OPTION AGREEMENT
THIS AGREEMENT dated for reference the 4th day of
February, 1997
BETWEEN:
DAKOTA MINING CORPORATION, of Suite 2450,
410 Seventeenth Street, Denver, Colorado, 80202
(hereinafter referred to as "Dakota"),
AND:
USMX, INC., of Suite 100, 141 Union Boulevard,
Lakewood, Colorado 80228
(hereinafter referred to as "USMX"),
WHEREAS:
A. The board of directors of USMX has determined that, as
an inducement and consideration for Dakota entering into the
letter of intent (the "Letter") dated January 3, 1997
between Dakota and USMX (including Schedule (the "Schedule")
to the Letter which constitutes a binding agreement between
Dakota and USMX) and agreeing, subject to the terms and
conditions thereof, to effect the merger (as defined in the
Letter), the granting of an option to Dakota to purchase up
to 810,000 authorized and unissued shares of common stock of
USMX, $.001 par value per share, as presently constituted
("Shares") of USMX on the terms and conditions set forth
below, is in the best interests of USMX; and
B. Pursuant to paragraph 4 of the Schedule, USMX has
agreed to grant such option to Dakota subject to acceptance
for filing by The Toronto Stock Exchange (the "TSE") of
notice by USMX of the grant of such option (which notice has
been given by USMX and accepted for filing by the TSE).
NOW THEREFORE THIS AGREEMENT WITNESSES that, for and in
consideration of the premises and for other good and
valuable consideration, it is hereby agreed by and between
the parties hereto as follows:
1. USMX hereby grants to Dakota, on the terms and
conditions hereinafter set forth, an irrevocable option (the
"Option") to purchase at any time or from time to time
during the period hereinafter referred to all or any part of
810,000 authorized and unissued Shares of USMX (the
"Optioned Shares"), for a purchase price of US$1.75 per
Optioned Share (the "Exercise Price"), provided that, if the
Termination Fee (as defined in the Schedule) shall have been
paid to Dakota pursuant to and in accordance with the terms
of the Schedule or (if the Letter and the Schedule have been
superseded by the Merger Agreement (as defined in the
Letter)) the Merger Agreement, then the Option shall,
without any action on the part of USMX, cease and terminate
and be of no further force and effect.
2. Dakota shall have the right to exercise the Option at
any time or from time to time with respect to all or any
part of the Optioned Shares during the period (i) commencing
immediately after the Schedule or (if the Letter and the
Schedule are superseded by the Merger Agreement) the Merger
Agreement is terminated in accordance with its terms (x) by
Dakota pursuant to subparagraph 3(j) of the Schedule or (if
the Letter and the Schedule are superseded by the Merger
Agreement) pursuant to the provisions of the Merger
Agreement corresponding to such subparagraph or (y) by USMX
pursuant to subparagraph 3(k) of the Schedule or (if the
Letter and the Schedule are superseded by the Merger
Agreement) pursuant to the provisions of the Merger
Agreement corresponding to such subparagraph and (ii)
expiring at 5:00 p.m. (Denver time) on the day that is six
months after the date of such termination or at such earlier
time as may be determined in accordance with section 4
hereof (the "Expiry Time") and, at the earlier to occur of
the time at which the consummation of the Merger becomes
effective and the Expiry Time, the Option shall expire and
terminate as to such of the Optioned Shares in respect of
which the Option has not then been exercised. The Option
shall be exercisable whether or not the Merger Agreement is
executed and delivered by Dakota and USMX. If the Schedule
or (if the Letter andf the Schedule have been superseded by
the Merger Agreement) the Merger Agreement has been
terminated (other than pursuant to subparagraphs 3(j) or (k)
of the Schedule or (if the Letter and Schedule have been
superseded by the Merger Agreement) other than pursuant to
the provisions of the Merger Agreement corresponding to such
subparagraphs), then the Option shall, without any action on
the part of USMX, cease and terminate and be of no further
force and effect.
3. No written notice of Dakota electing to exercise the
Option in whole or in part shall be necessary but payment by
or on behalf of Dakota by certified cheque or bank draft
payable to or to the order of American Securities Transfer
(the "Agent"), the transfer agent and registrar of the
Shares, at its office located at 938 Quail Street, Suite
101, Lakewood, Colorado, 80215, of the Exercise Price, in
respect of so many of the Optioned Shares as Dakota shall
from time to time determine to take up and purchase, shall
be an exercise pro tanto of the Option hereby granted. The
Agent shall be advised in writing at the time of any such
payment of the number of Optioned Shares in respect of which
the Option is then being exercised. Upon each such exercise
of the Option, USMX shall forthwith cause the Agent to
deliver forthwith to Dakota, at its address sert forth
above, a definitive certificate or certificates registered
in the name of Dakota, at its address sert forth above, a
definitive certificate or certificates registered in the
name of Dakota, or as Dakota may otherwise direct in
writing, representing in the aggregate such number of the
Optioned Shares as Dakota shall have then paid for.
