable efforts to maintain, develop and
operate the Illinois Creek Gold Property in accordance with
prudent mining industry practices, the Feasibility Study and the
Development Plan.
7.11 Maintenance of the Mining Properties. USMX agrees
to maintain, and cause AK to maintain, its property rights and
interests in the Mining Properties in full force and effect, and
to do all acts reasonably determined by USMX to be necessary to
preserve such rights and interests, including, by way of example
and not limitation, payment and performance of all terms of
leases pertaining to such rights and interests, and timely
performance of work reasonably intended to satisfy any annual
assessment work requirements for unpatented mining or millsite
claims included in such properties, or timely payment of
appropriate sums in lieu of performance of assessment work, and
timely filing of federal, provincial and state notices with
respect thereto; provided, however, that USMX or AK may, in the
ordinary course of its and AK's business, abandon unpatented
mining or millsite claims and/or leased properties which USMX
does not believe warrant further maintenance expenditures.
ARTICLE 8
NEGATIVE COVENANTS OF USMX
So long as the Loan and the Convertible Note shall
remain unpaid, or any other Obligation of USMX hereunder or under
the Guaranty shall not have been fully performed by USMX, or
waived by Lender, USMX shall, unless Lender otherwise consents in
writing (which consent Lender may grant or withhold in its sole
discretion), perform all covenants in this Article 8.
8.1 Indebtedness. USMX shall not, and shall not
permit AK to, directly or indirectly, create, incur, assume or
suffer to exist, any Indebtedness except (a) Indebtedness
hereunder and under the Convertible Note; (b) Indebtedness
secured by Liens permitted by Section 8.2; (c) Indebtedness
existing on the date hereof disclosed to Lender, (d) unsecured
trade payables; (e) Indebtedness incurred in the ordinary course
of business; (f) Indebtedness consisting of purchase or leasehold
obligations associated with the Project contemplated by the
Development Plan; (g) Indebtedness incurred by USMX for purposes
of developing the Illinois Creek Gold Property in accordance with
the Development Plan which has been approved by Lender, such
approval not to be unreasonably withheld by Lender; and (h) after
Completion (as that term is defined in the AK Credit Agreement),
indebtedness incurred by USMX for purposes of developing mining
properties where the sole recourse of the lender is the mining
property being developed.
8.2 Liens, Etc. USMX shall not, and shall not permit
AK to, directly or indirectly, create, incur, assume or suffer to
exist any Lien, upon or with respect to any portion of the Mining
Properties, now owned or hereafter acquired, or assign or
otherwise convey any right to receive the production, proceeds or
income therefrom, except:
(i) Liens for taxes, assessments or
governmental charges or levies if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings;
(ii) Liens imposed by law, such as carriers,
warehousemen and mechanics' liens and other similar liens arising
in the ordinary course of business associated with amounts not
yet due and payable, or which are being disputed in good faith by
USMX or AK;
(iii) Liens of purchase money mortgages
and other security interests on equipment acquired, leased or
held by USMX or AK (including equipment held by USMX or AK as
lessee under leveraged leases) in the ordinary course of business
to secure the purchase price of or rental payments with respect
to such equipment or to secure indebtedness incurred solely for
the purpose of financing the acquisition (including acquisition
as lessee under leveraged leases), construction or improvement of
any such equipment to be subject to such mortgages or security
interests, or mortgages or other security interests existing on
any such equipment at the time of such acquisition, or
extensions, renewals or replacements of any of the foregoing for
the same or a lesser amount, provided that no such mortgage or
other security interest shall extend to or cover any equipment
other than the equipment being acquired, constructed or improved,
and no such extension, renewal or replacement shall extend to or
cover any property not theretofore subject to the mortgage or
security interest being extended, renewed or replaced, and
provided further, that any such Indebtedness shall not otherwise
be prohibited by the terms of this Agreement;
(iv) Liens outstanding on the date hereof and
described in Schedule 6.1(i) hereto;
(v) Liens arising under the Security
Documents, the AK Credit Agreement, the Second Mortgage, the
Fourth Mortgage, the NPMC Agreement or this Agreement;
(vi) the Lien or any right of distress
reserved in or exercisable under any lease for rent and for
compliance with the terms of such lease, provided there is no
rent in arrears under such lease;
(vii) cash labor or governmental
obligations deposited in the ordinary course of business in
connection with contracts, bids, tenders or to secure workmen's
compensation, unemployment insurance, surety or appeal bonds,
costs of litigation, when required by law, public and statutory
obligations, Liens or claims incidental to current construction,
mechanics', warehousemen's, carriers' and other similar Liens;
(viii) Liens given in the ordinary course
of business to a public utility or any municipality or
governmental or other public authority when required by such
utility or municipality or governmental or other authority in
connection with the operations of USMX or AK;
(ix) easements, rights-of-way and servitudes
which in the opinion of Lender (in its sole discretion) will not
in the aggregate materially impair the use of the Illinois Creek
Gold Property by USMX or AK for the Project;
(x) title defects or irregularities which in
the opinion of Lender (in its sole discretion reasonably
exercised) are of a minor nature and in the aggregate will not
materially impair the use of the Illinois Creek Gold Property for
the Project or materially affect the security created hereby;
(xi) liens related to Indebtedness permitted
by Section 8.1(h); and
(xii) all rights reserved to or vested in
any governmental body by the terms of any lease, license,
franchise, grant or permit held by USMX or AK or by any statutory
provision to terminate any such lease, license, franchise, grant
or permit or to require annual or other periodic payments as a
condition of the continuance thereof or to distrain against or to
obtain a lien on any property or assets of USMX or AK in the
event of failure to make such annual or other periodic payments.
8.3 Assumptions, Guarantees, Etc. of Indebtedness of
Other Persons. USMX shall not, and shall not permit AK to,
directly or indirectly, assume, guarantee, endorse or otherwise
become directly or contingently liable (including, without
limitation, liable by way of agreement, contingent or otherwise,
to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor or otherwise to assure the
creditor against loss) in connection with any Indebtedness of any
other Person, except guarantees by endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of business, or in respect of provision of
labor or materials for the Project or in connection with bonds,
letters of credit or other security posted by USMX in the
ordinary course of business in connection with the Project
(including the Guaranty) or the guarantee of obligations of
USMX's subsidiaries listed on Schedule 6.1(a) for the development
of mining properties, which guarantees are approved by Lender in
its sole discretion reasonably exercised.
8.4 Investments in Other Persons. USMX shall not
directly or indirectly, (i) make any loan to any Person other
than AK utilizing the Loan proceeds, (ii) make any loan (other
than loans approved by Lender for capital expenditures and
exploration expenses by Affiliates) to any Person in aggregate
exceeding $50,000, or (iii) purchase or otherwise acquire the
capital stock, assets, or obligations of, or any interest in, any
Person other than (y) wholly-owned subsidiaries of USMX formed
by USMX, or (z) readily marketable direct obligations of the
United States of America and certificates of time deposit issued
by Lender or commercial banks of recognized standing operating in
the United States of America or other investment grade
instruments reasonably approved by Lender); provided, however,
that to the extent USMX invests in any such Person, it shall
inform Lender thereof promptly upon such investment and shall
provide all information with respect to such Person as Lender may
require.
8.5 Mergers, Changes in Capital Structures, Etc.
USMX shall not, and shall not permit AK to, directly or
indirectly, merge or consolidate with any Person, or sell,
assign, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person,
or acquire (whether in one transaction or in any series of
transactions) all or substantially all of the assets of any
Person, without the prior written consent of Lender. USMX will
not, and shall not permit AK to, establish, or enter into
agreements or other arrangements which obligate USMX or AK, as
the case may be, to establish, any capital structure which
consists of equity interests in USMX or AK other than the Common
Stock (in the case of USMX) or the common stock of AK currently
issued and outstanding; provided that after Completion, USMX may
do any of the foregoing so long as USMX is the survivor of any
merger, consolidation or other combination, and at all times
before and after such combination is in full compliance with its
agreements, obligations and covenants hereunder and pursuant to
the Guaranty.
8.6 Restriction on Dividends and Redemptions. USMX
shall not declare, order, pay or make any dividend, stock
repurchase or other distribution, directly or indirectly, in
respect of any shares of any class of stock of USMX, now or
hereafter outstanding, except for dividends payable solely in
shares of that class of stock to the holders of that class.
8.7 Disposition of Illinois Creek Gold Property. USMX
shall not, directly or indirectly, nor shall USMX permit AK to
directly or indirectly, sell, transfer, assign or otherwise
dispose of any of its assets or properties related to the
Project, except (i) for sales of gold, other mineral production
and other properties and assets related to the Project, (ii) as
provided by Section 7.11 with regard to abandoning certain
rights, (iii) for the transfer of the Mining Properties or other
property related to the Project from USMX to AK, and (iv) for
disposition of equipment that is replaced by equipment of equal
or higher capacity or value.
8.8 Restrictive and Inconsistent Agreements. USMX
will not enter into any agreement or undertaking or incur or
suffer any obligation prohibiting or inconsistent with the
performance by USMX of the Obligations or of AK of its
obligations under the AK Credit Agreement.
ARTICLE 9
CONVERSION RIGHTS
9.1 Lender's Loan Conversion Rights. At any time
after the date of the Advance while the Loan remains outstanding
and unpaid, Lender may by notice to USMX and at any time that the
Principal Amount remains outstanding, elect to convert all or any
part of the Principal Amount into all or any portion of the
Conversion Shares in accordance with the provisions of this
Article 9. Upon such conversion, the Principal Amount of the
Loan shall be deemed to have been paid in full.
9.2 USMX's Loan Conversion Rights. Upon the
satisfaction of the Conditions Precedent to USMX's Conversion
Rights and while such conditions remain satisfied, USMX may for a
period of five (5) Trading Days beginning on the first Trading
Day after the Conditions Precedent to USMX's Conversion Rights
are first satisfied, by notice to Lender, elect to convert the
Loan into the Conversion Shares in accordance with the provisions
of this Article 9. Upon any such conversion, the Principal
Amount of the Loan will be deemed to have been paid in full.
Failure of USMX to provide Lender with notice herein required
within the five (5) Trading Day period specified in this Section
9.2 shall terminate any right USMX has to require Lender to
convert the Loan into shares of Common Stock.
9.3 Loan Conversion Procedures.
(a) Conversion Date. The Conversion Date will be
the fifth Business Day following the date of exercise by either
Lender or USMX of its Conversion Right.
(b) Conversion Procedures. Not later than the
Conversion Date, USMX will have taken all actions, including
filing reports required by Governmental Authorities or with stock
exchanges on which the Common Stock is traded and preparation of
a certificate or certificates for the Common Stock to be issued
upon conversion in the denominations requested by Lender, as are
necessary to enable USMX to deliver to Lender on the Conversion
Date the certificates for the Conversion Shares. Whether or not
USMX delivers such certificates on the Conversion Date, Lender
will be deemed to be the owner of the Conversion Shares as of the
Conversion Date, with all voting rights, rights to receive
dividends and distributions and all other rights associated with
ownership of the Conversion Shares. Upon delivery of
certificates for such Common Stock, Lender will deliver the
Convertible Note to USMX, marked paid and endorsed by Lender or
the Holder thereof.
(c) Certain Agreements Regarding Conversion
Rights.
(i) No fractional shares of Common Stock
will be issued upon exercise of a Conversion Right. Instead of
any fractional share of Common Stock that would otherwise be
issuable upon such conversion, USMX will pay Lender or Holder a
cash adjustment in respect of such fraction determined by
multiplying such fraction times the Conversion Price.
(ii) If after the date hereof USMX
A. pays a
dividend or makes a distribution on
the Common Stock in shares of
Common Stock;
B. subdivides
the shares of Common Stock
outstanding on the date hereof into
a greater number of shares of
Common Stock;
C.
consolidates the number of shares
of Common Stock outstanding on the
date hereof into a smaller number
of shares of Common Stock; or
D. issues any
shares of Common Stock by reason of
any reclassification of shares;
the Conversion Price in effect immediately prior thereto shall be
adjusted so that Lender will, upon exercise of the Conversion
Rights be entitled to receive the number of shares of Common
Stock which Lender would have owned or have been entitled to
receive after the happening of any of the events described above
in this clause (ii) had the Loan been converted immediately prior
to the happening of such event. An adjustment made pursuant to
this clause (ii) shall become effective immediately after the
close of business on the record date in the case of a dividend or
distribution and shall become effective immediately after the
close of business on the record date in the case of a
subdivision, consolidation or reclassification.
(iii) If after the date hereof USMX shall
issue rights or warrants entitling any Persons to subscribe for,
purchase or otherwise receive Common Stock to be issued by USMX
at a price less than the Daily Closing Price on the Trading Day
preceding the date of issuance of such rights or warrants, then
the Conversion Price in effect immediately prior thereto shall be
adjusted to equal an amount determined by multiplying (I) the
Conversion Price in effect immediately prior to the date of
issuance of such rights or warrants by (II) a fraction, the
numerator of which shall be the sum of (w) the number of shares
of Common Stock outstanding on the date of issuance of such
rights or warrants (without giving effect to shares of Common
Stock which may be issued upon exercise thereof) and (x) the
number of shares of Common Stock which the consideration received
or to be received by USMX in connection with issuance and
exercise of such rights or warrants would purchase at such Daily
Closing Price; and the denominator of which shall be the sum of
(y) the number of shares of Common Stock determined in (w) above
and (z) the number of shares of Common Stock issued or issuable
upon exercise of such rights or warrants in accordance with the
terms thereof.
9.4 Lender's Registration Rights Upon Loan Conversion.
USMX shall execute and deliver herewith the Registration Rights
Agreement in the form of Exhibit D providing for the registration
of the Conversion Shares as freely tradable shares of stock
pursuant to applicable federal and state securities laws.
ARTICLE 10
EVENTS OF DEFAULT
10.1 Event of Default. Each of the following events
shall be an "Event of Default" hereunder:
(a) Nonpayment. USMX shall fail to pay any
principal when due hereunder (whether at stated maturity or by
prepayment or otherwise), or shall fail to pay interest hereunder
or on the Convertible Note when due.
(b) Other Defaults. USMX or AK shall fail to
observe or perform any of their respective covenants,
undertakings or agreements contained in this Agreement, the AK
Credit Agreement or any other Loan Document other than the
covenants referred to in paragraph (a) above, and USMX or AK has
not remedied such default within ten days after notice of default
has been given by Lender to USMX or AK, as the case may be.
(c) Representation or Warranty. Any representa
tion or warranty made by USMX or AK (or any of their officers)
under or in connection with this Agreement, the AK Credit
Agreement and related agreements and Instruments, or the other
Loan Documents shall prove to have been incorrect in any material
respect when made.
(d) Cross-Default. A default shall occur under
the AK Credit Agreement or related agreements and Instruments,
any of the other Loan Documents, or under any agreement
pertaining to Indebtedness permitted by Section 8.1, or USMX or
AK shall fail to pay any Indebtedness in excess of $100,000 in
principal amount (but excluding Indebtedness evidenced by the
Convertible Note and the Pledged Notes), or any interest or
premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such
failure to pay is not being contested by USMX or AK, as
appropriate, in good faith; or any other default under any
agreement or instrument relating to any such Indebtedness or any
other event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument,
if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Indebtedness,
unless such default or event shall be waived by the holders or
trustees for such Indebtedness; or any such Indebtedness shall be
declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), prior to the
stated maturity thereof.
(e) Insolvency. Either USMX or AK shall
generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against USMX or AK
seeking to adjudicate it a bankrupt or insolvent, or seeking a
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of any order for relief
or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property and,
if instituted, shall remain undismissed for a period of 60 days;
or USMX or AK shall take any corporate action to authorize any of
the actions set forth in this paragraph (f).
(f) Judgments. A final judgment or order for
the payment of money in excess of $100,000 shall be rendered
against USMX or AK and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order
or (ii) a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect
for any period of ten consecutive days.
(g) Security Interest. Any of the Security
Documents or Instruments creating security interests delivered by
USMX or AK pursuant to the AK Credit Agreement, after delivery
thereof shall for any reason, except to the extent permitted by
the terms thereof, cease to create a valid and perfected security
interest with the priority required by this Credit Agreement or
the AK Credit Agreement in any of the Collateral purported to be
covered thereby, or USMX or AK shall so state in writing.
(h) Condemnation. Any of the interests of USMX
or AK in the Mining Properties is taken by power of expropriation
or eminent domain or sold under threat of such taking, or
possession of any portion of the lands necessary for the
operation of the Project is taken through exercise of such power,
and such taking, loss or sale has or could have a Material
Adverse Effect on the Project, as determined by the Lender in its
sole discretion reasonably exercised.
(i) Regulatory Action. Any Governmental
Authority shall take any action with respect to USMX, AK or the
Project or any other Collateral subject to the Security Documents
which would have a Material Adverse Effect on USMX, AK,
operations on the Project or USMX's ability to repay the Loan
unless such action is set aside, dismissed or withdrawn within 90
days of its institution or such action is being contested in good
faith and its effect is stayed during such contest.
(j) Adverse Project Developments. If any of the
following occurs:
(i) The Project is abandoned or terminated,
or the Board of Directors of USMX or AK elects not to proceed
with the Project for whatever reason;
(ii) An Illinois Creek Loan Acceleration
Date occurs;
(iii) NPMC elects to participate for a
25% working interest in the Project and NPMC has not become a
party to this Agreement and the Loan Documents, and executed and
delivered such other agreements and Instruments as Lender, in its
sole discretion, deems necessary or desirable in order to
evidence and secure Lenders interests in the Mining Properties
and the Project in the manner and to the extent contemplated by
this Agreement and the Loan Documents;
(iv) USMX breaches any agreement, covenant
or undertaking under the NPMC Agreement which is not waived or
cured within the applicable grace period, including without
limitation, its obligation to register as provided by the NPMC
Agreement the shares of USMX common stock issued to NPMC pursuant
to such agreement; or
(v) A material adverse change occurs in the
permitting process involving the Project Permits.
(k) Default Under Hedging Contract. Any
condition or event or combination thereof exists under a Hedging
Contract which, of itself, or, with notice or the passage of
time, will constitute a default by USMX or AK under such contract
or give rise to remedies of the other party of acceleration of
time of performance by USMX or AK of its obligations thereunder.
10.2 Remedies Upon Event of Default.
(a) Upon the occurrence of an Event of Default
specified in Section 10.1(e) of this Agreement or, in the case of
any other Event of Default, upon notice by Lender to USMX of
Lender's election to declare USMX in default, the obligations of
Lender hereunder including, without limitation, Lender's
obligation to Advance the Loan, shall terminate. The date on
which such notice is sent or, in the case of an Event of Default
specified in Section 10.1(e) of this Agreement, the date of such
Event of Default, shall be the "Date of Default."
(b) Upon the Date of Default, upon notice
thereof from Lender to USMX in all cases other than the
occurrence of an Event of Default as specified in
Section 10.1(e), the Loan, all interest thereon, Breakage Costs
and all other amounts owed by USMX hereunder shall be immediately
due and payable in full. In the case of an Event of Default
specified in Section 10.1(e), no notice from Lender shall be
required, and all amounts owed by USMX hereunder shall be
immediately due and payable on the Date of Default, without
notice from Lender.
(c) Upon the occurrence of an Event of Default,
all of the remedies provided to Lender in all of the Security
Documents shall immediately become available to Lender.
(d) Except as expressly provided above in this
Section 10.2, presentment, demand, protest and all other notices
of any kind are hereby expressly waived. From and after the Date
of Default, interest shall accrue at the Default Rate provided in
Section 3.3(c) and shall be payable on demand.
ARTICLE 11
MISCELLANEOUS
11.1 Amendments, Etc. Except as otherwise expressly
provided in this Agreement, no amendment or waiver of any
provision of this Agreement or of the Convertible Note, nor
consent to any departure by USMX therefrom, shall in any event be
effective unless the same shall be in writing and signed by
Lender, and, in the case of any amendment, by USMX, and then such
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
11.2 Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telex, telegraphic and facsimile communication) and
mailed, transmitted, telegraphed, sent by facsimile, or
delivered,
if to USMX,
USMX, INC.
141 Union Blvd., Suite 100
Lakewood, Colorado 80228
Attention: Chief Financial Officer
Telephone: (303)-985-4665
Facsimile: (303)-980-1363;
if to AK,
USMX OF ALASKA, INC.
141 Union Blvd., Suite 100
Lakewood, Colorado 80228
Attention: President
Telephone: (303) 985-4665
Facsimile: (303) 980-1363;
and if to Lender,
N M Rothschild & Sons Limited
New Court, St. Swithin's Lane
London EC4P 4DU
Attention: Nick Wood
Telephone: 011 44-171-280-5000
Facsimile: 011 44-171-280-5139;
with a copy to
Rothschild Denver Inc.
3020 Republic Plaza
370 Seventeenth Street
Denver, Colorado 80202
Attention: Mark Williamson
Telephone: (303) 607-9890
Facsimile: (303) 572-5472
as to each party, at such other address or number as shall be
designated by such party in a written notice to the other
parties. All such notices and communications shall be effective
(a) when received, if mailed by registered or certified mail or
physically delivered; (b) five days after being sent by mail, if
sent by ordinary mail; and (c) upon confirmation of transmission,
if sent by telex or facsimile on a Business Day, addressed in
each case as aforesaid, except that notices to Lender under
Articles 2 or 3 shall not be effective until received by Lender.
11.3 No Waiver; Remedies. No failure on the part of
Lender to exercise, and no delay in exercising, any right here
under or under the Convertible Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right
hereunder or under the Convertible Note preclude any other or
further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
11.4 Costs, Expenses and Taxes. USMX agrees to pay
within five (5) Business Days of demand all reasonable costs and
expenses in connection with the preparation, execution, delivery
and administration of this Agreement, the Loan Documents, and the
other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of legal counsel and
any independent consultants to Lender and all other out-of-pocket
expenses of Lender, and all costs and expenses, if any, in
connection with the enforcement of this Agreement, the Loan
Documents, and the other documents to be delivered hereunder.
All such expenses will be itemized in reasonable detail. In
addition, USMX shall pay any and all stamp, mortgage recording
and other taxes, filing fees or charges payable or determined to
be payable in connection with the execution and delivery of this
Agreement, the Loan Documents, and the other documents to be
delivered hereunder, and agrees to save Lender harmless from and
against any and all liabilities with respect to or resulting from
any delay in paying or omission to pay such taxes, filing fees or
charges.
11.5 Binding Effect; Assignment. This Agreement shall
be binding upon and inure to the benefit of USMX, Lender and
their respective permitted successors and assigns; provided that
USMX shall not have the right to assign any of its rights or
obligations hereunder or any interest herein without the prior
written consent of the Lender. Lender may assign to its
successors and affiliates, or may grant participations to one or
more banks or other Persons in or to all or any part of, and may
assign to one or more banks or other Persons all or any part of,
this Agreement, the Loan Documents and the Loan, and, to the
extent of such assignment, such assignee shall have the same
obligations, rights and benefits with respect to USMX as it would
have had if it were Lender hereunder.
11.6 GOVERNING LAW. THIS AGREEMENT AND THE
CONVERTIBLE NOTE AND THE OTHER LOAN DOCUMENTS, EXCEPT THE
SECURITY DOCUMENTS, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, INCLUDING THE
CONFLICTS OF LAW PROVISIONS THEREOF. THE SECURITY DOCUMENTS
SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED
THEREIN, OR IF NONE IS SPECIFIED, BY THE LAWS OF THE JURISDICTION
IN WHICH THE COLLATERAL SUBJECT THERETO IS PRINCIPALLY LOCATED.
11.7 VENUE; SUBMISSION TO JURISDICTION. FOR THE
PURPOSE OF ASSURING THAT LENDER MAY ENFORCE ITS RIGHTS UNDER THIS
AGREEMENT, USMX, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS,
HEREBY IRREVOCABLY (A) AGREES THAT ANY LEGAL OR EQUITABLE ACTION,
SUIT OR PROCEEDING AGAINST USMX, OR BY USMX AGAINST LENDER,
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS
OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT
MATTER OF ANY OF THE FOREGOING SHALL BE INSTITUTED ONLY IN STATE
AND FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF DENVER,
COLORADO OR, IN THE CASE OF THE SECURITY DOCUMENTS, IN THE VENUES
SPECIFIED THEREIN; (B) WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO SUCH VENUE OF ANY SUCH ACTION, SUIT OR
PROCEEDING OR ANY CLAIM OF FORUM NON CONVENIENS; (C) SUBMITS
ITSELF TO THE NONEXCLUSIVE JURISDICTION OF ANY SUCH STATE OR
FEDERAL COURT FOR PURPOSES OF ANY SUCH ACTION, SUIT OR
PROCEEDING; AND (D) WAIVES ANY IMMUNITY FROM JURISDICTION TO
WHICH IT MIGHT OTHERWISE BE ENTITLED IN ANY SUCH ACTION, SUIT OR
PROCEEDING WHICH MAY BE INSTITUTED IN ANY SUCH STATE OR FEDERAL
COURT, AND WAIVES ANY IMMUNITY FROM THE MAINTAINING OF AN ACTION
AGAINST IT TO ENFORCE IN ANY SUCH STATE OR FEDERAL COURT OR
ELSEWHERE, ANY JUDGMENT FOR MONEY OBTAINED IN ANY SUCH ACTION,
SUIT OR PROCEEDING AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY IMMUNITY FROM EXECUTION. USMX HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY OF THE AFORESAID COURTS BY THE MAILING OF
COPIES OF SUCH PROCESS TO THE BORROWER, BY CERTIFIED OR
REGISTERED MAIL, AT THE ADDRESS SPECIFIED FOR USMX IN
SECTION 11.2.
11.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO
IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY
IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT MATTER
OF ANY OF THE FOREGOING.
11.9 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
11.10 Inconsistent Provisions. In the event of any
conflict between this Agreement and any of the Loan Documents,
the provisions of this Agreement shall govern and be controlling.
11.11 Termination of Agreement. Upon payment in full
or satisfaction of the Principal Amount of the Loan by conversion
to Common Stock as provided in Article IX, and upon payment in
full of all other amounts due hereunder and performance of all of
its obligation hereunder by USMX, this Agreement will terminate.
Upon such termination, at the request of USMX, Lender will
provide written evidence of such termination, including
appropriate releases.
11.12 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or
in connection herewith shall survive the execution and delivery
of this Agreement.
11.13 Concerning the Security Documents. In the event
that any amount payable by any Guarantor under any Security
Document is not paid in accordance with the terms thereof, USMX
agrees to pay such amount to the extent not so paid.
11.14 No Third Party Beneficiary. Nothing herein
contained shall be construed to confer upon any other party,
other than the Lender, the rights of a third party beneficiary.
No reference to Liens on Schedule 6.1(i) or other Permitted Liens
shall be deemed to constitute a recognition or acceptance by USMX
or the Lender for the benefit of the holders of such Liens, as to
the validity, subsistence or priority of such Liens.
11.15 Severability. The invalidity of any one or more
covenants, phrases, clauses, sentences or paragraphs of this
Agreement shall not affect the remaining portions of this
Agreement or any part hereof, and in case of any such invalidity,
this Agreement shall be construed as if such invalid covenants,
phrases, clauses, sentences or paragraphs had not been inserted.
11.16 Acknowledgments. USMX hereby acknowledges that:
(a) it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the
other Loan Documents;
(b) the Lender does not have any fiduciary duty
or relationship to or with USMX; and
(c) no joint venture exists between USMX and the
Lender.
11.17 Confidentiality. Lender agrees that it will keep
confidential and not disclose or divulge any confidential,
proprietary, or secret information that Lender may obtain from
USMX or AK pursuant to financial reports and other material
submitted by USMX or AK to Lender pursuant to this Agreement, or
pursuant to visitation or inspection rights granted hereunder,
unless such information is known, or until such information
becomes known, to the public; provided, however, that Lender may
disclose such information to its attorneys, accountants,
consultants and other professionals in connection with the
provision of professional services to the Lender.
11.18 Entire Agreement. This Agreement and the other
Loan Documents represent the final agreement among the parties
hereto and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties
hereto. There are no unwritten oral agreements among the parties
hereto, and there are no promises, undertakings, representations
or warranties by the Lender relative to the subject matter hereof
not expressly set forth or referred to herein.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
USMX, INC.
By:
Name:
Title:
By:
Name:
Title:
PER PRO
N M ROTHSCHILD & SONS LIMITED