4. Notwithstanding anything herein provided, Dakota may at
any time in its sole discretion terminate the Option by
giving written notice thereof, delivered to USMX at its
address set forth above, or sent by facsimile transmission
to USMX (facsimile no.: (303) 980-1363), and forthwith upon
such delivery or sending of such notice and notwithstanding
that such notice may not have been received by USMX, the
Option shall forthwith expire and terminate as to such of
the Optioned Shares in respect of which the Option has not
then been exercised.
5. Nothing herein contained or done pursuant hereto shall
obligate Dakota to purchase and/or pay for, or USMX to
issue, any Optioned Shares, except those Optioned Shares in
respect of which Dakota shall have exercised its option to
purchase hereunder in the manner hereinbefore provided.
6. In the event of any subdivision or change of the Shares
at any time prior to the Expiry Time into a greater number
of Shares, USMX shall deliver in connection with any issue
of Optioned Shares occurring after the record date of the
subdivision or change such additional number of Shares as
would have resulted from such subdivision or change if such
issue of Optioned Shares had been made prior to the record
date of such subdivision or change. In the event of any
consolidation or change of the Shares at any time prior to
the Expiry Time into a lesser number of Shares, the number
of Shares to be delivered by USMX on any exercise thereafter
of the Option shall be reduced to such number of Shares as
would have resulted from such consolidation or change if
such exercise of the Option had been made prior to the
record date of such consolidation or change.
7. If USMX shall at any time prior to the Expiry Time pay
any dividend or make any distribution or issuance, whether
or not payable in cash, property or other assets or in
shares or other securities of USMX, or make any payment by
way of return of capital, Dakota shall be entitled to
receive upon any exercise thereafter of the Option (in
addition to the number of Optioned Shares that Dakota
otherwise would have been entitled to receive on the
exercise of the Option) such cash, property or other assets
or such additional number of shares or other securities of
USMX or such capital payment as would have been payable on
the Shares that would have been issuable on such exercise of
the Option if they had been outstanding on record date for
payment of such dividend or such issuance, distribution or
capital payment, and USMX covenants and agrees that in the
event of any such payment of any dividend or issuance or
distribution payable in any shares or other securities of
USMX, it will reserve and set asisde a sufficient number of
shares or other securities of the appropriate class in which
any such dividend, issuance or distribution shall be payable
to enable it to fulfil its obligations hereunder.
8. USMX covenants that it has duly reserved, set aside and
allotted the Optioned Shares to and in favour of Dakota, its
successors and assigns, and that upon the exercise of the
Option in accordance with the terms hereof and payment of
the Exercise Price, the Optioned Shares in respect of which
Dakota shall have duly taken up and paid for hereunder shall
be duly issued and outstanding as fully paid and non-
asessable.
9. Time shall be of the essence of this agreement.
10. USMX acknowledges that Dakota will have no adequate
remedy at law if USMX fails to perform any of its
obligations under this agreement. In such event, USMX
agrees that Dakota shall have the right, in addition to any
other rights it may have, to specific performance of this
agreement and that it will not take any action to impede
Dakota's efforts to enforce such right of specific
performance.
11. USMX and Dakota severally convenant and agree to use
their respective reasonable best efforts to comply with,
satisfy and fulfil promptly any contions and requirements
imposed by or arising out of legal, regulatory, stock
exchange or administrative requirements applicable to the
rant of the Option hereunder, the issue of Optioned Shares
on the exercise of the Option and to lising and posting for
trading of Optioned shares issued on the exe4cise of the
Option on the TSE and on such other stock exchanges or
through such over-the-counter or other organized markets on
or through which the Shares may be listed or traded, and to
co-operate with each other concerning such matters.
12. Dakota represents and warrants to USMX, as a continuing
representation and warranty, which shall be true and correct
on the date hereof and on each date that Dakota exercises
the Option as if made and given on and as of each such date,
that Dakota is acquiring the Option and will acquire
Optioned Shares pruchased by it upon any exercise of the
Option as principal. Dakota acknowledtes that (i) the
Option has not been and the Optioned Shares will not be
registered under the United States Securities Act of 1933
(the "1933 Act"), as amended, or under any state securities
laws and therefore the Optioned Shares cannot be sold
without registration under the 1933 Act and the securities
laws of all applicable states in the United States unless an
exemption from registration is available, and (ii) Dakota is
an "accredited investor" as that term is defined under
Regulation D of the 1933 Act.
13. This agreement shall enure to the benefit of and be
binding upon the successors and assigns of the parties
hereto. All rights granted hereunder to Dakota are fully
assignable.
14. This agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
15. This agreement may be executed by the parties in one or
more counterparts and, if so executed and delivered, either
in original or facsimile form, such counterparts shall
together constitute a single instrument.
IN WITNESS WHEREOF the parties hereto have executed
these presents as of the day and year first above written.
DAKOTA MINING CORPORATION
By:
Title:
USMX, INC.
By:
Title: