-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V1Uu5ydttzMsUHmpuJyeCQ+7Niv0pCMHkwaTznNXjr7Wg+ByKvMjdW5EftQERU9s cqQvK/jwYqYC1JbmfqISNA== 0000315523-96-000016.txt : 19960729 0000315523-96-000016.hdr.sgml : 19960729 ACCESSION NUMBER: 0000315523-96-000016 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960711 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960726 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: USMX INC CENTRAL INDEX KEY: 0000315523 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 841076625 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-09370 FILM NUMBER: 96599138 BUSINESS ADDRESS: STREET 1: 141 UNION BLVD STE 100 CITY: LAKEWOOD STATE: CO ZIP: 80228 BUSINESS PHONE: 3039854665 MAIL ADDRESS: STREET 1: 141 UNION BLVD SUITE 100 CITY: LAKEWOOD STATE: CO ZIP: 80228 FORMER COMPANY: FORMER CONFORMED NAME: U S MINERALS EXPLORATION CO DATE OF NAME CHANGE: 19880222 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 11, 1996 ____________________ USMX, INC. (Exact name of registrant as specified in its charter) ____________________ Delaware 0-9370 84-1076625 (State or other (Commission File (I.R.S. Employer jurisdiction of Number) Identification incorporation) No.) 141 Union Boulevard, Suite 100 Lakewood, Colorado 80228 (Address of principal (Zip Code) executive offices) (303) 985-4665 Registrant's telephone number, including area code Item 2. Acquisition or Disposition of Assets. (a) Effective July 11, 1996, the Company acquired leasehold and other property interests in the Illinois Creek Project in north central Alaska from North Pacific Mining Corporation ("NPMC"). The Company made initial payments to NPMC totaling $100,000 in 1994 to evaluate the Illinois Creek property. The Company entered into an agreement with NPMC effective December 16, 1994, which was amended on February 5, 1996 (the "Agreement"). Pursuant to the Agreement, the Company agreed to make a $1,000,000 non-refundable payment to NPMC in cash or shares of the Company's $.001 par value common stock (the "Common Stock"). The Company elected to make the payment in Common Stock, and based upon an average market price of the Common Stock on The Nasdaq Stock Market as provided in the Agreement, the Company was required to issue to NPMC 449,754 shares. The Company also agreed that, upon obtaining the necessary permits and if no material adverse economic change had occurred, the Company would make a production decision and issue to NPMC an additional $3,000,000 in cash or Common Stock. The Company received the key permits related to the Project, and determined that no material adverse economic change had occurred with respect to the Project economics. The Company made a production decision and agreed to issue to NPMC an additional 1,090,909 shares of Common Stock. The calculation of the number of shares was based on the average market price of the Common Stock on The Nasdaq Stock Market as provided in the Agreement. Effective July 11, 1996, the Company issued the aggregate of 1,540,663 shares of Common Stock to NPMC. As a result of this transaction, NPMC owns approximately 9.5% of the Company's issued and outstanding Common Stock. The Company also granted a security interest to NPMC in the property, which is subject to a subordination arrangement with the Company's lender on this Project. See Item 5 below for a description of this facility. The Company had also agreed with NPMC in the Agreement to file a Registration Statement relating to the resale of these shares, which Registration Statement has been filed and declared effective by the Securities and Exchange Commission. The Company has agreed to use its best efforts to keep this Registration Statement effective until NPMC has sold these shares or until June 1999. In addition to the Common Stock, NPMC had the right to enter into a mining venture agreement with the Company in which the Company would transfer to NPMC an undivided 25% interest in the Illinois Creek Mining Leases, or to receive a 5% net returns royalty. NPMC chose to receive a 5% net returns royalty on production from the Illinois Creek Upland Mining Lease. No decision has been made regarding the property covered by the Illinois Creek Roundtop Mining Lease, which area has not yet been explored by the Company. If the Company delineates the existence of additional ore reserves on the lease known as the Illinois Creek Upland Mining Lease, which increases the total proven ore reserves to at least 1,000,000 ounces of equivalent gold ore reserves beyond the mineralization stated in the Company's February 1996 feasibility report, then NPMC will have the right to elect to participate in subsequent mining operations with respect to those additional reserves for a 25% working interest by reimbursing the Company 120% of NPMC's 25% share of exploration, development and capital costs incurred by the Company subsequent to February 1996 which are directly related to delineation and/or production of the additional reserves. Pursuant to the Agreement, the Company has until December 16, 1997, to achieve "commercial production" which is defined as the delivery to a bona fide purchaser of minerals produced for a minimum period of 45 consecutive days at not less than 70% of the pro forma production capacity as set forth in the Project feasibility report. This period may be extended at the option of the Company for two additional one-year periods upon payment by the Company of a $300,000 advance royalty, adjusted for inflation, for each one-year extension. The Agreement terminates on December 16, 1999, if the Company has not achieved commercial production by that date. NPMC is a wholly-owned subsidiary of Cook Inlet Region, Inc., an Alaska Native Regional Corporation ("CIRI"). Except for the transactions involving the Illinois Creek Project, the Company has not had any material relationship with NPMC or CIRI and the Company is unaware of any material relationship between the Company's affiliates, any director or officer of the Company, or any associate of any such director or officer, with NPMC or CIRI. The Company has transferred its property interest in the Project to its wholly-owned subsidiary, USMX of Alaska, Inc. ("AK"). The Company intends to use its internal cash resources and the proceeds from borrowings to finance the development and construction costs of the Project. See Item 5 for a discussion of the Company's borrowings from N M Rothschild & Sons Limited. (b) The Property acquired from NPMC consisted principally of leasehold interests in the Illinois Creek Project. The Company has conducted exploration activities at the site since 1994. The Company has received all necessary regulatory authorization and has commenced construction of the mining, processing and related facilities. It is the Company's goal to commence mining in late summer, 1996. The Company expects to conduct gold and silver mining operations on this property. Item 5. Other Events (a) Effective July 11, 1996, the Company entered into credit agreements with N M Rothschild & Sons Limited (the "Lender") for a $22,000,000 facility to finance the development and construction costs of the Illinois Creek Project (the "Project"). The Company's wholly-owned subsidiary, AK, is the borrower of $19.5 million of the $22 million facility. Under certain circumstances, the loan to AK may be in the form of a gold loan, in which event the maximum credit amount would be the number of ounces of gold equal to $19,500,000 divided by the price of gold in London. However, the Company has agreed with NPMC that it will not convert the loan to a gold loan until such time as the Project has achieved commercial production as defined in the Agreement with NPMC. See Item 2. Advances will be made by the Lender solely to an account dedicated to Project operations and only if certain conditions related principally to Project operations are satisfactory to the Lender. In addition, AK will be required to maintain a minimum balance in the Proceeds Account equal to the sum of: (I) the greater of $1,500,000 or a formula amount based on the present value of future net cash flow from the Project, (II) the lesser of $250,000 or interest payable to the Lender for the following three months, (III) capital expenditures scheduled for the following three months and, (IV) any other payments due to the Lender for the following three months. It is expected that AK will need to deposit approximately $1,500,000 for deposit in the Proceeds Account by September 30, 1996, to maintain the minimum balance. The Company has agreed to make a $1,500,000 equity contribution to AK by that date. AK will not be able to make withdrawals from the Proceeds Account for its general corporate purposes or to pay dividends until "Completion" has occurred. The requirements for Completion include the construction of the Project facilities, which facilities and the equipment thereon must be mechanically complete and electrically operable ("Mechanical Completion"), the achievement of production amounts and grades, costs and reserves similar to the development plan, and the absence of any default in the credit agreement. The note evidencing the $19.5 million obligation bears interest, payable quarterly, at 2.25% above LIBOR until Completion and 1.875% thereafter for the remainder of the approximate four-year term of the loan. Principal payments will be made in eight amortized installments on September 30 and December 31 of each year, commencing September 30, 1997. Subject to satisfaction of the requirements for maintenance of the Proceeds Account, advances will be made by the Lender to AK until the first to occur of September 30, 1997, or Mechanical Completion. AK paid an establishment fee of $292,500 to the Lender. AK will also be required to pay a commitment fee of one-half of one percent of the difference between the principal amount outstanding and the maximum credit amount. The balance of the facility is represented by a $2.5 million note made by the Company which may be converted into Common Stock at the conversion price of $3.40 per share at the option of the Lender at any time during the approximate four-year term of the note. The Company may also require conversion if the note is not in default and the daily closing price of the Common Stock exceeds $4.75 for 30 consecutive trading days. A total of 735,294 shares of Common Stock (subject to adjustment for certain events) is reserved for issuance by the Company upon conversion of the $2.5 million loan. The Company has also agreed to register the Common Stock for resale under certain circumstances. During the term of the convertible note evidencing this loan, the Lender will have the opportunity to profit from an increase in the market price of the Common Stock with resulting dilution to the holders of Common Stock. The existence of such convertible securities may adversely affect the terms on which the Company can obtain additional financing, and the holders of such convertible note can be expected to convert the securities at a time when the Company may be able to obtain additional capital by offering shares of the Common Stock on terms more favorable to the Company than those provided by the conversion of this note. The $2.5 million loan bears interest at 2% above LIBOR and will be payable no less frequently than semi-annually. In accordance with the requirements of the related credit agreements, the Company deposited the entire proceeds of the $2.5 million loan into the Proceeds Account and such proceeds are not available for general corporate purposes. Payments may be made to the Company from the Proceeds Account in an amount sufficient for the Company to make interest payments. AK will not be permitted to repay the $2.5 million to the Company or other advances by the Company in the approximate amount of $3.4 million unless certain conditions are satisfied, principally related to repayment of the notes to the Lender and satisfactory operation of the Project. The Company has pledged to the Lender its stock in AK as well as its notes from AK for advances made by the Company. The Company is also a guarantor of the $19.5 million loan to AK until it has been demonstrated that the Project is operating in a manner satisfactory to the Lender. There can be no assurance when, or if, this will occur, and the Company could have a substantial debt burden without other resources to make repayment. In addition, the Company will be a continuing guarantor of AK's covenant to comply with environmental laws. The Company's subsidiary, AK, must deliver to the Lender, among other things, financial information, reserve, hedging and operating reports, and must use all commercially reasonable efforts to maintain, develop and operate the Illinois Creek Project in accordance with the present development plan and prudent mining industry practices. AK must also comply with applicable laws and maintain its property rights in the Project, including payment of royalties which may become due to NPMC. In addition, except for limited circumstances, without the Lender's consent, AK may not incur any additional indebtedness, permit any liens on the Project, assume or guarantee indebtedness of others, invest in others, merge or change its capital structure, sell the assets of the Project, or permit Project reserves or future net cash flows to decline materially from the present development plan. AK must also achieve Mechanical Completion by July 31, 1997, and Completion by November 30, 1997. Such restrictions could affect the Company's operations and future plans. The Company has also agreed with the Lender that, so long as the $2.5 million Note made by the Company is unpaid, or any other obligation of the Company remains unsatisfied, including the Company's Guaranty of the loan to AK, the Company will, among other things, comply with all applicable laws, provide the Lender with financial reports and continue to engage principally in the mining business. In addition, except for limited circumstances, without the Lender's consent, the Company may not incur indebtedness (other than indebtedness after Completion to develop mining properties where the sole recourse of the lender is the mining property being developed), permit any liens on the Project, assume or guarantee indebtedness of others, invest in others, merge (unless after Completion and the Company is the survivor of the merger) or change its capital structure, pay dividends or sell the assets of the Project. Such restrictions could affect the Company's operations and future plans. The Company has also agreed with the Lender that it shall not permit its (a) current ratio to be less than 2.0 to 1.0; (b) consolidated tangible stockholders' equity to be less than $17,500,000; and (c) total consolidated liabilities to exceed 175% of its consolidated tangible stockholders' equity. There are substantial risk factors associated with the Project and the Company's future operations, including the substantial financial commitment made by the Company to the development of the Project, and the resultant strain on the Company's liquidity and capital resources, delays and other problems which may result from difficulties in transportation of equipment, supplies and personnel to the Project, potentially adverse weather conditions and potentially substantial costs to comply with environmental and other laws, as well as gold price volatility and other economic factors which are beyond the control of the Company. Moreover, inasmuch as the Project has not been fully constructed and is not yet operational, there is no operating history upon which to base estimates of future cash operating costs and other operating requirements. Accordingly, the Company is exploring alternatives to provide additiional financing to enable it to continue work to commence mining on the Project in the near future, provide contingency funds for unforeseen delays or other Project problems, and to provide for future operations, including exploration and development activities on other properties. The Company is reviewing alternative means of augmenting its capital base, but has no firm commitments for other funding. The failure to obtain other funding would have a material adverse effect on the Company. Item 7. Financial Statements and Exhibits. (c) Exhibits. Exhibit 2 Agreement, dated effective December 16, 1994, between the Company and North Pacific Mining Corporation, previously filed as Exhibit 10.46 to the Company's Report on Form 10-K for the year ended December 31, 1994, and Letter dated February 5, 1996, amending the Agreement dated effective December 16, 1994, between the Company and North Pacific Mining Corporation, previously filed as Exhibit 10.46a to the Company's Report on Form 10-K/A for the year ended December 31, 1994, are incorporated herein by this reference. Exhibit 10(a) Credit Agreement between USMX of Alaska, Inc. and N M Rothschild & Sons Limited. Exhibit 10(b) Credit Agreement between USMX, INC. and N M Rothschild & Sons Limited. Exhibit 10(c) Guaranty of USMX, INC. to N M Rothschild & Sons Limited Exhibit 10(d) Hedging Agreement between USMX of Alaska, Inc. and N M Rothschild & Sons Limited Exhibit 10(e) Registration Rights Agreement between USMX, INC. and N M Rothschild & Sons Limited. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. USMX, INC. (Registrant) Date: July 24, 1996 By: /s/Donald E. Nilson ________________________ Donald E. Nilson, Vice President - Finance, Chief Financial Officer and Secretary EX-10.A 2 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 EX-10.B 3 CREDIT AGREEMENT Between USMX OF ALASKA, 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 18 ARTICLE 2 COMMITMENT, USE OF PROCEEDS 18 2.1 Commitment 18 2.2 Use of Proceeds 19 2.3 Fees 19 ARTICLE 3 PROCEDURE AND PAYMENT 19 3.1 Advance Procedure 19 3.2 Notes 20 3.3 Loan Conversion Elections 20 3.4 Principal and Interest Payments Generally 21 3.5 Interest 21 3.6 Repayment of the Loans 22 3.7 Priority of Prepayments 23 3.8 Risk of Loss 23 3.9 Inability to Continue to Provide Gold; Mandatory Switching 23 3.10 Increased Costs and Reduction in Return 23 3.11 Payments and Computations 23 3.12 Payment on Non-Business Days 24 3.13 Taxes 24 3.14 Proceeds Account 26 ARTICLE 4 HEDGING FACILITY 27 4.1 Establishment of Hedging Facility 27 ARTICLE 5 COLLATERAL SECURITY 27 5.1 Security Documents 27 5.2 No Limitation on Application of Security Interests 28 5.3 Recordings and Filings of Security Documents 28 5.4 Protection of Security Document Liens 28 5.5 Right of Set-off 28 5.6 Additional Collateral 28 5.7 Partial Release of USMX Upon Completion of the Project 28 ARTICLE 6 CONDITIONS PRECEDENT 29 6.1Conditions Precedent to the Initial Advance 29 6.2 Conditions Precedent to all Advances 31 ARTICLE 7 REPRESENTATIONS AND WARRANTIES 32 7.1 Representations and Warranties of Borrower 32 ARTICLE 8 AFFIRMATIVE COVENANTS OF BORROWER 39 8.1 Compliance with Laws, Etc. 39 8.2 Reporting Requirements 39 8.3 Inspection 41 8.4 Maintenance of Insurance 41 8.5 Maintenance of Equipment, Etc. 41 8.6 Keeping of Records and Books of Account 41 8.7 Preservation of Existence, Etc. 41 8.8 Conduct of Business 41 8.9 Notice of Default 42 8.10 Defense of Title 42 8.11 Operation of the Project; Completion 42 8.12 Hedging Requirements 42 8.13 Maintenance of the Mining Properties 42 ARTICLE 9 NEGATIVE COVENANTS OF BORROWER 43 9.1 Indebtedness 43 9.2 Liens, Etc. 43 9.3 Assumptions, Guarantees, Etc. of Indebtedness of Other Persons 45 9.4 Investments in Other Persons 45 9.5 Mergers, Changes in Capital Structure, Etc. 45 9.6 Borrower's Financial Covenants 45 9.7 Project Reserves 46 9.8 Minimum Reserves 46 9.9 Restriction on Dividends and Redemptions 46 9.10 Limitations on Hedging Contracts 46 9.11 Sale of Project Assets 46 9.12Restrictions on Capital Expenditures, Etc. 46 9.13 Arm's Length and Take or Pay Contracts 47 9.14 Restrictive and Inconsistent Agreements 47 ARTICLE 10 EVENTS OF DEFAULT 47 10.1 Event of Default 47 10.2 Remedies Upon Event of Default 49 10.3 Conversion upon Acceleration 50 ARTICLE 11 MISCELLANEOUS 51 11.1 Amendments, Etc. 51 11.2 Notices, Etc. 51 11.3 No Waiver; Remedies 52 11.4 Costs, Expenses and Taxes 52 11.5 Binding Effect; Assignment 53 11.6 GOVERNING LAW 53 11.7 VENUE; SUBMISSION TO JURISDICTION 53 11.8 WAIVER OF JURY TRIAL 54 11.9 Execution in Counterparts 54 11.10 Inconsistent Provisions 54 11.11 Survival of Representations and Warranties 54 11.12 Concerning the Security Documents 54 11.13 No Third Party Beneficiary 54 11.14 Severability 55 11.15 Acknowledgments 55 11.16 Confidentiality 55 11.17 Entire Agreement; Merger 55 SCHEDULES Schedule 1.1(a) Mining Properties Schedule 3.6(b) Amortization Schedule Schedule 7.1(c) Project Permits Schedule 7.1(e) Litigation Schedule 7.1(f) Additional Financial Disclosures Schedule 7.1(h) Disclosure Schedule Schedule 7.1(i) Employee Benefit Plans Schedule 7.1(j) Permitted Liens Schedule 7.1(o) Hedging Contracts Schedule 7.1(p) Material Agreements Schedule 7.1(t) Compliance with Environmental Laws Schedule 7.1(u) Borrower's Indebtedness Schedule 8.4 Insurance Policies EXHIBITS Exhibit A-1 Form of Dollar Note Exhibit A-2 Form of Gold Note Exhibit B Form of Request for Disbursement Exhibit C-1 Form of Mortgage Exhibit C-2 Form of Second Mortgage Exhibit C-3 Form of NPMC Mortgage Exhibit C-4 Form of Fourth Mortgage Exhibit C-5 Form of NPMC Subordination Agreement Exhibit D Form of Hedging Agreement Exhibit E-1 Form of Guaranty Exhibit E-2 Form of Assignment Agreement Exhibit F Development Plan Exhibit G-1 Form of Borrower's Omnibus Certificate Exhibit G-2 Form of USMX's Omnibus Certificate Exhibit G-3 Form of NPMC's Omnibus Certificate Exhibit H-1 Form of Opinion of Borrower's and USMX's Counsel Exhibit H-2 Form of Opinion of NPMC's Counsel Exhibit H-3 Form of Security Opinion Exhibit I Form of Conversion/Interest Period Notice Exhibit J Form of Proceeds Account Agreement Exhibit K Form of Request for Advance Exhibit L Form of Completion Certificate CREDIT AGREEMENT This CREDIT AGREEMENT dated as of July 11, 1996, is by and between USMX OF ALASKA, INC., a corporation organized and existing under the laws of Alaska ("Borrower"), and N M ROTHSCHILD & SONS LIMITED, a company organized and existing under the laws of England ("Lender"). Recitals A. By this Credit Agreement the parties hereto desire to set forth the terms of their agreement pursuant to which Lender will make available to Borrower certain loans in Gold or in United States Dollars, to be used by Borrower to partially fund development of the Illinois Creek Gold Property in Alaska. B. The loans provided for herein will be guarantied by USMX, INC., a Delaware corporation ("USMX") as provided herein, of which Borrower is a wholly-owned subsidiary, and will be secured by first and prior liens (other than Permitted Liens, as defined below) in favor of Lender on the real and personal property comprising the Project and all other real and personal property rights and interests of Borrower. C. USMX and Lender have, as of the date hereof, entered into a separate Credit Agreement (the "USMX Credit Agreement") pursuant to which, inter alia, Lender will loan to USMX certain funds which will also be used to partially fund development of the Illinois Creek Gold Property in Alaska. Agreement NOW, THEREFORE, in consideration of the following mutual covenants and agreements, Borrower and Lender hereby agree as follows: ARTICLE 1 CERTAIN DEFINITIONS AND ACCOUNTING PRINCIPLES 1.1 Certain Defined Terms. As used in this Agreement and unless otherwise expressly indicated, the following terms shall have the following meanings: "Acceptable Delivery Location" means the offices of Lender in London, England; Golden West Refining (Canada) Ltd., Vancouver, B.C.; Johnson Matthey Refining, Inc., Salt Lake City, Utah; Metalor USA Refining Corp., North Attleboro, Massachusetts; Handy and Harman, Attleboro, Massachusetts; or any other location as mutually agreed by Borrower and Lender. "Advance" means an advance of Loans, in Gold or Dollars as the case may be, by Lender to Borrower pursuant to Articles 2 and 3. "Advance Period" means the period from the date hereof until the first to occur of July 31, 1997 and Mechanical Completion of the Project, during which period Lender will Advance Loans to Borrower, subject to all of the terms and conditions hereof. "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. "Applicable Margin" means, with respect to the rate of interest payable by Borrower on Loans, two and one-quarter percent (2.25%) per annum for any time period prior to Completion, and one and seven-eighths percent (1.875%) per annum for any time period commencing on the date of and following after Completion. "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 E-2. "Breakage Costs" means all costs and losses which Lender may incur as a result of payment of the Principal Amount of any Loan other than at the end of an Interest Period. "Business Day" means a day of the year (i) on which banks in Denver, Colorado, New York, New York and London, England are open for business and (ii) on which a London Gold Fixing occurs. "Capitalized Lease Liabilities" means all monetary obligations of Borrower under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601, et seq., as amended, reformed or otherwise modified from time to time. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List, as amended, reformed or otherwise modified from time to time. "Collateral" means all properties, rights and interests subject to the Security Documents. "Commitment" means the undertakings of Lender set forth in Section 2.1 to Advance Loans to Borrower from time to time during the Advance Period, with the aggregate Principal Amount of such Loans at no time to exceed the Maximum Credit Amount. "Commitment Fee" shall have the meaning specified in Section 2.3(b). "Completion" means each of the following shall have occurred and be in effect simultaneously with respect to the Project and with respect to Borrower generally: (i) Economic Completion shall have occurred; (ii) Borrower shall have submitted to Lender its written certificate that the Completion Test for the Illinois Creek Gold Property has been met and that Borrower is in compliance with all of the affirmative and negative covenants and other provisions of this Agreement, and Lender shall have reasonably satisfied itself that Borrower is so in compliance; (iii) Borrower shall have prepared and submitted to Lender, and Lender shall have approved in its sole discretion, reasonably exercised and, if requested by Borrower, in consultation with the Independent Consultant, all revisions to the Development Plan for the Illinois Creek Gold Property, if any; (iv) no event shall have occurred with respect to Borrower or the Illinois Creek Gold Property which has a Material Adverse Effect on Borrower or the Illinois Creek Gold Property; (v) no Default shall exist; (vi) Lender shall have received from Borrower evidence reasonably satisfactory to Lender that Borrower has paid all amounts due, and received releases from all obligations, under all contracts that are contemplated by the Development Plan to be completed at the time of Mechanical Completion; and (vii) the Proceeds Account, minus any amounts funded from sources other than cash flow generated by sales of Precious Metals from the Project, shall have a minimum balance at least equal to the Retention Amount. "Completion Test" means the Project has met and satisfied all of the requirements and parameters comprising Economic Completion during a continuous period of not less than ninety consecutive days, beginning not less than three (3) days nor more than ten (10) days after written notice thereof has been given to Lender. "Consolidated Current Assets" means the consolidated current assets of any Person, determined in accordance with GAAP. "Consolidated Current Liabilities" means the consolidated current liabilities of any Person, determined in accordance with GAAP. "Consolidated Tangible Stockholders' Equity" means for any Person, its Total Consolidated Tangible Assets, less its Total Consolidated Liabilities. "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/Interest Period Notice" means a notice from Borrower to Lender concerning a conversion of all Gold Loans to Dollar Loans, or a conversion of all Dollar Loans to Gold Loans, or a notice regarding Borrower's election concerning 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. "Cost of Future Production" means, for any period, the total operating costs and capital costs (if any) of the Project for such period as set forth in the Development Plan, and projected based on the Development Plan. "Current Ratio" means the ratio of Consolidated Current Assets to Consolidated Current Liabilities. "Date of Default" shall have the meaning specified in Section 10.2(a). "Debt Service Ratio" means for any six month period, the ratio of (y) the Future Net Cash Flow from the Project for such period based on the Development Plan plus the Principal Retention Amount and the Interest Retention Amount to (z) principal and interest payments payable by Borrower scheduled during such period on all Indebtedness of Borrower. The determination of Future Net Cash Flow shall take into account existing hedging and sales arrangements, and forecast operating and capital costs (including taxes). "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 Loans during periods when amounts payable by Borrower as principal repayments, interest payments or fee or expense payments are due and payable but unpaid by Borrower, which shall be an annual rate of interest which is equal to the Dollar Loan Interest Rate or Gold Loan Interest Rate (whichever is applicable to the Loan), plus four percent (4%). "Development Plan" means the Development Plan appended hereto as Exhibit F 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 and through the life of the mine, as amended from time to time by Borrower with the written approval of Lender, which approval Lender may withhold in its sole discretion reasonably exercised. "Discount Rate" means five percent (5%) per annum when applied to a Gold Loan, and eight percent (8%) per annum when applied to Dollar Loans. "Dollar Loan" or "Dollar Loans" means an Advance or Advances of Dollars by Lender to Borrower pursuant to Articles 2 and 3. "Dollar Loan Interest Rate" means with respect to an Interest Period pertaining to a Dollar Loan, 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. "Dollar Note" means a promissory note made by Borrower in favor of Lender in the Maximum Credit Amount, which promissory note evidences all Dollar Loans hereunder, which note is in the form of Exhibit A-1 hereto. "Dollar Value" shall mean with reference to the valuation of Ounces of Gold, for all purposes hereunder other than determining the Original Dollar Value of a Gold Loan, an amount determined by multiplying (y) the Ounces of Gold for which the Dollar Value is being calculated by (z) the London Price in effect two (2) Business Days prior to the date of determination. "Dollars" and the symbol "$" each mean lawful money of the United States of America. "Economic Completion" means a determination and certification by the Independent Consultant substantially in the form of Exhibit L with respect to the Project, that: (i) Mechanical Completion has been achieved; (ii) Proven and Probable Reserves are in accordance with comparable figures set out for reserves in the Development Plan; (iii) production from the Illinois Creek Gold Property has achieved at least 90% of budgeted ore production and metallurgical recovery levels, and has met the other technical parameters set forth in the Development Plan; (iv) the head grade of the ore delivered to the leach pads on the Illinois Creek Gold Property during the Completion Test has achieved at least 90% of ore head grades specified in the Development Plan; (v) total Project Operating Costs for operations of the Illinois Creek Gold Property during the Completion Test do not exceed 110% of the operating cost assumptions in the Development Plan; and (vi) operations at the Illinois Creek Gold Property during the Completion Test have met such other standards or requirements as may reasonably be required by Lender to confirm compliance with the Completion Test, the Feasibility Study and the Development Plan. "Environmental Laws" means federal, state, local and foreign laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to pollution or protection of the environment, including, without limitation, laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Establishment Fee" shall have the meaning specified in Section 2.3(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, granted by Borrower to USMX covering all the right, title and interest of Borrower in the Mining Properties and in production therefrom and personal property associated therewith, in the form of Exhibit C-4 hereto, securing the $3,400,000 USMX Secured Loan and subordinate to the Mortgage, the Second Mortgage and the NPMC Mortgage. "Future Net Cash Flow" means for any period: (a) Borrower's net share of the total revenue to be realized from the Project, projected based on the Development Plan during such period, with revenue calculated (i) in the case of Ounces of Gold which are covered by a Hedging Contract in effect on the relevant date of calculation, at the price for delivery of Gold specified in such Hedging Contract (or, if no price other than a floor price for delivery of Gold is specified in such Hedging Contract, the Minimum price for delivery of Gold referred to therein), and (ii) in the case of all other Ounces of Gold, at the lesser of the average London Price for the six (6) months immediately preceding the relevant date of calculation and $375 per Ounce of Gold; less (b) the Cost of Future Production for such period. "GAAP" means generally accepted accounting principles in the United States of America, consistently applied. "GOFO" means the rate per annum (rounded upwards if necessary to the nearest five one-hundredths of one percent (0.05%)) equal to (a) the mean of the offered rates as of 11:00 a.m., London time, appearing on the display designated as page "GOFO" on the Reuter Monitor Money Rates Service (or such other page as may replace the GOFO page on that service for the purpose of displaying London interbank gold forward offered rates of major bullion traders) for a term equivalent to the Interest Period, or (b) if fewer than two offered rates appear on the display referred to in (a) above, the rate determined by Lender in good faith (which determination shall be conclusive in the absence of manifest error) to be the average of the rates at which major bullion traders are offering Gold deposits for a term equivalent to the Interest Period in the London interbank Gold market at about 11:00 a.m., London time. "Gold" means various amounts of ounces of gold of a purity of at least .995 fine, and otherwise of grade and quality conforming to the usual requirements for good delivery in the London Gold market. As used herein, the term "ounces" means fine troy ounces. "Gold Loan" means an Advance of Gold by Lender to Borrower pursuant to Section 2.1. "Gold Loan Interest Rate" means, with respect to an Interest Period pertaining to a Gold Loan, an interest rate per annum equal to the sum of (y) LIBOR minus GOFO in effect on the first day of the Interest Period (provided, however that such calculation shall not result in a value less than zero), plus (z) the Applicable Margin. "Gold Note" means a promissory note made by Borrower in favor of Lender in the Maximum Credit Amount, which promissory note evidences all Gold Loans hereunder, which note is in the form of Exhibit A-2 hereto. "Governmental Acts" has the meaning set forth in Section 3.10. "Governmental Authority" means the federal, state, county, city or local government or political subdivision or authority in which any property of Borrower is located or which exercises valid jurisdiction over any such property, or in which Borrower conducts business or is otherwise present, and any agency, department, commission, board, bureau or instrumentality of any of them which exercises valid jurisdiction over Borrower. "Governmental Requirement" means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other direction or requirement (including, without limitation, Environmental Laws, energy regulations and occupational, safety and health standards or controls) of any Governmental Authority. "guarantee" shall mean any obligation, contingent or otherwise, of any Person guaranteeing any Indebtedness or obligation of any other Person in any manner, whether directly or indirectly, and including, 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 by USMX of payment of monies owed to Lender by Borrower pursuant to this Agreement, substantially in the form of Exhibit E-1 hereto. "Hazardous Material" means: (a) any "hazardous substance", as defined by CERCLA or by applicable state or provincial law; (b) any "hazardous waste", as defined by RCRA; (c) any petroleum product; or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state, provincial or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended, reformed or otherwise modified from time to time. "Hedging Agreement" means the agreement between Borrower and Lender, substantially in the form of Exhibit D hereto. "Hedging Contracts" means any agreement, facility, contract or other transaction entered into by Borrower relating to forward contracts or hedging (including but not limited to forward sales, which include spot deferred sales, options, swaps and price protection and floor price arrangements) for the management and/or protection of gold and other metals price risk, entered into with Lender or with other counterparties acceptable to Lender; and the proceeds of and all benefit and advantage derived in respect of the foregoing or any dealings therewith (including the closing out of any contracts or transactions). "Holder" means a holder in due course of the Note. "Illinois Creek Gold Property" means the Mining Properties identified as the Illinois Creek Upland Mining Lease in Schedule 1.1(a) hereto. "Indebtedness" means, for any Person, without duplication: (a) all obligations of such Person for borrowed money or metals (including (i) in the case of such obligations, all notes payable and drafts accepted representing extensions of credit; (ii) in the case of Borrower, Borrower's Obligations; and (iii) in the case of such metals, Gold and silver) and all obligations evidenced by bonds, debentures, notes, or other similar Instruments on which interest charges are customarily paid; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and bankers' acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined; (e) net liabilities of such Person under Hedging Contracts or Price Fixing Commitments; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (g) all Contingent Liabilities of such Person in respect of any of the foregoing. "Independent Consultant" means any consulting firm selected by Lender after consultation with Borrower qualified to make the investigations and determinations required to evaluate the Project, monitor and evaluate the Completion Test, and provide the Completion Test Certificates. "Initial Advance" means the first Advance of a Loan made by Lender to Borrower under this Agreement. "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 3.5(b). "Interest Rate" shall mean the interest rate applicable to the Loans from time to time, which shall be one of the Dollar Loan Interest Rate, the Gold Loan Interest Rate or the Default Rate, as applicable. "Interest Retention Amount" means the lesser of $250,000 or interest payable by Borrower to Lender under this agreement during the immediately following three months from the date of determination. "LIBOR" means, relative to any Interest Period for Dollar 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 Dollar Loans outstanding to which the rate will apply and for a period approximately equal to such Interest Period. "Lien" means, as to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance in or on, or any interest or title of any vendor, lessor, lender or other secured party to, or of such Person under any conditional sale or other title retention agreement or capital lease with respect to, any property or asset owned or held by such Person, or the signing or filing of a financing statement which names such Person as debtor, or the signing of any security agreement authorizing any other party as the secured party thereunder to file any financing statement. A Person shall be deemed to be the owner of any assets that it has placed in trust for the benefit of the holders of its indebtedness which indebtedness is deemed to be extinguished under GAAP but for which such Person remains legally liable, and such trust shall be deemed to be a Lien. "Loan" or "Loans" means Gold Loans and Dollar Loans made pursuant to this Agreement. "Loan Documents" means this Agreement, the Notes, the Guaranty, each Request for Advance, the Conversion/Interest Period Notices, the Security Documents, the Hedging Agreement, and each other Instrument executed by Borrower or USMX and delivered to Lender in connection with this Agreement or any of the foregoing Instruments, whether or not specifically identified in this paragraph. "Loan Life Ratio" means, at any date, the ratio, expressed as a percentage, of (a) the Present Value of Future Net Cash Flow from the Project for the period commencing on such date and ending on the Scheduled Maturity Date, to (b) Net Project Debt on such date. "London Gold Fixing" means a gold price fixing meeting among the five members from time to time of the London gold market. "London Price" means, on any day, the fixing price per fine ounce troy (in Dollars) for gold as announced at the afternoon London Gold Fixing for such day; provided, however, that if the afternoon London Gold Fixing shall not have occurred for such day, the "London Price" for such day shall be the fixing price per fine ounce troy (in Dollars) for gold as announced at the morning London Gold Fixing for such day or if the morning London Gold Fixing shall not have occurred for such day, the "London Price" for such day shall be the publicly quoted price per fine ounce troy (in Dollars) for Gold on such other accessible international gold market (allowing for physical delivery of such Gold) as may be reasonably selected by Lender, unless such day is a Saturday, Sunday or other recognized holiday in London, England, in which case the "London Price" shall be the last quoted London Price. "Material Agreements" means the contracts, agreements, leases and other binding commitments and undertakings of Borrower, the performance or breach of which could have a Material Adverse Effect on Borrower, which Instruments are identified in Schedule 7.1(p). "Material Adverse Effect" means, with respect to Borrower, USMX or any Person, an effect, resulting from any occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), which is materially adverse to: (a) the consolidated business, assets, revenues, financial condition, operations or prospects of such Person; (b) the ability of such Person to make any payment or perform any other material obligation required under any material agreement (including, with respect to Borrower, this Agreement or any of the Loan Documents) or, in the case of Borrower, to develop and operate the Illinois Creek Gold Property in accordance with the Feasibility Study; or (c) the Borrower and involves a liability or obligation (other than contractual commitments entered into by Borrower in the ordinary course of business which are not in default) of $100,000 or more. "Maximum Credit Amount" means with respect to the Loan the maximum Principal Amount, which shall be $19,500,000 for Dollar Loans and, for Gold Loans, the number of Ounces of Gold equal to $19,500,000 divided by the London Price applicable on the date of advance of the Gold Loan. "Mechanical Completion" means (a) a determination and certification by the Independent Consultant substantially in the form of Annex A of Exhibit L with respect to the Project, that Project facilities have been constructed and project equipment has been obtained in accordance with the description thereof contained in the Development Plan and such facilities and equipment are mechanically complete and electrically operable, and (b) Lender shall have been provided with lien waivers and other written notices from all contractors utilized in construction of Project facilities that such contractors have received payment of all amounts due in connection with their respective construction contracts. "Minimum Gold Price" means $375 per Ounce of Gold. "Mining Properties" means the leases and other property interests owned by Borrower, or in which Borrower directly or indirectly holds an interest, related to the mining leases described on Schedule 1(a), and all facilities situated thereon, together with all real and personal property and assets associated with such property. "Monetary Cap" means, with reference to a Gold Loan, the maximum permitted Dollar Value of the Principal Amount of the Gold Loan, which is one hundred fifty percent (150%) of the Original Dollar Value of the Gold Loan. "month" means a calendar month. "Mortgage" means the Mortgage, Deed of Trust, Assignment, Security Agreement and Financing Statement, dated as of July 11, 1996, granted by Borrower to Lender covering all the right, title and interest of Borrower in the Mining Properties and in production therefrom and personal property associated therewith, in the form of Exhibit C-1 hereto. "Net Project Debt" means the Principal Amount of the outstanding Loans plus the principal amount of loans outstanding to USMX pursuant to the USMX Credit Agreement less the Principal Retention Amount. "Notes" means the Dollar Note and the Gold Note. "NPMC" means North Pacific Mining Corporation, an Alaska corporation. "NPMC Agreement" means the agreement, as amended, dated effective December 16, 1994, by and between NPMC and USMX pursuant to which USMX acquired the Mining Properties, all of which it subsequently conveyed to Borrower. "NPMC Mortgage" means the Illinois Creek Deed of Trust, Assignment of Leases and Security Agreement, dated as of July 11, 1996, granted by Borrower to NPMC in the form of Exhibit C-3 hereto, securing NPMC's rights under the NPMC Agreement to the Mining Properties and subordinate to the Mortgage and the Second Mortgage pursuant to the Subordination Agreement. "NPMC Subordination Agreement" means an agreement between NPMC and Lender pursuant to which NPMC subordinates the NPMC Mortgage to the Mortgage and Second Mortgage, in the form of Exhibit C-5 hereto. "Obligations" means all obligations of Borrower (monetary or otherwise) arising under or in connection with this Agreement and each other Loan Document. "Omnibus Certificates" means the certificates from Borrower, USMX and NPMC respectively, substantially in the form of Exhibits G-1, G-2 and G-3 hereto. "Opinion of Borrower's and USMX's Counsel" means the legal opinion of Bearman, Talesnick & Clowdus, counsel to Borrower, substantially in the form of Exhibit H-1 hereto. "Opinion of NPMC's Counsel" means the legal opinion of Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., counsel to NPMC, in the form of Exhibit H-2 hereto. "Original Dollar Value" shall mean (a) with respect to Ounces of Gold Advanced as a Gold Loan hereunder, the Dollar Value thereof determined by reference to the London Price of such Ounces of Gold on a date two (2) Business Days prior to the date of Advance thereof, and (b) with respect to a Gold Loan established by conversion of the Dollar Loans to a Gold Loan as provided herein, the Dollar Value of the Ounces of Gold comprising such Gold Loan determined by reference to the London Price of such Ounces of Gold on a date two (2) Business days prior to the date on which the Dollar Loans were converted to a Gold Loan. "Original Gold Price" shall have the meaning specified in Section 3.1(b). "Other Taxes" shall have the meaning specified in Section 3.13(b). "Ounce of Gold" means a fine ounce troy weight of gold in form readily tradeable with members of The London Bullion Market Association (or any successor thereto) from time to time. "Permitted Liens" means the Liens identified in Schedule 7.1(j) and the Liens permitted by clauses (a) through (f) of Section 9.2. "Person" means an individual, limited liability company or partnership, corporation (including a business trust), joint venture or other entity, or a foreign state or political subdivision thereof or any agency of such state or subdivision. "Plan" means a pension plan providing benefits for employees of Borrower or any Affiliate and covered by Title IV of ERISA. "Precious Metals" means Gold and various amounts of troy ounces of silver of grade and quality conforming to the usual requirements for good delivery in the London silver market. "Present Value of Future Net Cash Flow" means, for any period (a "Calculation Period"), the aggregate of Future Net Cash Flow for such period, discounted, with respect to any Future Net Cash Flow scheduled to accrue during such Calculation Period at the Discount Rate to the first day of such Calculation Period from the last day of such Calculation Period. "Price Fixing Commitments" means the Gold Loan hereunder and net forward sale contracts for Gold or put options with respect to Gold, including forward sale contracts pursuant to the Hedging Agreement, with counterparties satisfactory to Lender, entered into by Borrower. "Principal Amount" means, as of any date, (a) with respect to a Gold Loan, the number of Ounces of Gold of such Gold Loan outstanding at such date, and (b) with respect to Dollar Loans, the aggregate principal amount in Dollars of such Dollar Loans outstanding at such date. "Principal Retention Amount" means the greater of $1,500,000 or that sum when subtracted from the sum of the Principal Amount of the Loans plus the principal amount of loans outstanding to USMX pursuant to the USMX Credit Agreement will yield a Loan Life Ratio of at least 1.6:1 and a Project Life Ratio of at least 2.0:1. "Proceeds Account" shall have the meaning specified in Section 3.14. "Project" means the construction, start-up and operation of the Illinois Creek Gold Property and related assets by Borrower in accordance with prudent mining industry practice, the Feasibility Study and the Development Plan. "Project Assets" means all properties, assets or other rights, whether now owned or hereafter acquired, by or for the benefit of Borrower, which are used or intended for use in or forming part of the Project, including all properties, assets or other rights acquired by Borrower with the portion of the proceeds of the Loans used for the Project. "Project Capital Costs" means, for any quarter, the aggregate of all Capital Expenditures scheduled to be paid in accordance with the Development Plan by Borrower during such quarter in respect of the development and operation of the Project. "Project Construction Reports" means reports concerning construction activities at the Project to be submitted by Borrower to Lender from time to time as provided herein, in a form reasonably acceptable to Lender. "Project Costs" means, for any period, the Project Operating Costs and the Project Capital Costs scheduled to be paid during such period. "Project Life Ratio" means, at any date, the ratio, expressed as a percentage, of: (a) the Present Value of Future Net Cash Flow from the Project for the period commencing on such date and ending on the date on which the Proven and Probable Reserves of the Mining Properties included in the Project are projected by the Development Plan to be extracted, milled, refined and sold, to (b) the Net Project Debt on such date. "Project Operating Costs" means, for any quarter, the aggregate of all payments scheduled to be paid in accordance with the Development Plan by Borrower, including: (a) costs scheduled to be paid in accordance with the Development Plan during such quarter in connection with the operation of the Project in order to mine, leach, mill, refine and deliver Project output for sale, including operating costs, leaching costs, milling costs, refining costs, smelting costs, plant service costs, transportation costs, administrative costs, reclamation costs or sustaining capital expenditures; (b) costs of scheduled principal and interest payments hereunder and in connection with all Indebtedness of Borrower; and (c) all royalties, overrides and other burdens on production. "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 7.1(c). "Project Review Report" means the Illinois Creek Project Due Diligence Review Report prepared by Fluor Daniel, Inc. for Lender. "Proven and Probable Reserves" means with respect to the Project, the aggregate of proven and probable reserves of gold at the Project economically recoverable at a gold price of U.S. $375/ounce (or other price approved by Lender in its sole discretion reasonably exercised) pursuant to the Development Plan, defined as follows: (a) "Proven Reserves" are such reserves for which (i) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, (ii) grade and/or quality are computed from the results of detailed sampling and (iii) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established and (b) "Probable Reserves" are such reserves for which quantity and grade and/or quality are computed from information similar to that used for Proven Reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced and the degree of assurance, although lower than that for Proven Reserves, is high enough for an experienced mining engineer reasonably to assume continuity between points of observation; or such other definition of such terms as may hereafter be adopted by the U.S. Securities and Exchange Commission. "quarter" means a calendar quarter. "Release" means a release, as such term is defined in CERCLA. "Request for Advance" means the irrevocable request for an Advance of a Gold Loan or Dollar Loan by Borrower, in the form set forth in Exhibit K hereto, signed by an authorized officer of Borrower. "Retention Amount" means an amount equal to the sum of (i) the Principal Retention Amount, (ii) the Interest Retention Amount, (iii) all Project Capital Costs during the immediately following three months from the date of determination and (iv) all payments scheduled or otherwise due and payable by Borrower to Lender (other than Principal and Interest payments related to the Loans and the loan pursuant to the USMX Credit Agreement) and to any other Person for or related to Indebtedness during the three months immediately following the date of determination. "RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended, reformed or otherwise modified from time to time. "Scheduled Maturity Date" means September 30, 2000. "Second Mortgage" means the Mortgage, Deed of Trust, Assignment, Security Agreement and Financing Statement, dated as of July 11, 1996, granted by Borrower to USMX covering all the right, title and interest of Borrower in the Mining Properties and in production therefrom and personal property associated therewith, in the form of Exhibit C-2 hereto, securing the $2,500,000 USMX Secured Loan and subordinate to the Mortgage. "Security Documents" means the Mortgage, the Second Mortgage, the Fourth Mortgage, the NPMC Subordination Agreement, the Guaranty and related Assignment Agreement, 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 the Mining Properties and the personal property of Borrower, wherever located and of whatever nature, associated therewith. "Security Opinion" means the legal opinion of Guess & Rudd, P.C. concerning the Mortgage and Liens created thereby, the Second Mortgage and Liens created thereby, the Fourth Mortgage and Liens created thereby, the nature and quality of Borrower's title to the Mining Properties and certain other matters, substantially in the form of Exhibit H-3 hereto. "Statement of Reserves" shall have the meaning specified in Section 8.2(c). "Subsidiary" means any corporation, association or other business entity more than 50% of each class of equity or voting securities of which is owned, directly or indirectly, by Borrower. "Tangible Assets" means the tangible assets of a Person, expressly excluding goodwill, determined in accordance with GAAP. "Taxes" shall have the meaning specified in Section 3.13. "Total Consolidated Liabilities" means all liabilities of a Person, including Indebtedness, determined on a consolidated basis in accordance with GAAP. "Total Consolidated Tangible Assets" means for any Person, its Tangible Assets, determined on a consolidated basis in accordance with GAAP. "USMX" means USMX, INC., a Delaware corporation, guarantor of Borrower's Obligations hereunder pursuant to the Guaranty, and parent and sole shareholder of Borrower. "USMX Secured Loans" means a loan of $2,500,000 from USMX to Borrower secured by the Second Mortgage and a loan of $3,400,000 from USMX to Borrower secured by the Fourth Mortgage, the proceeds of each to be used solely for the purpose of developing the Illinois Creek Gold Property. "year" means a calendar year. 1.2 Accounting Principles. All accounting terms not otherwise defined herein shall be construed, all financial computations required under this Agreement shall be made, and all financial information required under this Agreement shall be prepared, in accordance with GAAP applied on a basis consistent with the financial statements referred to in Section 7.1(f) except as specifically provided herein. ARTICLE 2 COMMITMENT, USE OF PROCEEDS 2.1 Commitment. Subject to all of the terms and conditions of this Agreement, Lender agrees, during the Advance Period, to Advance Dollar Loans to Borrower in multiple Advances of not less than Two Million Five Hundred Thousand Dollars ($2,500,000) each, or to Advance a Gold Loan to Borrower in a single Advance up to the Maximum Credit Amount, in either case as provided in Section 3.1 hereof; provided, however, that the aggregate Dollar Value of the Principal Amount of Loans outstanding, valued in the case of a Gold Loan at the Original Gold Price of such Loan, shall not exceed the Maximum Credit Amount; and provided further that all Loans outstanding at any time must be either exclusively a Gold Loan or exclusively Dollar Loans. After the Advance Period the Commitment shall automatically terminate and Lender shall have no obligation to make any additional Advances to Borrower. 2.2 Use of Proceeds. Borrower will utilize the proceeds of the Loans solely to fund costs and expenses associated with developing the Illinois Creek Gold Property, substantially in accordance with the Development Plan, including costs associated with the Hedging Agreement. 2.3 Fees. (a) Establishment Fees. Borrower agrees to pay Lender a fee (the "Establishment Fee") in the amount of $146,250 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 Borrower acknowledge that USMX has previously paid Lender $146,250 (the "Pre- Establishment Fee") at the time of Lender's written commitment to USMX to make the Loans 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) Commitment Fee. Borrower agrees to pay to Lender a fee (the "Commitment Fee") with respect to the unused credit available hereunder from time to time as follows. The Commitment Fee shall be determined daily during the Advance Period and paid quarterly in arrears at the rate of one-half of one percent (1/2%) per annum on the difference between the Principal Amount of Dollar Loans outstanding and the Maximum Credit Amount if Dollar Loans are outstanding, or while no Loans are outstanding until the Maximum Credit Amount has been Advanced or the Advance Period terminates or a Gold Loan is outstanding. The Commitment Fee will be payable on the fifteenth Business Day of each quarter following conclusion of the quarter in which the Commitment Fee accrued. (c) Payment of Fees. Payment of the Establishment Fee and Commitment Fees shall be made in Dollars by wire transfer to Lender's account as specified in Section 3.11. ARTICLE 3 PROCEDURE AND PAYMENT 3.1 Advance Procedure. (a) Requests for Loans. No more frequently than once during any 30-day period, and not less than two Business Days prior to the desired date of the Advance of a Loan, Borrower will submit a Request for Advance to Lender. The Request for Advance, which will be effective only upon actual receipt by Lender, will specify whether a Gold Loan or a Dollar Loan is requested. Each Request for Advance shall be irrevocable when it becomes effective upon receipt by Lender. (b) Gold Loan. A Gold Loan shall be Advanced only in a single Advance for the Maximum Credit Amount, and only if no Dollar Loans are outstanding. The Request for Advance will specify an initial Interest Period for the Gold Loan and the Business Day on which Borrower wishes to have the Advance made. The number of Ounces of Gold Advanced shall be equal to the result of the Maximum Credit Amount divided by the London Price two (2) Business Days prior to the date of Advance of the Gold Loan, and such price per Ounce of Gold shall be the "Original Gold Price". Lender shall sell such number of Ounces of Gold at the Original Gold Price and shall deposit the proceeds thereof by wire transfer in the Proceeds Account. (c) Dollar Loans. If a Dollar Loan is requested, the Request for Advance will specify the amount of the Advance in Dollars, an initial Interest Period for the Advance and the Business Day on which Borrower wishes to have the Advance made. On the date specified in the Request for Advance, Lender shall wire transfer each Advance to the Proceeds Account. 3.2 Notes. A Gold Loan shall be evidenced by the Gold Note and Dollar Loans shall be evidenced by the Dollar Note. 3.3 Loan Conversion Elections. (a) Conversion. Subject to the terms and conditions hereof, Borrower is hereby granted the right to elect to convert an outstanding Gold Loan to a Dollar Loan, or all (but not part) of the outstanding Dollar Loans to a Gold Loan, from time to time after the Advance Period and prior to the Scheduled Maturity Date, (i) only if Lender is able to provide the requested type of Loan; (ii) only if no Default exists or would be caused by such conversion; (iii) only if the Scheduled Maturity Date has not been accelerated by Lender; (iv) in the case of outstanding Dollar Loan to be converted to a Gold Loan, only if the London Price is above the Minimum Gold Price; (v) only concurrently with the end of the Interest Period applicable to the Loans; (vi) only if modifications to hedging arrangements of Borrower satisfying the requirements of Section 8.12 are taken simultaneously with such conversion; and (vii) only on a Business Day. Each such election shall be effected by Borrower's delivery to Lender of a Conversion/Interest Period Notice and shall be effective three Business Days after receipt by Lender of such notice. Notwithstanding the foregoing, the Borrower may not request that more than one conversion of Loans from one type to another type thereof be effected during any twelve (12) month period. For purposes of effecting any such conversion, the equivalency calculations shall be made by Lender on the effective date of such conversion. Subject to other relevant provisions of this Agreement, Borrower shall make a repayment in full of the relevant type and Principal Amount of the Loans to be converted and the Lender shall make Loans of the relevant type and Principal Amounts of Loans which are to be outstanding immediately following such conversion. A Gold Loan will be converted to a Dollar Loan by multiplying the Principal Amount of the Gold Loan in Ounces of Gold by the Original Dollar Value thereof, with the resultant Dollar amount being the Principal Amount of the Dollar Loan into which such Gold Loan will convert. Dollar Loans will be converted to a Gold Loan by dividing the Principal Amount of the Dollar Loans by the London Price in effect on a date two (2) Business Days prior to the date of conversion, with the resultant amount being the Ounces of Gold comprising the Principal Amount of the Gold Loan into which such Gold Loan shall convert. 3.4 Principal and Interest Payments Generally. All principal and interest payments of a Gold Loan shall be made in Gold. All principal and interest payments of Dollar Loans shall be made in Dollars. If a conversion of a Loan occurs during an Interest Period pursuant to Section 3.9, interest will be payable through the date of conversion in the form of the Loan prior to conversion and after the date of conversion in the form of the Loan after conversion. 3.5 Interest. (a) General. Borrower shall pay interest on the outstanding Principal Amount of Loans calculated on a 360-day year basis, at the Gold Loan Interest Rate if a Loan is a Gold Loan or at the Dollar Loan Interest Rate if Loans are Dollar Loans or at the Default Rate, as applicable. Interest payable shall be calculated daily. Interest calculated at the Gold Loan Interest Rate or at the Dollar Loan Interest Rate shall be payable either quarterly in arrears on the first Business Day of each quarter with respect to the preceding quarter or, in the case of an Interest Period which ends within a quarter, in arrears at the end of such Interest Period. Interest calculated at the Default Rate shall be payable on demand. (b) Interest Periods. Borrower may select an interest period with respect to each Advance ("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; provided that in no event may more than three (3) different Interest Periods be in effect hereunder at any one time. Borrower will select Interest Periods by giving notice to Lender in the Request for Advance and thereafter at least three (3) Business Days prior to the expiration of the Interest Period then in effect by a Conversion/Interest Period Notice. If at any time Borrower fails to give timely notice of its Interest Period selection, then Borrower shall be deemed to have selected an Interest Period of thirty (30) days. No Interest Period shall end after the Scheduled Maturity Date. (c) Default Interest. Interest on the Loans shall accrue and shall be payable by Borrower at the Default Rate during all periods when any amounts payable by Borrower as principal repayments, interest payments or fee or expense payments are due and payable hereunder, whether by acceleration or otherwise, but remain unpaid by Borrower; provided the Default Rate shall not apply to past-due fees and expenses unless Lender has provided written notice to Borrower 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, Borrower shall indemnify Lender against any direct loss or expense (not including lost profits on re-employment of capital) which Lender may sustain or incur as a result of the failure by Borrower to pay when due the Principal Amount of the Loans. A certificate or other notice of Lender submitted to Borrower setting forth the basis for the determination of Default Rate interest due and of the amounts necessary to indemnify Lender in respect of such loss or expense, shall constitute evidence of the accuracy of the information contained therein in the absence of error and, absent notice from Borrower of such error, shall be conclusive and binding for all purposes. Interest accruing at the Default Rate shall be payable on demand. 3.6 Repayment of the Loans. (a) Principal Repayment Generally. Borrower agrees to repay the Loans as provided herein. Loan amounts repaid may not be reborrowed. (b) Scheduled Principal Payments. Subject to the other terms hereof pertaining to mandatory prepayments of the Loans, Borrower shall repay the Principal Amount of the Loans in the amounts and on the dates set forth in the amortization schedule attached hereto as Schedule 3.6(b), with each payment equal to an amount determined by multiplying the Principal Amount as of July 31, 1997 by the percentage stated in the amortization schedule for the corresponding payment date, subject to adjustment for any voluntary prepayments pursuant to Section 3.6(c) and mandatory prepayments pursuant to Sections 3.6(d) and 3.6(e). (c) Voluntary Prepayment. Upon not less than thirty (30) days' prior written notice to Lender, Borrower may, without premium or penalty, prepay at the end of any Interest Period applicable to the portion of the Loan so prepaid, in the case of a Dollar Loan, One Million Dollars ($1,000,000) or larger portion of the Principal Amount of Dollar Loans, or in the case of a Gold Loan, a number of Ounces of Gold that when multiplied by the Original Gold Price results in a Dollar Value that is greater than or equal to One Million Dollars ($1,000,000). Upon the giving of such notice, which shall be irrevocable, the prepayment, together with all interest accrued through the prepayment date, shall be due and payable on the date set forth therein. Any such voluntary prepayment of the Loans shall be applied to the outstanding Principal Amount, and shall be applied to the scheduled principal payments of the Loan provided for in Section 3.6(b) in inverse order of maturity. (d) Mandatory Prepayment Upon Loan Acceleration. Borrower will repay the Principal Amount of Loans in full, together with accrued interest thereon, Breakage Costs and fees, upon acceleration of the due date thereof by Lender pursuant to Section 10.2 (e) Mandatory Prepayments Where a Gold Loan Principal Amount Exceeds Monetary Cap. If at any time the Dollar Value of a Gold Loan exceeds the Monetary Cap, within not more than three (3) Business Days after notice thereof by Lender, Borrower will prepay a portion of the Principal Amount of the Gold Loan which is sufficient to reduce the Dollar Value of the Gold Loan to an amount which is less than the Monetary Cap. 3.7 Priority of Prepayments. All Loan prepayments made by Borrower pursuant to Sections 3.6(d) and (e) shall be accompanied by payment of Lender's Breakage Costs, if any, and shall be applied first to accrued and unpaid interest on the Loans so prepaid as of the end of the most recent Interest Period, then to any other amounts then payable by Borrower hereunder including Breakage Costs and fees, then to the Principal Amount in inverse order of maturity thereof. 3.8 Risk of Loss. Borrower will assume all risk of loss of, or damage to, any Gold to be delivered by it to Lender hereunder until it has been delivered to Lender at an Acceptable Delivery Location. Unless Borrower has received notice of error within fourteen (14) Business Days of Lender's receipt of Gold so delivered, Lender's receipt of the quantity and quality of the Gold will be conclusively deemed to be as set out in Borrower's delivery order. 3.9 Inability to Continue to Provide Gold; Mandatory Switching. Lender shall not be liable for any failure to comply with its obligations under or pursuant to this Article 3, and shall be entitled to terminate any arrangements entered into under this Article without liability, if such failure is caused directly or indirectly, wholly or partly, by act or omission of any government or competent authority, lack of availability of Gold, force majeure or other contingency, circumstance or event of any nature beyond the control of Lender. Notwithstanding any other provision hereof, a Gold Loan will be converted to Dollar Loans upon any such event effective as of the date Lender gives Borrower notice of the foregoing. 3.10 Increased Costs and Reduction in Return. If due to (a) the introduction of, or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in, or in the interpretation of, any law or regulation or (b) the compliance by Lender with any guideline or request from any central bank or other governmental agency having jurisdiction over Lender (whether or not having the force of law) collectively referred to as "Governmental Acts," there shall be any increase in the cost or reduction in return to Lender of agreeing to make or making, funding or maintaining the Loan, then Borrower shall from time to time, upon demand by Lender, pay to Lender additional amounts sufficient to indemnify it against such increased costs or reduction in return; provided that Lender agrees to use reasonable efforts to mitigate the increased cost or reduction in return to the extent reasonably practicable. A certificate as to the amount of such increased cost or reduced return, submitted to Borrower by Lender, shall be conclusive absent manifest error. 3.11 Payments and Computations. Borrower shall make each payment due in Gold hereunder and under the Note not later than 5:00 p.m. (New York City time) on the day before the day when due. Borrower shall make each payment due in Dollars hereunder and under the Note in immediately available funds not later than 5:00 p.m. (New York City time) on the day before the day when due Lender as follows (or as Lender shall otherwise advise Borrower by notice as provided herein): to: Chase Manhattan Bank N.A. 1 Chase Manhattan Plaza New York, New York ABA No. 02100021 for the account of N M Rothschild & Sons Limited A/C No.: 001-1-948262 Payments in Gold shall be made by delivery of Gold to the account of Lender at any Acceptable Delivery Location. Borrower agrees to pay all shipping, insurance, refining charges and other costs related to such delivery and warrants that such Gold upon its delivery to the account of Lender shall be free and clear of all Liens, encumbrances, charges and security interests except those in favor of Lender. Borrower hereby authorizes Lender, if and to the extent payment of money owed to it is not made when due hereunder or under the Note, to charge from time to time against Borrower's accounts with Lender any amount so due. All computations of interest hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed (including the first day but excluding the last day). 3.12 Payment on Non-Business Days. Whenever any payments of Gold or Dollars to be made hereunder or under the Note shall be due on a day which is not a Business Day, such return or payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be, unless such next succeeding Business Day is after the end of the Interest Period, in which case the payment will be made on the next preceding Business Day and such payment shall not reflect the actual payment date in the computation of interest or fees due and payable. 3.13 Taxes. (a) General. Any and all payments by Borrower hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, duties, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (excluding taxes imposed on Lender's income and franchise taxes imposed on Lender) imposed by the jurisdiction under the laws of which Lender is organized, or the United States of America, the state of Alaska or any other jurisdiction under the laws of which Lender is otherwise subject to tax, or any political subdivision thereof (all such non-excluded taxes, levies, duties, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.13) Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. The foregoing obligation of Borrower will apply with respect to any assignee of Lender. (b) Other Taxes. In addition, Borrower agrees to pay any present or future stamp, sales, use or documentary taxes or any other excise or property taxes, charges, duties or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, any of the Loan Documents, or any Instrument contemplated thereby (hereinafter referred to as "Other Taxes"). To Lender's knowledge, no Other Taxes will be applicable to the transactions contemplated by this Agreement. (c) Tax Indemnity. Borrower hereby indemnifies Lender for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.13) paid by Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Lender shall use commercially reasonable efforts to mitigate any Taxes or Other Taxes to the extent practicable, and to refund to Borrower its proportionate share of any Taxes or Other Taxes paid by Borrower pursuant hereto ultimately refunded to Lender. (d) Payment of Taxes. Within 30 days after the date of any payment of Taxes or Other Taxes withheld by Borrower in respect of any payment to Lender, Borrower will furnish to Lender the original or a certified copy of a receipt evidencing payment thereof. (e) Lender's Taxes. To Lender's knowledge, under applicable law and treaties in effect as of the date hereof between the United States and the United Kingdom, no United States federal taxes will be required to be withheld by Borrower with respect to any payment to be made to Lender in respect of this Agreement. Lender agrees upon written request of Borrower to deliver to Borrower, in duplicate, duly completed and signed copies of either Form 1001 (relating to Lender and entitling Lender to a complete exemption from withholding on all amounts to be received by Lender pursuant to this Agreement, the 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 Loans and Notes) 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 3.13 shall survive the payment in full of the Loan and interest hereunder. 3.14 Proceeds Account. (a) Prior to the Initial Advance of the Loans, Borrower will execute and deliver the Proceeds Account Agreement, will establish an account with a national banking institution, satisfactory to Lender in its sole discretion reasonably exercised (the "Proceeds Account"), will enter into an escrow agreement with such banking institution in form acceptable to Lender and will at all times upon and after Completion while any portion of the Loans remains outstanding maintain a balance in the Proceeds Account at least equal to the Retention Amount. Borrower will promptly deposit all gross revenues of, and all other payments received in relation to, the Project including the proceeds of Dollar Loans, the Dollar equivalent (calculated on the date of making of any Gold Loan as set forth in Section 3.1) of the proceeds of such Gold Loan, the proceeds derived from the exercise of any Hedging Contract, the net proceeds of any equity or debt offering by Borrower to any Person, including USMX or a Subsidiary of USMX, all funds received from USMX (whether as loans or equity contributions), the net proceeds of any disposition of Project Assets and any insurance proceeds received in connection with the Project to, and shall disburse all funds, including funds disbursed for Project Costs from, such account. Disbursements or withdrawals from the Proceeds Account will be made by Borrower only pursuant to a Request for Disbursement in the form of Exhibit B hereto. Credit balances in the Proceeds Account shall be applied as follows: First, to payment of Project Capital Costs and Project Operating Costs, incurred by Borrower in accordance with the Development Plan; Second, to payment of fees or other amounts due Lender hereunder or under any of the Loan Documents which are due and payable and which remain unpaid; Third, to payment of interest and the Principal Amount due and payable hereunder, and principal and interest payments of the $2,500,000 USMX Secured Loan; and Fourth, after Completion and provided that no Default or Event of Default is outstanding hereunder, Borrower may, on a quarterly basis, withdraw funds for general corporate purposes, including permitted dividends to stockholders, so long as after any such withdrawal the Proceeds Account contains an amount greater than or equal to the Retention Amount. (b) On each principal repayment date referred to in Section 3.6(b), and on any other due date of any portion of the Loans, Loan repayments shall (without prejudice to the right of Lender to such repayment of any Obligation from any other source) be made (i) in the case of Dollar Loans in Dollars by payment to Lender of an amount sufficient to provide for such repayment or prepayment, or (ii) in the case of a Gold Loan, in Ounces of Gold by payment to Lender or any other member of The London Bullion Market Association reasonably acceptable to Lender a Dollar amount sufficient to provide for such repayment or prepayment in Ounces of Gold with irrevocable instructions to transfer such Ounces of Gold to an Acceptable Delivery Location. (c) Borrower hereby pledges, assigns and grants to Lender a security interest in the Proceeds Account and all funds in the Proceeds Account from time to time, in accordance with common law pledge requirements and the Uniform Commercial Code. Upon occurrence of a Default or Event of Default, Borrower agrees that, notwithstanding the provisions of clause (a) above concerning application of funds in the Proceeds Account, Lender may elect not to honor a Request for Disbursement received from Borrower; Lender may prohibit any withdrawals or transfers of funds by Borrower or by any Persons claiming interests by, through or under Borrower (and for this purpose shall return marked "NSF" any checks or other instruments or orders for payment of money received by Lender); and Lender shall be entitled to exercise its rights hereunder with respect to all funds in the Proceeds Account in accordance with law, including, without limitation, transfer of such funds to Lender in payment or partial payment of Borrower's Obligations. In connection therewith, Borrower agrees and covenants to indemnify Lender against any claim, cost or liability incurred by Lender in connection with its refusal, as permitted herein, to honor a Request for Disbursement received from Borrower or in connection with its application of funds in the Proceeds Account, as permitted herein, in satisfaction of Borrower's Obligations. ARTICLE 4 HEDGING FACILITY 4.1 Establishment of Hedging Facility. Concurrently herewith, Lender has established a Gold hedging facility in favor of Borrower on the terms and conditions of the Hedging Agreement. ARTICLE 5 COLLATERAL SECURITY 5.1 Security Documents. As security for the due repayment of Loans hereunder, for the payment of all moneys due hereunder, for the performance of all Obligations of Borrower and USMX hereunder and under the other Loan Documents, Borrower shall contemporaneously with the execution of this Agreement, execute and deliver to Lender the Security Documents to which it is a party, including amendments or assignments thereof and notices to third Persons as Lender may require in connection with the perfection of its security interests in the property and interests subject to the Security Documents. 5.2 No Limitation on Application of Security Interests. Borrower and Lender agree that notwithstanding any provision of any Security Document to the contrary, all Liens created and perfected pursuant to the Security Documents shall secure all Obligations of Borrower hereunder and under the other Loan Documents. 5.3 Recordings and Filings of Security Documents. Lender will record, file or deliver to account debtors as necessary the Security Documents, as appropriate, at Borrower's expense, promptly after execution and delivery thereof by Borrower. 5.4 Protection of Security Document Liens. As and when requested to do so by Lender, Borrower will deliver to Lender from time to time any financing statements, continuation statements, extension agreements and other documents, properly completed and executed (and acknowledged when required) by Borrower in form and substance satisfactory to Lender, for the purpose of perfecting or protecting Lender's Liens on the property and interests subject to the Security Documents. 5.5 Right of Set-off. Upon the occurrence and during the continuance of any Event of Default, Lender is hereby authorized at any time and from time to time, without notice to Borrower or USMX (any such notice being expressly waived by Borrower), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Lender to or for the credit or the account of Borrower against any and all of the Obligations of Borrower now or hereafter existing, although such Obligations may be contingent and unmatured. Lender agrees promptly to notify Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Lender under this Section 5.5 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which Lender may have. 5.6 Additional Collateral. Borrower and Lender intend that the Security Documents cover and extend to all property rights and interests of Borrower, real or personal, tangible or intangible, presently held or hereafter acquired, which are related to the Project, the production therefrom, Hedging Contracts related to the Project and the proceeds of all of the foregoing. In the event that Borrower acquires any property right or interest related to the Project which is not subject to the Lien of the Security Documents, upon request therefor from Lender, Borrower shall promptly execute and deliver such Instruments and take such actions as Lender may reasonably request in order to perfect a first and prior Lien on such right or interest, subject only to Permitted Liens with the priority expressly provided hereunder or under the USMX Credit Agreement. Whether or not Lender requests that any such right or interest be subjected to the Security Documents, Borrower agrees to keep such rights or interests related to the Project free and clear of all Liens other than Permitted Liens. 5.7 Partial Release of USMX Upon Completion of the Project. Upon Completion, if no Default or Event of Default is outstanding, Lender's recourse with respect to the obligations of USMX under the Guaranty will be limited to the Pledged Collateral pursuant to the Pledge Agreement, as those latter two terms are defined in the Pledge Agreement and the USMX Credit Agreement, respectively, and the Assignment Agreement; provided that the obligations of USMX under the Guaranty with respect to Obligations of Borrower which arise under a breach of the representation in Section 7.1(t) or the covenants in Section 8.1 insofar as Environmental Laws are concerned shall remain unchanged and unaffected by Completion, and shall remain the full recourse obligation of USMX. ARTICLE 6 CONDITIONS PRECEDENT 6.1 Conditions Precedent to the Initial Advance. The obligation of Lender to make the Initial Advance of 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 Initial Advance of the Loan, each dated on or no more than five days prior to such date of delivery (or as otherwise agreed by Lender), and in form and substance as shall be satisfactory to Lender: (i) this Agreement, duly executed by Borrower; (ii) the Gold Note or Dollar Note, as the case may be, duly executed by Borrower; (iii) the Hedging Agreement; (iv) the Establishment Fee; (v) the Security Documents, duly executed by Borrower, NPMC and USMX, as the case may be, 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 Proceeds Account Agreement, duly executed by Borrower; (vii) the NPMC Subordination Agreement, duly executed by NPMC; (viii) an Omnibus Certificate for each of Borrower, NPMC and USMX, duly executed by an officer thereof; (ix) a Certificate from the Department of Commerce and Economic Development of the State of Alaska confirming the due organization and good standing of Borrower in Alaska; (x) the Opinion of Borrower's and USMX's Counsel; (xi) the Opinion of NPMC's Counsel; (xii) the Security Opinion in form and content reasonably acceptable to Lender; (xiii) the Development Plan; (xiv) certificates of issuing insurance companies, confirming compliance by Borrower with the insurance requirements set forth in Section 8.4; (xv) accurate and complete copies of the financial statements referred to in Section 7.1(f); 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 Initial Advance of the Loan by Lender: (i) all conditions precedent to the advance of funds pursuant to the USMX Credit Agreement shall have been satisfied or waived by Lender; (ii) since the date of the financial statements of Borrower and USMX most recently delivered to Lender (referred to in Section 7.1(f)), there has been no Material Adverse Effect on the financial condition, operations or business of Borrower or USMX; (iii) there is no pending or threatened action or proceeding affecting Borrower, USMX or the Project before any court, Governmental Authority or arbitrator, including any matter involving Environmental Laws, which seeks to prevent prosecution of the Project or performance by Borrower, USMX or Lender hereunder or which could be reasonably expected to have a Material Adverse Effect upon the financial condition, operations or business of Borrower or USMX or the Project; (iv) all Governmental Requirements and all material approvals and consents (including, without limitation, all Project Permits) of Governmental Authorities or other Persons, if any, required in connection with the operation of the Project, including specifically the activities contemplated by the Development Plan shall have been obtained and remain in effect; (v) the Liens established by the Security Documents shall be in full force and effect as valid, enforceable first priority Liens (or as otherwise expressly provided hereunder or under the USMX Credit Agreement) on the Collateral, except for Permitted Liens with the priority expressly contemplated by this Agreement; (vi) no event shall have occurred or condition exist which would have a Material Adverse Effect on Borrower; (vii) Lender shall have approved the Development Plan, in its sole discretion reasonably exercised; (viii) the Proceeds Account shall have been established and the related escrow agreement (as contemplated by Section 3.14 hereof) shall have been entered into by Borrower and escrow agent and approved by Lender; (ix) The entire proceeds of the $2,500,000 USMX Secured Loan shall be deposited in the Proceeds Account; (x) Lender shall have received evidence satisfactory to Lender in its sole judgment reasonably exercised that Borrower or USMX or both in aggregate have expended $3,400,000 or more on construction of the Project pursuant to and in accordance with the Development Plan; (xi) USMX shall have paid to NPMC all sums due under the NPMC Agreement and shall have duly issued and delivered to NPMC registered, freely tradeable common stock of USMX in full payment for the real property and other interests to be conveyed thereunder as contemplated by the NPMC Agreement, the Mining Properties shall be owned by Borrower free and clear of all Liens other than Permitted Liens, and no defaults shall exist or have been asserted by NPMC to exist under the NPMC Agreement or the NPMC Mortgage; and (xii) the Independent Consultant shall have completed and submitted to Lender, and Lender shall have approved in its sole discretion reasonably exercised, the Project Review Report. 6.2 Conditions Precedent to all Advances. The obligation of Lender to make each Advance (including the Initial Advance), shall be subject to the further conditions precedent that: (a) Borrower shall have performed and complied with all agreements and conditions herein required to be performed and complied with on or prior to the date of such Advance and USMX shall have complied with all agreements and covenants contained in the USMX Credit Agreement; (b) Lender shall receive evidence satisfactory to Lender of aggregate Price Fixing Commitments which comply with the requirements of Section 8.12; (c) Lender shall have received a Request for Advance, duly executed by Borrower; (d) on the date of such Advance, Lender shall have received such other approvals, opinions or documents as Lender may reasonably request; (e) on the date of such Advance, Lender shall have satisfied itself of the absence of any Material Adverse Effect with respect to Borrower; (f) such Advance shall not cause the aggregate Principal Amount of the Loans to exceed the Maximum Credit Amounts; (g) there shall exist no Default hereunder or under the USMX Credit Agreement; and (h) all representations and warranties made by Borrower herein and made by USMX in the USMX Credit Agreement and the Guaranty shall be true and correct on the date of the Advance, except for such changes therein as shall be acceptable to Lender. ARTICLE 7 REPRESENTATIONS AND WARRANTIES 7.1 Representations and Warranties of Borrower. Borrower represents and warrants as follows: (a) Organization, Qualification and Subsidiaries. Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Alaska and has all requisite corporate power and authority to enter into this Agreement and the Loan Documents to which it is a party and to carry out the transactions contemplated hereby and thereby. USMX is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Delaware and has all requisite corporate power and authority to enter into the USMX Credit Agreement, the Loan Documents to which it is a party and to carry out the transactions contemplated thereby. Borrower has no subsidiaries. (b) Authorization; No Conflict. The execution, delivery and performance by Borrower of this Agreement and of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action on the part of Borrower and do not and will not (i) require any consent or approval of the stockholder of Borrower that has not been obtained; (ii) contravene Borrower's articles of incorporation, charter or bylaws; (iii) violate any provision of any law, rule, regulation (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Borrower; (iv) result in a breach of or constitute a default under or require the consent of any party pursuant to any indenture or loan or credit agreement or any other agreement, lease or instrument to which Borrower is a party or by which it or its properties may be bound or affected; or (v) result in, or require, the creation or imposition of any Lien (other than Liens arising under the Security Documents) upon or with respect to any of the properties now owned by Borrower; and, to the best knowledge of Borrower, Borrower is not in breach or default in any material respect under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or any such indenture, agreement, lease or instrument, except as otherwise disclosed to Lender in writing prior to the date hereof. The execution, delivery and performance by USMX of the USMX Credit Agreement and Loan Documents to which it is a Party has been duly authorized by all necessary corporate action and does not and will not contravene USMX's articles of incorporation, charter or bylaws. (c) Governmental Consents; Project Permits and Authoriza tions. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required (i) for the due execution and delivery of, and due performance of the financial obligations of Borrower under, this Agreement, any other Loan Document to which Borrower is a party or for the due execution, delivery and performance by the USMX of the Loan Documents to which the USMX is a party or (ii) for the due performance of all other obligations of Borrower or USMX under this Agreement or any other Loan Document to which Borrower or USMX is a party (other than registrations or filings to perfect the liens created by the Security Documents) 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 7.1(c). All Project Permits have been duly issued to or are held by Borrower, are valid and in good standing and free of any violation thereof by Borrower, and Borrower has not received any notice of an asserted violation or proposed revocation, withdrawal or material modification thereof. (d) Binding Obligations. This Agreement is, and the Loan Documents when delivered hereunder will be, the legal, valid and binding obligations of Borrower and USMX, respectively, enforceable against Borrower and USMX, respectively, in accordance with their respective terms (except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws or equitable principles affecting enforcement of creditors' rights generally at the time in effect). (e) Litigation. Except as indicated on Schedule 7.1(e), there is no action, proceeding or investigation pending or threatened in writing against or involving Borrower which alleges the violation of any laws, including Environmental Laws, or which questions the validity of this Agreement 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 Borrower's record or equitable title to the Mining Properties or which might result, either in any case or in the aggregate, in any Material Adverse Effect on the business, operations, condition (financial or otherwise), aggregate properties or aggregate assets of Borrower or in any material liability on the part of Borrower. (f) Financial Statements; No Material Adverse Change. The audited consolidated balance sheet of USMX (including Borrower) as of December 31, 1995, and the related consolidated statements of income, cash flow and stockholders' equity of USMX (including Borrower) for the period then ended, audited by KPMG Peat Marwick LLP and the unaudited consolidating balance sheets of USMX (including Borrower) as of March 31, 1996, and the related unaudited consolidating statements of income, cash flow and stockholders' equity of USMX (including Borrower) for the period then ended certified by officers of USMX and Borrower, copies of which have been furnished to Lender, fairly present the financial condition of Borrower and USMX as at such dates and the results of the operations of such Persons for the periods ended on such dates, all in accordance with GAAP consistently applied. Neither Borrower nor USMX has on the date hereof any material Contingent Liability or liability for taxes, long-term leases or unusual forward or long-term commitments which are not reflected in such financial statements or listed in Schedule 7.1(f). Since such date, except as previously disclosed in writing to Lender, neither the business, operations or prospects of Borrower or USMX, nor any of their respective properties or assets, have been affected by any occurrence or development (whether or not insured against) which would result, either in any case or in the aggregate, in a Material Adverse Effect on any such Person. (g) Other Agreements. Except for Material Agreements, Borrower is not a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or other corporate restriction which would, upon a default thereunder or otherwise, result in a Material Adverse Effect on Borrower, or materially impair the ability of Borrower to carry out its Obligations under this Agreement, or any of the Loan Documents. (h) Information Accurate. Except as disclosed to Lender on Schedule 7.1(h) hereto, none of the information delivered to Lender by Borrower or USMX in connection with the transactions contemplated by this Agreement or the USMX Credit Agreement, including any representation or warranty, contains any material misstatement of fact or omits to state a material fact, and all projections contained in any such information, exhibits or reports, including in particular the Feasibility Study and Development Plan, were based on information which when delivered was, to the best knowledge of Borrower, true and correct, and to the best knowledge of Borrower all calculations contained in such projections were accurate, and such projections presented Borrower's then-current estimate of its future business, operations and affairs and, since the date of the delivery of such projections, to the best knowledge of Borrower, there has been no material change in the assumptions underlying such projections, or the basis therefor or the accuracy thereof. (i) Employee Benefit Plans. Except as disclosed on Schedule 7.1(i), Borrower has not established, does not maintain and has made no contributions to, nor has any liability with respect to, any Plan. (j) Title to Properties; Liens. (i) With respect to those properties owned in fee simple by Borrower which are subject to any of the Security Documents, Borrower is in exclusive possession of and owns such properties free and clear of all material defects of title, burdens on production or Liens except Liens disclosed in Schedule 7.1(j) and specifically identified in the Security Opinion delivered pursuant hereto. (ii) With respect to those properties held under leases or other contracts which are subject to any of the Security Documents: (A) Borrower is in exclusive possession of such properties other than the airstrip located on those properties and any navigable waters; (B) Borrower has not received any notice of, and has no knowledge of any facts or circumstances that, with the passage of time or notice, or both, could result in any default of any of the terms or provisions of such leases or contracts; (C) under such leases and contracts Borrower has the authority to perform fully, and no provision thereof prohibits or would be breached by Borrower's performance of, its obligations under this Agreement and the other Loan Documents; (D) to the best of Borrower's knowledge and belief, such leases and contracts are valid and are in good standing; and (E) to the best of Borrower's knowledge and belief, the properties covered thereby are free and clear of all defects of title or Liens, except for those specifically identified in the Security Opinion or disclosed in Schedule 7.1(j) [or in such leases or contracts.] Borrower has delivered or will make available to Lender all information concerning title to the properties in Borrower's possession or control, or to which Borrower has access, which Lender requests. (iii) With respect to mining claims, leases and other property interests (for purposes of this Section 7.1(j)(iii), "Claims") which are subject to any of the Security Documents, except as provided in the Security Opinion: (A) the Claims are free of Liens, except as disclosed in Schedule 7.1(j); (B) to the best of Borrower's knowledge, (w) the Claims were properly located and monumented; (x) all required location and validation work was properly performed; (y) location notices and certificates were properly recorded and filed with appropriate Governmental Authority; and (z) all assessment work or fees, or both, required to hold the Claims has been performed in a manner consistent with generally accepted standards of major companies in the mining industry through the assessment year ending August 31, 1996]; (C) all maintenance fees or rental payments have been duly and timely made in order to maintain the Claims through the rental year ending August 31, 1996; (D) all affidavits of assessment work and other filings required to maintain the Claims in good standing have been timely recorded or filed with appropriate Governmental Authority; and (E) Borrower has no knowledge of conflicting claims or leases, except overlaps to avoid gaps or to maintain parallel end lines, or inadvertent overstakings which do not materially impair Borrower's property position. (iv) Except as disclosed on Schedule 7.1(j), no approval or consent of any Governmental Authority or any other party is necessary to authorize the execution and delivery of the Mortgage, the Second Mortgage, the Fourth Mortgage or of any other written Instrument constituting or evidencing the Obligations. (k) Securities Activities. The proceeds of the Loan hereunder will not be used to acquire any security in any transaction which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934, as amended. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation X of the Federal Reserve Board) or carrying any margin stock. (l) Solvency. Borrower is not entering into the arrangements contemplated by this Agreement 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 Loans, the execution of the Hedging Agreement, after giving effect to the Loan, and all such Instruments, and to any fees and expenses in connection with such undertaking, (i) Borrower's property at a fair valuation, is, and will be, greater than the sum of its Indebtedness (including its Contingent Liabilities); (ii) the present fair salable value of Borrower's assets exceeds, and will exceed, the probable liability of Borrower on its Indebtedness (including its Contingent Liabilities) as they become absolute and mature; (iii) Borrower has not, and will not have, incurred, and does not intend to, or believe that it will, incur debts (including its Contingent Liabilities) beyond its ability to pay such debts as such debts mature (taking into account the timing and amounts of cash to be received by Borrower from any source, and of amounts to be payable on or in respect of its debts), and the cash available to Borrower after taking into account all other anticipated uses of the cash, is, and is anticipated to be, sufficient to pay all such amounts on or in respect of such debts (including its Contingent Liabilities), when such amounts are required to be paid; and (iv) subject to receipt of the Loan, Borrower has sufficient capital with which to conduct its business and Borrower's capital does not constitute unreasonably small capital with which to conduct its business. As used in clauses (i) through (iv) above, the terms therein shall have the meanings as used in Section 548 of the United States Bankruptcy Code, the Uniform Fraudulent Conveyance Act and any applicable state law concerning fraudulent conveyances as such may from time to time have been amended or developed by judicial interpretation to the date the representations herein are made. (m) Warranties of Borrower With Respect to Gold. Borrower warrants that Gold delivered by Borrower to Lender hereunder will conform to the description of the Gold herein and shall be free of Liens or rights or claims of interest by third Persons. THERE ARE NO EXPRESS WARRANTIES WITH RESPECT TO SUCH GOLD OTHER THAN THOSE SPECIFIED HEREIN. NO WARRANTY OF MERCHANTABILITY, OR ANY WARRANTY OF ANY OTHER NATURE, SHALL BE IMPLIED. (n) Capital Structure of Borrower and USMX. Borrower is a wholly-owned subsidiary of USMX. Borrower has no outstanding obligations to issue additional shares or other equity interests, including any stock or securities convertible into or exercisable or exchangeable for any shares of its capital stock or any rights or options to purchase any of the foregoing, or to convert any existing Indebtedness to equity interests in Borrower. (o) Hedging Contract Obligations. Except as set forth in Schedule 7.1(o), Borrower has no Hedging Contracts currently in effect for Gold except Price Fixing Commitments as contemplated by the Development Plan. (p) Material Agreements; Absence of Default. All of Borrower's Material Agreements are identified in Schedule 7.1(p). No event has occurred that, with notice or the passage of time, or both, would constitute or give rise to an event of default or a default, or any equivalent occurrence, by Borrower under any of the Material Agreements, and Borrower has not received any notice of an asserted default thereunder from any other Person that is a party to any such agreement. (q) Taxes and Other Payments. Borrower has filed all tax returns (including all property tax returns and other similar tax returns applicable to the Mining Properties) and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing and due and all claims for sums due for labor, material, supplies, personal property and services of every kind and character provided with respect to, or used in connection with the Mining Properties and no claim for the same exists except as permitted hereunder, except any such taxes, charges or amounts which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on the books of Borrower. (r) Development Plan. The Development Plan has been prepared in accordance with prudent mining practices and after diligent inquiry by Borrower, and Borrower is not aware of any facts or state of affairs which would materially hinder or prevent Borrower from operating the Mining Properties in accordance with the Development Plan and achieving, after allowance for existing royalty burdens, the net Gold production provided for therein. (s) Compliance With Laws. Borrower is in compliance with all laws, regulations and rules of federal, state and local Governmental Authorities (t) Environmental Laws. Except as set forth in Schedule 7.1(t): (i) All facilities and property (including underlying groundwater) comprising the Mining Properties have been, and continue to be, owned, operated, leased or utilized by Borrower in material compliance with all Environmental Laws. (ii) With respect to the Mining Properties, there have been no past, and there are no pending or threatened claims, complaints, notices or requests for information received by Borrower with respect to any alleged violation of any Environmental Law. (iii) There have been no Releases of Hazardous Materials at, on or under any property presently or formerly owned or operated by Borrower that singly, or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect on Borrower. (iv) No property now or previously owned, operated or leased by Borrower is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or any similar state list of sites requiring investigation or clean- up. (v) There are no underground or above-ground storage tanks, active or abandoned, including petroleum storage tanks, at, on or under any property now or previously owned, operated or leased by Borrower that singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect on Borrower. (vi) Borrower has not directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against Borrower for any remedial work, damage to natural resources or personal injury, including claims under CERCLA. (vii) There are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned, operated or leased by Borrower that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect with respect to Borrower. (viii) No conditions exist at, on or under any property now or previously owned, operated or leased by Borrower which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law that, individually or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect with respect to Borrower. (u) Borrowers' Indebtedness. Except as disclosed on Schedule 7.1(u) or specifically identified in the financial statements of Borrower identified in Section 7.1(f), Borrower has no existing Indebtedness (a) which is not in the ordinary course of business and (b) which involves an obligation of $100,000 or greater. (v) Insurance. Borrower maintains in effect the insurance identified in Schedule 8.4, and such insurance is with responsible and reputable insurance companies or associations in such amounts and covering such risks as is prudent and consistent with good operating practices. ARTICLE 8 AFFIRMATIVE COVENANTS OF BORROWER So long as the Loans or the Notes shall remain unpaid, or any other Obligation of Borrower hereunder, or obligations of USMX hereunder or under the USMX Credit Agreement or under Agreements and Instruments entered into pursuant to either of them, shall not have been fully performed or waived by Lender (including obligations of Borrower under the Hedging Agreement), Borrower shall, unless Lender otherwise consents in writing (which consent Lender may grant or withhold in its sole discretion), perform all covenants in this Article 8. 8.1 Compliance with Laws, Etc. Borrower shall comply in all material respects with all applicable laws (including without limitation Environmental Laws), rules, regulations and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon its property, except to the extent contested in good faith and adequately reserved for in accordance with GAAP. 8.2 Reporting Requirements. Borrower shall deliver, or cause USMX to 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 consolidating balance sheet of USMX (including Borrower), as of the end of such quarter and consolidating statements of income, cash flow and retained earnings of USMX (including Borrower) prepared in accordance with GAAP for such quarter and for the period commencing at the end of the previous year and ending with the end of such quarter, certified in a manner acceptable to Lender by the chief financial officer of Borrower, and, in the case of each quarter ending June 30, confirmation (showing calculations) of compliance by Borrower with the financial covenants of Sections 9.6 and 9.8 certified by the chief financial officer of Borrower. As soon as available and in any event no later than 60 days after the end of each quarter, Borrower shall deliver to Lender a certificate by the chief financial officer of Borrower, showing for such quarter actual expenditures contrasted with projected expenditures as shown in the Development Plan. (b) Annual Financial Information. As soon as available and in any event within 105 days after the end of each year, a consolidating balance sheet of USMX (including Borrower), as of the end of such year and consolidating statements of income, cash flow and retained earnings of USMX (including Borrower) for such year and for the quarter prepared in accordance with GAAP, and audited by KPMG Peat Marwick LLP or other certified public accountants acceptable to Lender, together with a confirmation (showing calculations) of compliance by Borrower with the financial covenants of Section 9.6, 9.7 and 9.8, all of which shall be certified in a manner acceptable to Lender by the chief financial officer of Borrower. (c) Statement of Project Reserves. Concurrently herewith, and not later than each March 31 thereafter, commencing March 31, 1997, Borrower shall submit to Lender a certificate, certified by the presidents of each Borrower and USMX, indicating the calculations of the Project Proven and Probable Reserves as at December 31, 1995 (in the case of the certificate submitted concurrently herewith) and as at the preceding December 31 (in the case of the certificates submitted by each March 31), with each such certificate referred to as a "Statement of Reserves." (d) ERISA Information. Promptly after the filing or receiving thereof (if any), copies of all material reports and notices under ERISA which Borrower files with or receives from the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor. (e) Environmental Matters. Promptly after the filing or receiving thereof, copies of all notices which Borrower receives from any Governmental Authority alleging its noncompliance with Environmental Laws and any replies of Borrower filed in response thereto. (f) Projected Variations in the Development Plan. Concurrently herewith and on or before each quarter, Borrower shall submit to Lender a report which shall show any projected variations from the Development Plan in Gold production from the Project and in operating costs, capital expenditures and exploration expenditures of achieving such production (i) on a monthly basis, for the remainder of the then-current calendar year and (ii) on an annual basis thereafter for the life of the Project. (g) Litigation. Promptly after initiation thereof, notice of any litigation by or against Borrower, USMX, or the Mining Properties, or litigation against Borrower's or USMX's other properties which could have a Material Adverse Effect on Borrower or USMX. (h) Monthly Project Reports. No later than the 15th day of each month, Borrower shall submit to Lender a report concerning production and operations of the Project during the preceding month, and showing metallurgical balances, production and cost information and statistics, to include actual expenditures contrasted with projected expenditures as budgeted in the Feasibility Study and Development Plan, in form and substance reasonably acceptable to Lender. (i) Quarterly Hedging Contract Reports. Not later than the date of the Initial Advance, and not later than 60 days after the end of each quarter thereafter, a report of all Hedging Contracts of Borrower as of the close of the preceding quarter, unless such Hedging Contracts have been entered into with Lender. (j) Other Information. Such other information respecting the condition or operations, financial or otherwise, of Borrower as Lender may from time to time reasonably request. 8.3 Inspection. At any reasonable time during normal business hours and from time to time, on reasonable notice, Borrower shall permit Lender or its agents or representatives to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, Borrower and to discuss the affairs, finances and accounts of Borrower with any of its officers, directors, employees or agents. Borrower will not be responsible for injuries to or damages suffered by agents or representatives of Lender while visiting the properties of Borrower unless such injuries or damage are caused or contributed to by the negligence or willful misconduct of Borrower or its employees or agents. 8.4 Maintenance of Insurance. Borrower shall maintain with respect to the Mining Properties, the Project and Borrower's other assets and business generally, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is prudent and consistent with good operating practices, with such insurance listed in Schedule 8.4. All such insurance shall name Lender as an additional insured or as loss payee, as the case may be, and shall contain an endorsement providing that such insurance cannot be terminated without at least ten days' prior notice to Lender. 8.5 Maintenance of Equipment, Etc. Borrower shall maintain and preserve all equipment and other personal property which is material to the proper conduct of the Project in good working order and condition, ordinary wear and tear excepted, in accordance with maintenance requirements specified in connection with manufacturer's warranties therefor. 8.6 Keeping of Records and Books of Account. Borrower shall keep adequate records and books of account, in which complete entries shall be made in accordance with GAAP consistently applied, reflecting all financial transactions of Borrower. 8.7 Preservation of Existence, Etc. Borrower shall preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and will qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification is necessary or desirable in view of its business and operations or the ownership of its properties. 8.8 Conduct of Business. Borrower shall engage solely in the business of exploring for and mining gold and by-product metals at the Mining Properties and vicinity, and in activities incident thereto, in accordance with generally accepted industry practices and the Development Plan. 8.9 Notice of Default. Borrower shall furnish to Lender as soon as possible and in any event within five Business Days after the occurrence of each Event of Default or each event or condition which with the giving of notice or lapse of time, or both, would constitute an Event of Default, continuing on the date of such statement, a statement of the president or chief financial officer of Borrower setting forth the details of such Event of Default or event or condition, and the action which Borrower proposes to take with respect thereto. 8.10 Defense of Title. Borrower shall defend, at its expense, title to the Mining Properties, as such title is represented and warranted in Section 7.1(j), and the Liens in favor of Lender under the Security Documents and maintain and preserve such Liens as first Liens upon the properties and interests subject to the Security Documents, subject only to Permitted Liens. 8.11 Operation of the Project; Completion; Assignment of Contracts. Borrower agrees to use all commercially reasonable efforts to maintain, develop and operate the Mining Properties and the Project in accordance with the Development Plan and prudent mining industry practices. Mechanical Completion shall be achieved no later than July 31, 1997 and Completion shall be achieved no later than November 30, 1997. 8.12 Hedging Requirements. Concurrently with the Initial Advance, and at all times thereafter while any Loans hereunder remain outstanding or Lender has any obligation to make further Advances, either pursuant to the Hedging Agreement, or pursuant to other Price Fixing Commitments fixing the prices at which Gold produced from the Project (produced in accordance with the Development Plan) is sold, Borrower will have entered into Price Fixing Commitments for 80% of the Gold to be produced from the Project prior to six (6) months after the Scheduled Maturity Date, which hedging shall be maintained on a three-year, forward- rolling basis and ending no sooner than six (6) months after the Scheduled Maturity Date. 8.13 Maintenance of the Mining Properties. Borrower agrees to maintain its property rights and interests in the Mining Properties in full force and effect, and to do all acts reasonably determined by Borrower to be necessary to preserve such rights and interests, including, by way of example and not limitation: (i) payment and performance of all terms of leases pertaining to such rights and interests, (ii) timely performance of work reasonably intended to satisfy any annual assessment work requirements for unpatented mining or millsite claims included in such properties or timely payment of appropriate sums in lieu of performance of assessment work, (iii) timely filing of federal, provincial and state notices with respect thereto, and (iv) payment under Section 6.1 of the NPMC Agreement of any Advance Minimum Royalty (as defined in the NPMC Agreement) as they come due, if Commercial Production (as defined in the NPMC Agreement) has not been achieved; provided, however, that Borrower may, in the ordinary course of business, abandon unpatented mining or millsite claims and/or leased properties which Borrower reasonably believes do not warrant further maintenance expenditures. ARTICLE 9 NEGATIVE COVENANTS OF BORROWER So long as the Loan and the Note shall remain unpaid, or any other Obligation of Borrower hereunder or USMX under the USMX Credit Agreement or the Guaranty shall not have been fully performed by Borrower or USMX, as the case may be, or waived by Lender (including obligations of Borrower under the Hedging Agreement), Borrower shall, unless Lender otherwise consents in writing (which consent Lender may grant or withhold in its sole discretion), perform all covenants in this Article 9. 9.1 Indebtedness. Except as contemplated by the Development Plan, Borrower shall not directly or indirectly, create, incur, assume or suffer to exist any Indebtedness except (a) Indebtedness hereunder and under the Note; (b) Indebtedness secured by Liens permitted by Section 9.2; (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; and (g) Indebtedness incurred by Borrower 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. 9.2 Liens, Etc. Borrower shall not, directly or indirectly, create, incur, assume or suffer to exist, any Lien, upon or with respect to any portion of the Mining Properties, now owned or hereafter acquired, or assign or otherwise convey any right to receive the production, proceeds or income therefrom, except: (a) Liens for taxes, assessments or governmental charges or levies if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings; (b) Liens imposed by law, such as carriers, warehousemen and mechanics' liens and other similar liens arising in the ordinary course of business associated with amounts not yet due and payable, or which are being disputed in good faith by Borrower; (c) Liens of purchase money mortgages and other security interests on equipment acquired, leased or held by Borrower or USMX (including equipment held by Borrower or USMX as lessee under leveraged leases) in the ordinary course of business related to the Project to secure the purchase price of or rental payments with respect to such equipment or to secure indebtedness incurred solely for the purpose of financing the acquisition (including acquisition as lessee under leveraged leases), construction or improvement of any such equipment to be subject to such mortgages or security interests, or mortgages or other security interests existing on any such equipment at the time of such acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided that no such mortgage or other security interest shall extend to or cover any equipment other than the equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the mortgage or security interest being extended, renewed or replaced, and provided further, that any such Indebtedness shall not otherwise be prohibited by the terms of this Agreement; (d) Liens outstanding on the date hereof and described in Schedule 7.1(j) hereto; (e) Liens securing subordinated Indebtedness permitted by Section 9.1(e); (f) Liens arising under the Security Documents and under this Agreement; (g) the Lien or any right of distress reserved in or exercisable under any lease for rent and for compliance with the terms of such lease, provided there is no rent in arrears under such lease; (h) cash labor or governmental obligations deposited in the ordinary course of business in connection with contracts, bids, tenders or to secure workmen's compensation, unemployment insurance, surety or appeal bonds, costs of litigation, when required by law, public and statutory obligations, Liens or claims incidental to current construction, mechanics', warehousemen's, carriers' and other similar Liens; (i) Liens given in the ordinary course of business to a public utility or any municipality or governmental or other public authority when required by such utility or municipality or governmental or other authority in connection with the operations of Borrower; (j) easements, rights-of-way and servitudes which in the opinion of Lender (in its sole discretion, reasonably exercised) will not in the aggregate materially impair the use of the Illinois Creek Gold Property by Borrower for the Project; (k) title defects or irregularities which in the opinion of Lender (in its sole discretion, reasonably exercised) are of a minor nature and in the aggregate will not materially impair the use of the Illinois Creek Gold Property for the Project or materially affect the security created hereby; and (l) all rights reserved to or vested in any governmental body by the terms of any lease, license, franchise, grant or permit held by Borrower or by any statutory provision to terminate any such lease, license, franchise, grant or permit or to require annual or other periodic payments as a condition of the continuance thereof or to distrain against or to obtain a lien on any property or assets of Borrower in the event of failure to make such annual or other periodic payments. 9.3 Assumptions, Guarantees, Etc. of Indebtedness of Other Persons. Without the written permission of Lender, which may be withheld in Lender's sole discretion reasonably exercised, Borrower shall not, directly or indirectly, assume, guarantee, endorse or otherwise become directly or contingently liable (including, without limitation, liable by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss) in connection with any Indebtedness of any other Person, except guarantees by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, or in respect of provision of labor or materials for the Project or in connection with bonds, letters of credit or other security posted by Borrower in the ordinary course of business in connection with the Project. 9.4 Investments in Other Persons. Borrower shall not directly or indirectly, make any loan or advance to any Person utilizing loan proceeds or exceeding at any one time outstanding an aggregate of $50,000. Borrower shall not, without the written approval of Lender, purchase or otherwise acquire the capital stock, assets, or obligations of, or any interest in, any Person (other than readily marketable direct obligations of the United States of America and certificates of time deposit issued by Lender or commercial banks of recognized standing operating in the United States of America or other investment grade instruments reasonably approved by Lender). 9.5 Mergers, Changes in Capital Structure, Etc. Borrower shall not, directly or indirectly, merge or consolidate with any Person, or sell, assign, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any Person, or acquire (whether in one transaction or in any series of transactions) all or substantially all of the assets of any Person, without the prior written consent of Lender. Borrower will not establish, or enter into agreements or other arrangements which obligate Borrower to establish any capital structure which consists of equity interests in Borrower other than the common stock of Borrower currently issued and outstanding. 9.6 Borrower's Financial Covenants. Borrower will not permit: (a) the Loan Life Ratio, calculated on July 1st and January 1st of each year (commencing January 1, 1997), to be, on each July 1st and January 1st as shall occur on or after the date of calculation through the Scheduled Maturity Date, less than or equal to 1.6:1.0; or (b) the Project Life Ratio, calculated on July 1st and January 1st of each year (commencing January 1, 1997), to be, on each July 1st and January 1st as shall occur on or after the date of calculation through the Scheduled Maturity Date, less than or equal to 2.0:1.0; or (c) the Debt Service Ratio, calculated on the date of Completion and July 1st and January 1st of each year (commencing January 1, 1997) thereafter, to be, on each January 1st and July 1st as shall occur on or after the date of calculation through the Scheduled Maturity Date, less than 1.35:1.0. 9.7 Project Reserves. Borrower will not permit the value of the aggregate Proven and Probable Reserves of the Illinois Creek Gold Property to be less than 400% of the aggregate Principal Amount of the Loans outstanding at any time. 9.8 Minimum Reserves. Borrower will not permit any Obligations to remain outstanding if the Proven and Probable Reserves of the Illinois Creek Gold Property included in the Project are reduced to 30% or less of Proven and Probable Reserves of such Mining Properties on the date of the Initial Advance, or if projections based on the Development Plan, as modified from time to time with the consent of Lender, indicate that less than 30% of the Proven and Probable Reserves on the date of the Initial Advance shall be remaining at the Scheduled Maturity Date. 9.9 Restriction on Dividends and Redemptions. Other than as provided in Section 3.14(a), Borrower shall not declare, order, pay or make any dividend or other distribution, directly or indirectly, in respect of any shares of any class of stock of Borrower, now or hereafter outstanding. 9.10 Limitations on Hedging Contracts. Subject to the requirements of Section 9.12, Borrower shall not, directly or indirectly, enter into or be a party to (a) any contract or arrangement (including forward sales agreements, futures and option contracts but not put options where delivery is at the option of the holder thereof) which requires or may, upon the occurrence of certain events, require Borrower to deliver Precious Metals during a certain year, if at such time 80% of the Proven and Probable Reserves for the Project for such year (as set forth in the Development Plan) shall already be committed for delivery under this Agreement and under other similar contracts or arrangements, or (b) any production payments (other than normal and customary royalties on production of the Project). 9.11 Sale of Project Assets. Borrower shall not, directly or indirectly, sell, transfer, assign or otherwise dispose of any of its assets or properties related to the Project, except for sales of Precious Metals, other mineral production and other properties and assets related to the Project except as provided by Section 8.13 and except for disposition of equipment that is replaced by equipment of equal or higher capacity or value. 9.12 Restrictions on Capital Expenditures, Etc. Borrower shall not, directly or indirectly, incur expenditures for capital improvements or exploration expense at the Project or on other properties of Borrower other than as set out in the then-current Borrower's Development Plan or in the ordinary course of business. 9.13 Arm's Length and Take or Pay Contracts. Borrower will not, directly or indirectly, enter into or be a party to any arrangement for the purchase of materials, supplies, other property or services if such arrange ment (a) is on terms less favorable than are available for similar property or services between or among unrelated third parties in an arm's length transaction, or (b) by its express terms requires that payment be made by Borrower regardless of whether or not such materials, supplies, other property or services are delivered or furnished to it; provided that nothing in this Section 9.14 shall prohibit Borrower from entering into any Price Fixing Commitments as contemplated by Section 8.12. 9.14 Restrictive and Inconsistent Agreements; Modification of Material Contracts. Borrower will not enter into any agreement or undertaking or incur or suffer any obligation prohibiting or inconsistent with the performance by Borrower of the Obligations. Borrower shall not agree to any material amendments or modifications to any Material Agreements without the written consent of Lender. ARTICLE 10 EVENTS OF DEFAULT 10.1 Event of Default. Each of the following events shall be an "Event of Default" hereunder: (a) Nonpayment. Borrower 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 Note when due. (b) Other Defaults. Borrower or USMX shall fail to observe or perform any of their covenants, undertakings or agreements contained in this Agreement or any other Loan Document, other than the covenants referred to in paragraph (a) above, and Borrower or USMX has not remedied such default within ten days after notice of default has been given by Lender to Borrower or USMX, as the case may be. (c) Failure to Achieve Completion. Borrower has failed to achieve Mechanical Completion by July 31, 1997 or Completion by November 30, 1997. (d) Representation or Warranty. Any representation or warranty made by Borrower or USMX (or any of their officers) under or in connection with this Agreement, the USMX Credit Agreement or the other Loan Documents shall prove to have been incorrect in any material respect when made. (e) Cross-Default. A default shall occur under the USMX Credit Agreement, any of the other Loan Documents, or Borrower or USMX shall fail to pay any Indebtedness in excess of $100,000 in principal amount (but excluding Indebtedness evidenced by the Note), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure to pay is not being contested by USMX or Borrower, as appropriate, in good faith; or any other default under any agreement or instrument relating to any such Indebtedness or 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. (f) Insolvency. Either Borrower or USMX shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Borrower or USMX seeking to adjudicate it a bankrupt or insolvent, or seeking a liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of any order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, if instituted against Borrower or USMX, shall remain undismissed for a period of 60 days; or Borrower or USMX shall take any corporate action to authorize any of the actions set forth in this paragraph (f). (g) Judgments. A final judgment or order for the payment of money in excess of $100,000 shall be rendered against Borrower or USMX and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect for any period of ten consecutive days. (h) Security Interest. Any of the Security Documents after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to create a valid and perfected first priority security interest in any of the Collateral purported to be covered thereby except pursuant to Section 5.7, or Borrower or USMX shall so state in writing. (i) Guaranty. The Guaranty shall cease to be effective and enforceable in accordance with its terms, or Borrower or USMX shall so state in writing. (j) Condemnation. Any of the property or assets of Borrower or USMX in the Mining Properties is taken by power of expropriation or eminent domain or sold under threat of such taking, or possession of any material portion of the lands necessary for the operation of the Project is taken through exercise of such power. (k) Regulatory Action. Any Governmental Authority shall take any action with respect to Borrower, USMX, the Project or the Project Permits or any other Collateral subject to the Mortgage which would have a Material Adverse Effect on Borrower, USMX, operations on the Project or Borrower's ability to repay the Loan unless such action is set aside, dismissed or withdrawn within 90 days of its institution or such action is being contested in good faith and its effect is stayed during such contest. (l) Adverse Project Developments. If any of the following occurs: (i) The Project is abandoned or terminated, or the Board of Directors of Borrower or USMX elects not to proceed with the Project for whatever reason; (ii) Borrower or USMX either (a) sells or otherwise transfers any interest in the Illinois Creek Gold Property to any other Person other than the Borrower, except to the extent expressly permitted hereunder or under the USMX 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 Borrower or USMX and such other Person have agreed to the shared, cooperative or joint maintenance, exploration, development or exploitation of such portion of the Illinois Creek Gold Property; (iii) USMX breaches any agreement, covenant or undertaking under the NPMC Agreement, 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; (iv) A material adverse change occurs with respect to the Project Permits. (m) Default Under Hedging Contract. Any condition or event or combination thereof exists under a Hedging Contract which, of itself, or, with notice or the passage of time, will constitute a default by Borrower or USMX under such contract or give rise to remedies of the other party of acceleration of time of performance by Borrower or USMX of its obligations thereunder. 10.2 Remedies Upon Event of Default. (a) Upon the occurrence of an Event of Default specified in Section 10.1(f) of this Agreement or, in the case of any other Event of Default, upon notice by Lender to Borrower of Lender's election to declare Borrower 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(f) of this Agreement, the date of such Event of Default, shall be the "Date of Default." (b) Upon the Date of Default, in addition to any other remedies that Lender may have hereunder, Lender shall have the right to elect, upon notice to Borrower, to exercise its rights under the assignment of production in the Mortgage. (c) Upon the Date of Default, upon notice thereof from Lender to Borrower with a copy to NPMC in all cases other than the occurrence of an Event of Default as specified in Section 10.1(f), the Loans, all interest thereon, Breakage Costs and all other amounts owed by Borrower hereunder shall be immediately due and payable in full. In the case of an Event of Default specified in Section 10.1(f), no notice from Lender shall be required, and all amounts owed by Borrower hereunder shall be immediately due and payable on the Date of Default, without notice from Lender. (d) 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. (e) Except as expressly provided above in this Section 10.2, presentment, demand, protest and all other notices of any kind are hereby expressly waived. From and after the Date of Default, interest shall accrue at the Default Rate provided in Section 3.5(c) and shall be payable on demand. 10.3 Conversion upon Acceleration. Upon a Date of Default Lender may, at its option and notwithstanding clause (ii) of Section 3.3(a), convert any Gold Loan then outstanding into a Dollar Loan. For the purpose of computing the Principal Amount of any Loan outstanding after any conversion pursuant to the foregoing sentence, any such Gold Loan shall be converted into a Dollar Loan having a Principal Amount equal to the Dollar Value (calculated at the date of conversion) of the Principal Amount of such Gold Loan. In addition, and upon any such Date of Default, Lender may, at its option, elect that interest on the Principal Amount of the Gold Loan converted as aforesaid which would otherwise be payable in Gold shall instead be payable in Dollars at the Dollar Value thereof. In addition, if upon any such Date of Default, or for purposes of obtaining a judgment in any court for any purpose hereunder (including a proceeding under Title XI of the United States Bankruptcy Code), it becomes necessary to determine the Dollar Value of any payment obligation hereunder (whether with respect to a Principal Amount or interest) which is payable in Gold (a "Gold Obligation"), such determination shall be made at the time (or from time to time) and to the extent payment (in whole or in part) has actually been made by Borrower or USMX or a judgment has been rendered. If the amount of Gold that could be purchased at the time and with the proceeds of any such payment or judgment is not sufficient to satisfy in full the relevant Gold Obligation, the Borrower hereby indemnifies and holds harmless Lender: (a) with respect to such deficiency; and (b) from all costs and expenses incurred in the event that, as a result of any default by Borrower or USMX hereunder or under any other Loan Document, such Lender, at its own expense, must, at any time or from time to time purchase Gold in an open exchange market to satisfy its obligations to any funding source which has provided Gold to Lender to make, in whole or in part, the Gold Loan. Such indemnity obligations of the Borrower: (c) shall be payable in Dollars; (d) shall be determined in accordance with (and at times provided pursuant to) this Section; and (e) shall be enforceable, insofar as clause (a) is concerned, as a separate or additional cause of action, and such enforceability shall not be affected by any prior judgment being obtained for any other sums due under this Agreement or any other Loan Document. ARTICLE 11 MISCELLANEOUS 11.1 Amendments, Etc. Except as otherwise expressly provided in this Agreement, no amendment or waiver of any provision of this Agreement or of the Note, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender, and, in the case of any amendment, by Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 11.2 Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telex, telegraphic and facsimile communication) and mailed, transmitted, telegraphed, sent by facsimile, or delivered, if to Borrower, USMX OF ALASKA, INC. 141 Union Blvd., Suite 100 Lakewood, Colorado 80228 Attention: President Telephone: (303)-985-4665 Facsimile: (303)-980-1363 with a copy to: USMX, INC. 141 Union Blvd., Suite 100 Lakewood, Colorado 80228 Attention: Chief Financial Officer 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) 607-0998 as to each party, at such other address or number as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective (a) when received, if mailed by registered or certified mail or physically delivered; (b) five days after being sent by mail, if sent by ordinary mail; and (c) upon confirmation of transmission, if sent by telex or facsimile on a Business Day, addressed in each case as aforesaid, except that notices to Lender under Articles 2 or 3 shall not be effective until received by Lender. 11.3 No Waiver; Remedies. No failure on the part of Lender to exercise, and no delay in exercising, any right hereunder or under the Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under the Note preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 11.4 Costs, Expenses and Taxes. Borrower agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery and administration of this Agreement, 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, Borrower shall pay any and all stamp, mortgage recording and other taxes, filing fees or charges payable or determined to be payable in connection with the execution and delivery of this Agreement, 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 Borrower, Lender and their respective successors and assigns; provided that Borrower shall not have the right to assign any of its rights or obligations hereunder or any interest herein without the prior written consent of Lender. Lender may assign to its successors and affiliates, or may grant participations to one or more banks or other Persons in or to all or any part of, and may assign to one or more banks or other Persons all or any part of, this Agreement, the Loan Documents and the Loan, and, to the extent of such assignment, such assignee shall have the same obligations, rights and benefits with respect to Borrower as it would have had if it were Lender hereunder. 11.6 GOVERNING LAW. THIS AGREEMENT AND THE NOTE AND THE OTHER LOAN DOCUMENTS, EXCEPT THE SECURITY DOCUMENTS, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, INCLUDING THE CONFLICTS OF LAW PROVISIONS THEREOF. THE SECURITY DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED THEREIN, OR IF NONE IS SPECIFIED, BY THE LAWS OF THE JURISDICTION IN WHICH THE COLLATERAL SUBJECT THERETO IS PRINCIPALLY LOCATED. 11.7 VENUE; SUBMISSION TO JURISDICTION. FOR THE PURPOSE OF ASSURING THAT LENDER MAY ENFORCE ITS RIGHTS UNDER THIS AGREEMENT, BORROWER, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY (A) AGREES THAT ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING AGAINST BORROWER, OR BY BORROWER AGAINST LENDER, ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT MATTER OF ANY OF THE FOREGOING SHALL BE INSTITUTED ONLY IN STATE AND FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF DENVER, COLORADO OR, IN THE CASE OF THE SECURITY DOCUMENTS, IN THE VENUES SPECIFIED THEREIN; (B) WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO SUCH VENUE OF ANY SUCH ACTION, SUIT OR PROCEEDING OR ANY CLAIM OF FORUM NON CONVENIENS; (C) SUBMITS ITSELF TO THE NONEXCLUSIVE JURISDICTION OF ANY SUCH STATE OR FEDERAL COURT FOR PURPOSES OF ANY SUCH ACTION, SUIT OR PROCEEDING; AND (D) WAIVES ANY IMMUNITY FROM JURISDICTION TO WHICH IT MIGHT OTHERWISE BE ENTITLED IN ANY SUCH ACTION, SUIT OR PROCEEDING WHICH MAY BE INSTITUTED IN ANY SUCH STATE OR FEDERAL COURT, AND WAIVES ANY IMMUNITY FROM THE MAINTAINING OF AN ACTION AGAINST IT TO ENFORCE IN ANY SUCH STATE OR FEDERAL COURT OR ELSEWHERE, ANY JUDGMENT FOR MONEY OBTAINED IN ANY SUCH ACTION, SUIT OR PROCEEDING AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY IMMUNITY FROM EXECUTION. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OF THE AFORESAID COURTS BY THE MAILING OF COPIES OF SUCH PROCESS TO THE BORROWER, BY CERTIFIED OR REGISTERED MAIL, AT THE ADDRESS SPECIFIED FOR BORROWER IN SECTION 11.2. 11.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT MATTER OF ANY OF THE FOREGOING. 11.9 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 11.10 Inconsistent Provisions. In the event of any conflict between this Agreement and any of the Security Documents, the provisions of this Agreements shall govern and be controlling. 11.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement. 11.12 Concerning the Security Documents. In the event that any amount payable by USMX under any Security Document is not paid in accordance with the terms thereof, Borrower agrees to pay such amount to the extent not so paid. 11.13 No Third Party Beneficiary. Nothing herein contained shall be construed to confer upon any other party, other than Lender, the rights of a third party beneficiary. No reference to Liens on Schedule 7.1(j) or other Permitted Liens shall be deemed to constitute a recognition or acceptance by Borrower or Lender for the benefit of the holders of such Liens, as to the validity, subsistence or priority of such Liens. 11.14 Severability. The invalidity of any one or more covenants, phrases, clauses, sentences or paragraphs of this Agreement shall not affect the remaining portions of this Agreement or any part hereof, and in case of any such invalidity, this Agreement shall be construed as if such invalid covenants, phrases, clauses, sentences or paragraphs had not been inserted. 11.15 Acknowledgments. Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) Lender does not have any fiduciary duty or relationship to or with Borrower; and (c) no joint venture exists between Borrower and Lender. 11.16 Confidentiality. Lender agrees that it will keep confidential and not disclose or divulge any confidential, proprietary, or secret information that Lender may obtain from USMX or Borrower pursuant to financial reports and other material submitted by USMX or Borrower to Lender pursuant to this Agreement, or pursuant to visitation or inspection rights granted hereunder, unless such information is known, or until such information becomes known, to the public; provided, however, that Lender may disclose such information to its attorneys, accountants, consultants and other professionals in connection with the provision of professional services to the Lender. 11.17 Entire Agreement; Merger. This Agreement and the other Loan Documents represent the final agreement among the parties hereto and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties hereto. There are no unwritten oral agreements among the parties hereto, and there are no promises, undertakings, representations or warranties by Lender relative to the subject matter hereof not expressly set forth or referred to herein. [balance of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. USMX OF ALASKA, INC. By: Name: Title: By: Name: Title: PER PRO N M ROTHSCHILD & SONS LIMITED EX-10.C 4 GUARANTY This GUARANTY (the "Guaranty"), dated as of July 11, 1996, is made by USMX, INC., a Delaware corporation ("Guarantor"), in favor of and for the benefit of N M ROTHSCHILD & SONS LIMITED, a company organized and existing under the laws of England ("Lender"). RECITALS A. Pursuant to a certain Credit Agreement dated as of July 11, 1996 by and between USMX OF ALASKA, INC., an Alaska corporation and wholly-owned subsidiary of Guarantor ("Borrower"), and Lender (as amended, modified, supplemented or extended, the "Credit Agreement"), Lender has agreed to make certain loans in Gold or in Dollars to Borrower (the "Loans"), to be used by Borrower for purposes of funding expenditures and working capital at the Project (having the meaning set forth in the Credit Agreement) and for general corporate purposes. B. Lender's obligation to make Loans under the Credit Agreement is conditioned on Guarantor having executed and delivered this Guaranty, and this Guaranty being in full force and effect. C. This Guaranty is given by Guarantor in favor of Lender to guaranty the Obligations of Borrower in accordance with the terms of the Credit Agreement and this Guaranty. AGREEMENT NOW, THEREFORE, (i) in order to set forth Guarantor's guaranty of the Loans made pursuant to the Credit Agreement, (ii) to comply with the terms and conditions of the Credit Agreement, (iii) to induce Lender to make the Loans to Borrower pursuant to the terms of the Credit Agreement, (iv) at the special insistence and request of Lender, and (v) for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby covenants and agrees to and with Lender as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms used in this Guaranty have the meanings assigned to such terms in the Credit Agreement. 2. Guaranty. (a) Guarantor hereby guarantees, absolutely and unconditionally, the prompt and complete payment and performance of the Obligations when due (whether at the stated maturity, by acceleration or otherwise) and at all times thereafter, provided that, on or after Completion of the Project, if no Default or Event of Default is outstanding, Lender's sole recourse under this Guaranty shall be to the Pledged Collateral (defined in the Pledge and Security Agreement of even date herewith between Guarantor and Lender (the "Pledge Agreement") and the collateral subject to the Assignment Agreement, of even date herewith, between Guarantor and Lender (the "Assignment Agreement"), other than for Obligations of Borrower which arise under a breach of the representation in Section 7.1(t) of the Credit Agreement or the covenants in Section 8.1 of the Credit Agreement insofar as Environmental Laws are concerned, the guarantee of which hereunder shall remain unchanged and unaffected by Completion, and shall remain the full recourse obligation of the Guarantor. Guarantor also agrees to pay: (i) any and all expenses (including attorneys' fees and disbursements) related to any failure of Borrower to pay or perform any Obligation of the Project guaranteed hereunder, which may be paid or incurred by Lender in enforcing any rights with respect to, or collecting, any or all of the Obligations of Borrower guaranteed hereunder; and (ii) any and all expenses (including attorneys' fees and disbursements) related to or arising from Lender's enforcement of this Guaranty and collecting against Guarantor under this Guaranty The guarantees and obligations of this Section 2(a) are collectively the "Guaranteed Obligations". (b) Guarantor agrees that this Guaranty constitutes a guaranty of payment and not of collection, and Lender shall not be obligated to initiate, pursue or exhaust any form of recourse or obtain any judgment against Borrower or others (including other guarantors) or to realize upon or exhaust any collateral security held by or available to Lender before being entitled to payment from the undersigned hereunder. The liability of Guarantor shall not be limited, diminished or affected by (i) any condition of Borrower or Guarantor (including bankruptcy, liquidation or dissolution) or failure by Lender to file or enforce any claim against the estate (in administration, bankruptcy, dissolution or otherwise) of Borrower, Guarantor or others, (ii) the fact that recovery from Borrower or any other person is barred by any statute of limitations, invalidity, illegality, unenforceability or for any other reason or that Borrower or Guarantor have valid defenses, claims or offsets (whether at law, in equity or by agreement), (iii) any amendment, modification or change of any kind or nature to the Credit Agreement, the Loan Document, the Notes or this Guaranty, or any Instrument or understanding executed or entered into pursuant to the Credit Agreement, (iv) any adjustment, indulgence, forbearance or compromise granted by Lender to Borrower or Guarantor, or (v) any other circumstance which might otherwise constitute a legal or equitable discharge of a guarantor. Guarantor renounces all benefits of discussion and division and waives diligence, presentment, protest, notice of dishonor, protest or default, demand for payment upon Borrower or the undersigned, notice of acceptance of this Guaranty, notice of any addition to or increase or decrease in the Obligations, and all other notices and demands whatsoever. (c) This Guaranty is a continuing guaranty, and it will not be discharged until payment in full of all of the Guaranteed Obligations and cancellation of this Guaranty by Lender ("Termination") and will remain in full force and effect notwithstanding any interruption in the business relations between Borrower and Lender or any increase or decrease from time to time in the amount of the Obligations. (d) Guarantor hereby acknowledges and agrees that subject to the limitations set forth in Section 2(a): (i) it is personally obligated and fully liable for the amount due under this Guaranty (i.e., for all Guaranteed Obligations hereunder); and (ii) the Lender has the right to sue on this Guaranty and obtain a personal judgment against Guarantor for satisfaction of the amount due under this Guaranty either before or after a judicial foreclosure of the Deed of Trust under Alaska Statute 09.45.170 - 09.45.220. 3. Guaranty Secured. Payment and performance under this Guaranty is secured by pledges, encumbrances and security interests in certain collateral pursuant to the Pledge Agreement and the Assignment Agreement. Reference is hereby made to the Pledge Agreement and the Assignment Agreement for a definition and description of such collateral so encumbered to secure all the obligations of Guarantor hereunder. 4. Lender's Rights. Guarantor authorizes Lender, without notice or demand and without affecting Guarantor's liability hereunder, to take and hold security for the payment of this Guaranty and/or any of the Guaranteed Obligations, and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as Lender, in its discretion, may determine; and to obtain a guaranty of the Guaranteed Obligations from any one or more Persons and at any time or times to enforce, waive, rearrange, modify, limit or release any of such other Persons from their obligations under such guaranties. Guarantor hereby acknowledges and agrees that the obligations of all Persons to pay and satisfy the Guaranteed Obligations pursuant to their respective agreements or guaranties (including Guarantor's obligations hereunder) shall be joint and several. 5. Effectiveness; Reinstatement. This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by Lender upon the insolvency, bankruptcy, dissolu tion, liquidation or reorganization of Borrower, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, Borrower or any substantial part of its property, or otherwise, all as though such payments had not been made. Borrower and Lender may modify, rearrange, extend for any period and/or renew from time to time the Guaranteed Obligations without notice to Guarantor, and in such event the obligations of Guarantor with respect to the Guaranteed Obligations shall not be released, discharged or reduced and Guarantor will remain fully bound hereunder on such Guaranteed Obligations. This Guaranty may be enforced by Lender and any subsequent holder of the Guaranteed Obligations and shall not be discharged by the assignment or negotiation of all or a part of the Guaranteed Obligations. 6. Default. If Borrower has failed to pay or perform when due the Guaranteed Obligations or there is an event with respect to Guarantor that would require or permit the accelera tion pursuant to the Credit Agreement of any outstanding loan, then all of the Guaranteed Obligations shall be immediately due and payable by Guarantor, regardless of whether the payment of the Guaranteed Obligations has been accelerated or Borrower is in default with respect to the Guaranteed Obligations. 7. Merger. This Guaranty shall not be affected by any change in the name of Borrower, or by the acquisition of Borrower's business by any person, firm or corporation, or by any change whatsoever in the objects, capital structure or consti tution of Borrower, or by any merger, amalgamation or consolida tion of Borrower with any corporation, or by any dissolution or liquidation of Borrower, but shall, notwithstanding the happening of any such event, continue to apply to all the Obligations whether theretofore or thereafter incurred, and in this instru ment the word "Borrower" shall include every such person, firm, partner and corporation and all successors of the customer. Guarantor shall promptly notify Lender of any change or event described in this Section 7. 8. No Waiver. Lender shall not be obligated to exercise any right, power or privilege hereunder, and no failure to exercise and no delay in exercising, on the part of Lender, any such right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No notice to or demand on Guarantor shall be deemed to be a waiver of the right of Lender to take further action without notice or demand as provided herein. No waiver shall be applicable except in the specific instance for which given, nor in any event shall any modification or waiver of any provision of this Guaranty be effective unless in writing and signed on behalf of Lender. 9. Representations and Warranties. (a) In order to induce Lender to make the Loans to Borrower pursuant to the Credit Agreement, Guarantor represents and warrants to Lender (which representations and warranties will survive the creation of the Guaranteed Obligations and any extension of credit under the Credit Agreement) that: (i) Benefit to Guarantor: Guarantor's guaranty pursuant to this Guaranty reasonably may be expected to benefit, directly or indirectly, Guarantor; (ii) Familiarity and Reliance: Guarantor is familiar with, and has independently reviewed the books and records regarding, the financial condition of Borrower and is familiar with the value of any and all collateral intended to be created as security for the Notes and Guaranteed Obligations. Notwithstanding the foregoing, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty; (iii) No Representation: Neither Lender nor any other person, corporation or entity has made any representation, warranty or statement to Guarantor with regard to Borrower or its financial condition in order to induce Guarantor to execute this Guaranty; and (iv) Guarantor's Financial Condition: As of the date hereof and after giving effect to this Guaranty and the contingent liability evidenced hereby, Guarantor is and will be solvent, and has assets which, fairly valued, exceed its obligations, liabilities and debts. (b) Additional Representations. Guarantor hereby adopts and makes the representations, warranties and covenants concerning Guarantor as set forth in Sections 7.1(a), (b), (c), (d), (f) and (h) of the Credit Agreement. 10. Covenants. Guarantor hereby covenants and agrees with Lender to make an equity contribution to Borrower of one million five hundred thousand dollars ($1,500,000.00) after the Initial Advance but no later than September 30, 1996 in order to assist Borrower to comply with certain financial covenants of Borrower contained in the Credit Agreement. Guarantor also hereby covenants and agrees with Lender to cause Borrower to perform all of the Guaranteed Obligations under the Credit Agreement or to perform itself the Guaranteed Obligations of Borrower under the Credit Agreement and to execute and deliver to Lender each Security Document to which it is a party, 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 subject to the Security Documents to which it is a party. In particular, Guarantor covenants and agrees: (a) to insure the timely delivery of all financial information required by the Credit Agreement, whether concerning Borrower or Guarantor, including the financial information required by Section 8.2 of the Credit Agreement; (b) to preserve and maintain its, and to cause Borrower to maintain its, corporate existence, rights, franchises and privileges in the jurisdiction of their respective incorporation, and to qualify and remain qualified as foreign corporations in each jurisdiction in which such qualification is necessary or desirable in view of Guarantor or Borrower's (as the case may be) business and operations or the ownership of their respective properties; (c) to comply with all of its obligations, agreements and covenants under that certain credit agreement dated the date hereof by and between Guarantor and Lender (the "USMX Credit Agreement") and documents and other Instruments entered into by Guarantor pursuant thereto and hereto, and to cause Borrower to engage solely in the business of exploring for and mining gold and by-product metals at the Illinois Creek Gold Property and vicinity, and in activities incident thereto, in accordance with generally accepted industry practices and the Development Plan; (d) that, except as contemplated by the Development Plan, Guarantor shall not permit Borrower to (and prior to Completion Guarantor shall not), directly or indirectly, create, incur, assume or suffer to exist, any Indebtedness except (i) Indebtedness hereunder, under the Credit Agreement and under the USMX Credit Agreement; (ii) Indebtedness secured by Liens permitted by Section 9.2 of the Credit Agreement and Section 8.2 of the USMX Credit Agreement; (iii) Indebtedness existing on the date hereof disclosed to Lender pursuant to the Credit Agreement and the USMX Credit Agreement; (iv) unsecured trade payables; (v) Indebtedness incurred in the ordinary course of business; (vi) Indebtedness consisting of purchase or leasehold obligations associated with the Project contemplated by the Development Plan; and (vii) Indebtedness incurred by Borrower 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. (e) Guarantor shall not permit Borrower to, and prior to Completion Guarantor shall not, directly or indirectly, create, incur, assume or suffer to exist, any Lien, upon or with respect to any portion of the Mining Properties, now owned or hereafter acquired, or assign or otherwise convey any right to receive the production, proceeds or income therefrom, except: (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 Borrower; (iii) Liens of purchase money mortgages and other security interests on equipment acquired, leased or held by Borrower or Guarantor (including equipment held by Borrower or Guarantor as lessee under leveraged leases) in the ordinary course of business related to the Project to secure the purchase price of or rental payments with respect to such equipment or to secure indebtedness incurred solely for the purpose of financing the acquisition (including acquisition as lessee under leveraged leases), construction or improvement of any such equipment to be subject to such mortgages or security interests, or mortgages or other security interests existing on any such equipment at the time of such acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided that no such mortgage or other security interest shall extend to or cover any equipment other than the equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the mortgage or security interest being extended, renewed or replaced, and provided further, that any such Indebtedness shall not otherwise be prohibited by the terms of the Credit Agreement or the USMX Credit Agreement; (iv) Liens outstanding on the date hereof and described in Schedule 7.1(j) of the Credit Agreement; (v) Liens securing subordinated Indebtedness permitted by Section 9.1(e) of the Credit Agreement or securing Indebtedness (as that term is defined in the USMX Credit Agreement) permitted by Section 8.1; (vi) Liens arising under the Security Documents, the Credit Agreement and the NPMC Agreement (as contemplated by the Loan Documents); (vii) 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; (viii) 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; (ix) Liens given in the ordinary course of business to a public utility or any municipality or governmental or other public authority when required by such utility or municipality or governmental or other authority in connection with the operations of Borrower; (x) easements, rights-of-way and servitudes which in the opinion of Lender (in its sole discretion, reasonably exercised) will not in the aggregate materially impair the use of the Illinois Creek Gold Property by Borrower for the Project; (xi) title defects or irregularities which in the opinion of Lender (in its sole discretion, reasonably exercised) are of a minor nature and in the aggregate will not materially impair the use of the Illinois Creek Gold Property for the Project or materially affect the security created hereby; and (xii) all rights reserved to or vested in any governmental body by the terms of any lease, license, franchise, grant or permit held by Borrower or by any statutory provision to terminate any such lease, license, franchise, grant or permit or to require annual or other periodic payments as a condition of the continuance thereof or to distrain against or to obtain a lien on any property or assets of Borrower in the event of failure to make such annual or other periodic payments. (f) Without the written permission of Lender, which may be withheld in Lender's sole discretion reasonably exercised, Guarantor shall not permit Borrower to, and prior to Completion Guarantor shall not, directly or indirectly, assume, guarantee, endorse or otherwise become directly or contingently liable (including, without limitation, liable by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss) in connection with any Indebtedness of any other Person, except guarantees by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, or in respect of provision of labor or materials for the Project or in connection with bonds, letters of credit or other security posted by Borrower or Guarantor in the ordinary course of business in connection with the Project or hereunder. (g) Guarantor shall not permit Borrower to (and prior to Completion, other than to Borrower, Guarantor shall not) directly or indirectly, make any loan or advance to any Person utilizing loan proceeds or exceeding at any one time outstanding an aggregate of $50,000. Guarantor shall not permit Borrower to (and prior to Completion Guarantor shall not), without the written approval of Lender, purchase or otherwise acquire the capital stock, assets, or obligations of, or any interest in, any Person, other than readily marketable direct obligations of the United States of America and certificates of time deposit issued by Lender or commercial banks of recognized standing operating in the United States of America or other investment grade instruments reasonably approved by Lender, and provided that Guarantor may form and hold the shares of wholly-owned subsidiaries. 11. Financial Tests. Guarantor shall not permit its: (a) Current Ratio to be less than 2.0 to 1.0; (b) Consolidated Tangible Stockholders' Equity to be less than $17,500,000; and (c) Total Consolidated Liabilities to exceed one hundred seventy-five percent (175%) of its Consolidated Tangible Stockholders' Equity. 12. Notices. All notices, demands, instructions or other communications required or permitted to be given or made to Guarantor or Lender shall be given in accordance with the provisions of the Credit Agreement and at the addresses set forth therein. 13. Amendments. No amendment or waiver of any provision of this Guaranty, nor consent to any departure by Guarantor 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 Guarantor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 14. Successor and Assigns. This Guaranty shall extend to and inure to the benefit of Lender and its successors and assigns, and every reference herein to Guarantor is a reference to, and shall be construed as including, Guarantor and the successors and assigns of Guarantor, to and upon all of whom this Guaranty and agreement shall extend and be binding. 15. Further Assurances. Guarantor agrees to execute and deliver to Lender all such documents and to take all such other action as may be reasonably requested by Lender to more fully vest in and assure Lender of all of the rights, powers, privileges and remedies herein intended to be granted to or conferred upon Lender. 16. Financial Statements. Guarantor covenants and agrees that so long as any part of any Guaranteed Obligations remain outstanding, Guarantor shall furnish to Lender the financial and other information required by Section 7.2 of the USMX Credit Agreement. 17. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, INCLUDING THE CONFLICTS OF LAW PROVISIONS THEREOF. 18. VENUE; SUBMISSION TO JURISDICTION. FOR THE PURPOSE OF ASSURING THAT LENDER MAY ENFORCE ITS RIGHTS UNDER THIS GUARANTY, GUARANTOR, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY (A) AGREES THAT ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING AGAINST GUARANTOR, OR BY GUARANTOR AGAINST LENDER, ARISING OUT OF OR RELATING TO THIS GUARANTY, 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; (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. GUARANTOR 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 IN SECTION 12 HEREOF. 19. WAIVER OF JURY TRIAL. GUARANTOR 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 GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY OR THE SUBJECT MATTER OF ANY OF THE FOREGOING. 20. ENTIRE AGREEMENT. THIS WRITTEN GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN LENDER AND GUARANTOR WITH RESPECT TO THE MATTERS SET FORTH HEREIN AND MAY NOT BE CONTRA DICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF LENDER AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN LENDER AND GUARANTOR RELATING TO THIS GUARANTY OR THE MATTERS SET FORTH HEREIN. IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered by its duly authorized officer this 11th day of July, 1996. USMX, INC. By: Name: Title: By: Name: Title: EX-10.D 5 N M Rothschild & Sons Limited New Court, St. Swithin's Lane London, EC4P 4DU Registered Number 925279 July 11, 1996 USMX OF ALASKA, INC. 141 Union Blvd., Suite 100 Lakewood, Colorado 80228 USA Dear Sirs: Further to our recent discussions, we write to advise USMX OF ALASKA, INC., the wholly-owned subsidiary of USMX, INC. (with USMX of Alaska, Inc. referred to herein as "USMX" or "you") that in principle, as contemplated by the Credit Agreement dated as of July 11, 1996 (the "Credit Agreement") by and between USMX OF ALASKA, INC. and NM Rothschild & Sons Limited ("NMR"), we are prepared to deal with you on an uncommitted basis in spot and forward gold and silver transactions and in gold and silver options subject to the terms and conditions of this letter. 1. Effective Date The arrangements in this letter will be effective on: (a) your acceptance of such arrangements in accordance with the terms of this letter; and (b) receipt by us of all the documents listed in the Schedule to this letter in form and substance satisfactory to us. Our entry into any transaction under this letter is also conditional upon you being in compliance at the relevant time with the terms and conditions of, and there being no breach of or default under (including any conditions which with the passing of time or the giving of notice or the occurrence of any other event, might constitute such a breach or default) this letter. 2. Single Agreement Each party acknowledges that this letter, any confirmation in writing (a "Confirmation"), including any telex or facsimile communication from either party to the other, evidencing and setting out the principal terms of a Spot, Option or Forward (as each such transaction is defined below) agreed between the parties and all Spots, Options and Forwards entered into at any time pursuant to this letter, shall constitute a single agreement between the parties, it being understood that the parties would not otherwise enter into any such Spot, Option or Forward. 3. Maturity Notwithstanding any other provision of this letter, no Option shall expire and no Forward shall mature after December 31, 1999. 4. Options A. Granting of Options (i) Subject always to our mutual agreement as to terms, either party (the "Writer") may from time to time grant the other (the "Buyer") an option (an "Option") entitling, but not obliging, the Buyer to purchase from (a "Call Option") or sell to (a "Put Option") the Writer a specified quantity of Metal (the "Metal Quantity") at a stated or defined price per unit of Metal according to market practice (the "Strike Price"), no later than a specified time (the "Expiration Time") on a specified day (the "Expiry Date"). (ii) In this letter "Option" means a Put Option or a Call Option and "Options" means Put Options and/or Call Options. B. Option Premium In consideration of the Writer granting an Option to the Buyer, the Buyer will pay to the Writer an option premium agreed at the time the Option is granted no later than two Business Days after the date on which the Option is granted. C. Exercise of Options (i) Exercise Date Unless otherwise agreed, an Option under this letter may be exercised only on its Expiry Date. However, the parties may from time to time agree to enter into other types of Options on terms to be agreed between us. (ii) Automatic Exercise If the Writer has not received notice of exercise (where such exercise is possible under the terms of the Option) prior to the Expiration Time of an Option having positive Option Value for the Buyer, the Writer will immediately (and automatically) exercise such Option on the Buyer's behalf in accordance with paragraph 4.C.(iii) without further reference to the Buyer ("Automatic Exercise"). (iii) Settlement Subject to paragraph 4.C.(iv), immediately upon Automatic Exercise an Option will be automatically converted into a sale by the Writer to the Buyer (in the case of a Call Option) or a purchase by the Writer from the Buyer (in the case of a Put Option) at the Transaction Value for Settlement (as defined below) two Business Days (the "Settlement Date") after such exercise. (iv) Cash Settlement Where the Option so requires or where the parties so agree at the time the Option is entered into, settlement by the parties shall be by delivery or receipt of the positive Option Value of such Option on the Settlement Date. (v) Alternative Settlement As an alternative to Settlement of an exercised Option you may settle by requesting us to convert the relevant maturing spot transaction into a Forward. (vi) Default Settlement If you do not specify which method of settlement available to you under this paragraph 4 you wish to adopt before 10:00 a.m. London time on the day falling two Business Days prior to the Settlement Date, we shall settle such transaction in accordance with Clause 4.C.(iv). (vii) In this letter,- (a) "Option Value" at any time means, in the case of a Call Option, Market Value minus Transaction Value and, in the case of a Put Option, Transaction Value minus Market Value; and (b) "Market Value" in relation to Options means the product of (x) the Metal Quantity and (y) the then prevailing market bid (in the case of a Call Option) or offered (in the case of a Put Option) price for the Metal for settlement on the Settlement Date. (c) "Transaction Value" means the amount equal to the product of the Metal Quantity and the Strike Price. D. Expiry/Cancellation Subject to Automatic Exercise an Option shall expire on its stated Expiry Date without value if not exercised by such date. 5. Forward and Spot Transactions A. Purchase and Sale (i) Spot Transactions We may purchase from you and/or sell to you Metal for Settlement two Business Days thereafter at a price (the "Spot Price") which you may choose to be: i) our loco London spot price prevailing at the time you wish to deal; or ii) in the case of gold, the morning or afternoon US Dollar London Gold Market Fixing Price; or iii) in the case of silver, the spot US Dollar London Silver Market Fixing Price, in each case on the day of entering into the transaction (each such transaction a "Spot"). (ii) Forward Transactions We may purchase from you and/or sell to you Metal for settlement on a specified future date (the "Maturity Date") on the basis of a price (the "Forward Price") determined in accordance with the provisions of this letter (each such transaction a "Forward"). (iii) Fixed or Floating Forwards Each Forward shall have a Forward Price comprising the Spot Price on the day of entering into the Forward and a forward premium determined in accordance with the terms of this letter on a fixed rate basis (a "Fixed Rate Forward") or on a Floating rate basis ("Floating Rate Forward"). B. Fixed Rate Forwards (i) Premium Unless the parties agree otherwise and subject to paragraph 5.D., the forward premium for a Fixed Rate Forward will be determined by reference to the then prevailing market interest rates for the period of the Forward applied to the Spot Price. The forward premium will be calculated on an annual basis based on a 360-day year. (ii) Settlement You may settle any Fixed Rate Forward on its Maturity Date on giving us not less than two Business Days' prior written notice or by closing out such Forward by either: (a) entering into a matching Forward at any time in the same quantity and for the same Maturity Date as the original Forward, with the matching Forward Price being determined in accordance with the terms of this letter. The difference between the original Forward Price and the matching Forward Price multiplied by the Metal Quantity will be paid on the Maturity Date; or (b) entering into a matching Spot on the Maturity Date of the original Forward at a price based, at your election, on: (1) our prevailing spot price by reference to the market prices quoted two Business Days before the Maturity Date; or (2) the morning London Gold Market US Dollar Fixing Price two Business Days before the Maturity Date; or (3) in the case of silver, the London Silver Market spot US Dollar Fixing price two Business Days before the Maturity Date; and cash payment of the amount equal to the product of the Metal Quantity and the difference between the original Forward Price and the matching spot price will be made on the Maturity Date. (i) New Forward At the time you close out a Fixed Rate Forward under this letter you may elect to enter into a new Forward in the same Metal Quantity with a Maturity Date and Forward Price determined in accordance with the terms of this letter. (ii) Conversion As an alternative to closing out a Fixed Rate Forward you may elect on not less than two Business Days' prior notice to settle such Forward by requesting us to convert it into a Floating Rate Forward. C. Floating Rate Forwards (i) Premium (a) Unless the parties agree otherwise, and subject to the remainder of paragraph 5.C., the forward premium for a Floating Rate Forward will be determined by us by reference to market interest rates for gold and Dollars for successive floating rate periods (each a "Floating Rate Period") over the term of the Forward. (b) In calculating the gold or silver floating rate of interest, the purchaser may elect for one or more tranches of the gold or silver (as the case may be) purchased pursuant to a Forward to be subject to our quoted rate for an interest period agreed by the parties which does not exceed thirty-six months, PROVIDED that each such tranche comprises at least 5,000 fine ounces of gold or (as the case may be) 50,000 ounces of silver. (c) If a Forward is not settled on the last day of a Floating Rate Period, the accrued forward premium will be aggregated with the Spot Price for such Forward, such aggregate being the new Spot Price for the succeeding floating rate period. The forward premium for the succeeding floating rate period will be calculated by reference to and will apply to such new Spot Price. Forward premiums shall be aggregated in such manner to each successive floating rate period until settlement. (d) If you elect to settle a Floating Rate Forward prior to the Rollover Date (as defined below), the accrued forward premium will be calculated by discounting to present value the forward premium for said floating rate period from the date of settlement to the last day of such period at the rate determined by us by reference to the market for the unexpired portion of such period. (e) The forward premium will be calculated on an annual basis based on a 360- day year. (ii) Floating Rate Periods You may select the duration of each Floating Rate Period provided that: (a) you notify us no later than two Business Days before the beginning of the relevant Floating Rate Period of such duration; and (b) the first Floating Rate Period will commence two Business Days after the date on which we enter into the relevant Floating Rate Period; and (c) no Floating Rate Period shall extend beyond the Maturity Date. (iii) Rollover On the last day of each Floating Rate Period (the "Rollover Date" and the last Rollover Date shall fall on the Maturity Date) you may on notifying us no later than two Business Days before such Rollover Date: (a) Settle; or (b) close out the Forward in accordance with paragraph 5.C.(iv)(b)(2), except that (1) if the Floating Rate Period ends on the Maturity Date, the appropriate Spot Price will be the relevant quotes two Business Days before the Maturity Date and (2) the Forward Price will not be discounted to present value; or (c) except where the Rollover Date is the Maturity Date, elect that the relevant Forward continues as a Floating Rate Forward with a new Floating Rate Period and in the same Metal Quantity, with the new Forward Price determined in accordance with the terms of this letter, provided that if by 10:00 a.m. on the Rollover Date we have not received such notification we shall settle the Forward in such manner as we may in our discretion consider appropriate. (iv) Settlement On any date prior to the Maturity Date of a Floating Rate Forward you may: (a) on notifying us no later than two Business Days before the proposed settlement date Settle; or (b) except on Rollover Dates or the Maturity Date close out such Forward by: 1) entering (except on Rollover Dates or the Maturity Date) into a matching Forward in the same Metal Quantity and for the Rollover Date for the relevant Floating Rate Period, with the matching Forward Price being determined in accordance with the terms of this letter. The difference between the original Forward Price and the matching Forward Price multiplied by the Metal Quantity will be paid on the Rollover Date. In this subparagraph, the Maturity Date shall be deemed to be the Rollover Date if the Floating Rate Period ends on the Maturity Date; or 2) entering (subject to paragraph 5.C.(iii)(b)) into a Spot in the same Metal Quantity at a Spot Price determined in accordance with the terms of this letter. The difference between the Forward Price (discounted to present value) and the Spot Price multiplied by the Metal Quantity will be paid two Business Days after the date of the Spot is entered into. D. Fixing Commission (i) In respect of your sales of Metal to us based on a London Fixing Price we will until further notice allow you a return commission of $0.05 per fine ounce (in the case of gold) and one-sixteenth of one percent of the price per ounce (in the case of silver). In respect of your purchases of Metal from us based on a London Fixing Price we shall until further notice charge you Fixing commission at the rate of $0.15 per fine ounce (in the case of gold) and three-sixteenths of one percent of the price per ounce (in the case of silver). (ii) If you use the London Fixing Price as a base price for a Forward, the forward premium will be calculated on such Fixing Price (excluding Fixing commission) and the relevant Fixing commission specified above will then be added to the Forward Price. 6. Open Position Limit A. Open Position Limit The maximum Open Position Limit that we are currently prepared to have outstanding with you at any time will (subject to paragraph 6.C.) be 150,000 ounces of gold. B. Utilization of Limit Utilization of the Open Position Limit will be deemed to be the difference between: (a) your outstanding Forward Sales of Metal to us; (b) outstanding Call Options sold by us to you; and (c) outstanding Put Options sold by us to you and the Open Position Limit. C. Variation We hereby reserve the right to vary the Open Position Limit at any time by notice to you in writing. 7. Exposure Limit and Margin A. Exposure Limit (i) Without prejudice to paragraphs 6.A. and 7.C., your Exposure Limit under the terms of this letter is US$7,500,000.00 (Seven Million Five Hundred Thousand United States Dollars). (ii) Your Exposure Limit will comprise the aggregate of: (a) the notional cost to us of replacing in the market any Options sold by you to us; and (b) the amount by which the Market Value of your outstanding Forward sales to us under the terms of this letter is in excess of their Contractual Values; and (c) the amount by which the Contractual Value of your outstanding Forward purchases from us under the terms of this letter is in excess of their Market Value, less the aggregate of (d) the notional cost to you of replacing in the market any Options sold by us to you; and (e) the amount by which the Market Value of your outstanding Forward sales to us under the terms of this letter is less than their Contractual Value; and (f) the amount by which the Contractual Value of your outstanding Forward purchases from us under the terms of this letter is less than their Market Value; and (iii) In this letter, Market Value means in relation to a Forward, the product of(x) the Metal Quantity and (y) the Market Price Portion of the Forward Price determined by reference to the latest available London Market Price for the Metal adjusted by a forward premium determined by us by reference to market prices. B. Margin (i) In the event that the Exposure Limit is exceeded, you will, within two Business Days after demand by us in writing at any time, provide us with an acceptable margin ("Margin") at least equal to such excess but in any event equal in value to not less than US$250,000.00 (Two Hundred Fifty Thousand United States Dollars). (ii) Subject to the following provisions of paragraph 7.B., to the extent that at any time you have provided us with any Margin in excess of the amount required by clause (i) above or otherwise required by this Agreement, we shall release to you such excess Margin within our possession five Business Days after your request therefor, provided always that we shall not be obligated to release any Margin within seven Business Days of your having lodged the same with us. (iii) Margin may be provided by you in the form of any combination of the following: (a) deposits placed with us on which we will pay to you the relevant London Interbank Bid Rate for the period concerned as mutually agreed at the time of deposit. (b) Metal (conforming to the good delivery specifications of the London Bullion Market Association and being for loco London delivery unless agreed otherwise by us in writing) which may be deposited with us either by way of physical delivery or by way of book transfer in a manner acceptable to us. (iv) When releasing physical Metal placed with us by way of Margin we shall not be obliged to release the identical Metal placed with us but rather Metal of an equivalent quantity, type and assay. (v) You shall not pledge, mortgage, charge or create any other form of encumbrance over Margin, or your rights in respect thereof, delivered (or to be delivered) to us (except liens in favor of N M Rothschild & Sons Limited), and such rights shall not be capable of being transferred, assigned, mortgaged, charged or otherwise dealt with in any way without our prior written consent. At all times (whether before or after the occurrence of an Event of Default) your rights in respect of Margin provided hereunder shall constitute contractual rights for the delivery, subject to the provisions hereof, of identical amounts of gold (to the intent that you shall not retain any proprietary right to or entitlement in gold delivered as Margin to us and we shall be entitled in our absolute discretion to lend, lease, dispose of or otherwise deal with the same as the beneficial owner thereof). C. Variation We hereby reserve the right to vary your Exposure Limit at any time by notice to you in writing. 8. Termination A. Termination Date Subject to paragraph 8.B., the facilities in this letter are available to you until December 31, 1999 (the "Termination Date"). B. Termination by Notice (i) We may at any time, by notice to you in writing, immediately terminate the arrangements set out herein by giving you written notice of termination, provided that such termination shall be without prejudice to transactions entered into between us hereunder then outstanding, subject always to paragraph 11. (ii) After giving you notice of termination, we will be prepared to enter into matching transactions with you to close out existing transactions between us. 9. Representations You represent to us, on the date of your acceptance of this letter and on each date that any transaction under this letter is outstanding (with reference to the facts and circumstances then existing) as follows: A. USMX is a corporation duly organized under the laws of Delaware with the necessary power and authority to enter into the transactions and arrangements referred to in this letter; and your obligations under this letter are legal and valid obligations binding on you in accordance with its terms; B. your entry into and/or performance of or observance of your obligations under this letter does not and will not violate or breach any law, regulation, agreement, deed, license, order, obligation or document which is applicable to you; C. you will not be required to make any deduction or withhold ing from any payment you may make pursuant to this letter; D. our claims made in respect of, or pursuant to, this letter will rank at least pari passu with the claims of all your other secured creditors (save those preferred solely by any bankruptcy, insolvency, liquidation or other similar laws of general application); E. in any proceedings taken in your jurisdiction of incorpora tion in relation to this letter, you will not be entitled to claim for yourself or any of your assets immunity from suit, execution, attachment or other legal process; F. all acts, conditions and things required to be done, fulfilled and performed in order (a) to enable you lawfully to enter into, exercise your rights under and perform and comply with the obligations under this letter, (b) to ensure that your obligations under this letter are and shall be legal, valid and binding, and (c) to make this letter admissible in evidence in your jurisdiction of incorporation, have been done, fulfilled and performed; G. under the laws of your jurisdiction of incorporation, it is not necessary that this letter or any document issued pursuant hereto be filed, recorded or enrolled with any court or other authority in such jurisdiction or that any stamp, registration or similar tax be paid on or in relation to this letter or any such document; H. no Event of Default (as defined below) has occurred; I. no action or administrative proceeding of or before any court or agency which might have a material adverse effect on your business or financial condition has been started or threatened; J. you are a producer, processor or commercial user of, or a merchant handling, Metal or Metal products or by-products; and in entering into the transactions and arrangements referred to in this letter are doing so solely for the purpose related to your business as such; K. you are acting as principal in connection with each Spot, Forward and Option under this letter and not as agent; L. you have carefully reviewed this letter and the transactions contemplated under it and have determined that you can bear the risks involved in such transactions; and M. you are an eligible swap participant as defined in applicable commodity futures trading laws. 10. Covenants You shall: A. not enter into contracts or options hereunder or otherwise hedge pursuant to other hedging arrangements more than eighty percent (80%) of its annual Metals production; B. from time to time on our request, furnish us with such information about your business and financial condition as we may reasonably require; C. obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorizations, approvals, licenses and consents required in or by the laws and regulations of your jurisdiction of incorporation to enable you lawfully to enter into and perform your obligations arising under or pursuant to this letter or to ensure the legality, validity, enforceability or admissibility in evidence in your jurisdiction of incorporation of this letter and/or any agreements or documents made or issued pursuant to it; D. promptly inform us of the occurrence of any event which is or may become (with the passage of time, the giving of notice, the making of any determination hereunder, or any combination thereof) an Event of Default and, upon receipt of a written request to that effect from us confirm to us that, save as previously notified to us or as notified in such confirmation, no such event has occurred. 11. Events of Default and Close-Out A. Events of Default Any of the following shall constitute an Event of Default: (i) you fail to make any payment or delivery (including the supply of Margin) when due under this letter or any Option and/or Forward and/or Spot or breach any other term of this letter; (ii) any steps are taken, petition presented, application made, resolution proposed, meeting summoned to consider a resolution, or request made for your liquidation, bankruptcy, administration, voluntary arrangement, dissolution or any other insolvency proceedings whatsoever are taken in respect of you or for the appointment of a receiver, administrative receiver, liquidator, administrator or other insolvency representative whatsoever in respect of you; (iii) you convene a meeting for the purpose of making, or propose entering into, any agreement or composition for the benefit of your creditors or any class of them; (iv) you cease or threaten to cease to carry on your business, or dispose or threaten to dispose of your undertaking or assets or become unable to pay or stop or suspend payment of your debts as they fall due; (v) any of your indebtedness or obligations for the repayment of any borrowed moneys becomes due and payable, or capable of being declared due and payable, prior to the specified maturity date thereof due to any default thereunder or is not paid when due; (vi) an encumbrancer takes possession or a receiver, administrative receiver, liquidator, administrator or other similar officer is appointed in respect of you or any part of your undertaking or assets or a distress, execution or other process is levied or enforced upon or against any of your property and is not removed, discharged or paid out within seven days; (vii) any security created by any mortgage or charge or other security interest created by you becomes enforceable; (viii) any event occurs or proceeding is taken with respect to you in any jurisdiction to which you are subject which has an effect equivalent or similar to any of the events mentioned in paragraphs (ii), (iii), (iv) and (vi) above; (ix) any representation made pursuant to paragraph 9. proves to have been materially incorrect or misleading when made; (x) at any time it becomes unlawful for you to perform or comply with any or all of your obligations arising under this letter or under any Option or Forward or such obligations cease to be legal, valid and binding; (xi) if any circumstances arise which in our opinion have or may have a material adverse effect on your ability to perform your obligations under this letter; (xii) an Event of Default (as therein defined) occurs under the Credit Agreement. B. Rights on Default (i) If an Event of Default occurs and is not corrected within one Business Day in respect of a late payment under paragraph 11.A.(i), or within five Business Days in respect of any other Event of Default, we shall have the absolute discretion at any time (without prior notice to you) to immediately (a) determine the replacement cost to either party of outstanding Options and exercise any Option having positive Option Value for either party and to close out the resultant open position by entering into a matching transaction with you; and/or (b) to close out all outstanding Forwards by entering into matching transactions for the relevant Metal Quantity in the market; and/or (c) terminate our obligations under this letter by written notice to you; and/or (d) restrict the maximum duration of future Forwards; and/or (e) change the Termination Date; and/or (f) amend any other provision of this letter, provided always that upon the occurrence of any Event of Default arising under any one or more of paragraphs 11.A(ii), (iii), (iv), (vi), (vii) and (viii), then we shall be deemed automatically and immediately to have exercised our rights set out in 11.B(i)(a) and (b) above so as to reduce outstanding obligations between us to the payment of a single cash sum payable by either party to the other. (ii) If an Event of Default occurs and is corrected within the time periods stated in paragraph 11.B., we shall have the absolute right in our sole discretion to exercise any one or more of our rights under paragraph 11.B.(i)(d),e) and (f) without prejudice to existing options or contracts established pursuant to paragraphs 4 and 5 hereof. C. Default Netting Having exercised our rights in accordance with paragraph 11.B.(i)(a) and (b) we shall: (i) net the transaction amounts and quantities in the manner described in paragraph 12.A. and adjust any resulting amount to present value from the value date of the forward transaction and matching transaction to the close-out date by discounting such amount at the appropriate Eurodollar rate for the period concerned (as determined by us at our absolute discretion) assuming a 360-day year. (ii) liquidate any of your property in our possession by sale or other commercially reasonable means; and (iii) convert any such amounts resulting from paragraph 11.C.(i) and (ii) above into US Dollars in such manner and at such rates as we may in our reasonable discretion determine. The net resulting amount shall be paid by us to you or by you to us (as the case may be) forthwith in Dollars upon notice to you of the amount so determined and shall be in full and final settlement and discharge of all payment and delivery obligations between you and us under this letter. D. Performance on Default Without prejudice to the foregoing provisions of paragraph 11, upon the occurrence of an Event of Default, we shall not be required to deliver US Dollars or Metal hereunder or under any transaction entered into pursuant to this letter unless and until you first satisfy all your obligations to us. 12. Netting and Payments A. Netting If on any date in respect of Spots or maturing Forwards or Options any amounts are payable by both parties in the same currency or any amounts of Metal having the same assay and delivery location are transferable by both parties, then: (i) the amounts so payable or transferable by each party respectively in that currency or metal type shall be aggregated; and (ii) if the aggregate amount payable by one party hereto ("the first party") exceeds the aggregate amount payable or transferable by the other party hereto, the respective obligations of the parties to pay or transfer such aggregate amounts shall be deemed to be satisfied and discharged and replaced by an obligation on the part of the first party to pay to the other party an amount equal to such excess; and (iii) if the aggregate amounts payable by each party hereto are equal, such amounts shall be deemed to be satisfied and discharged and no payment or transfer shall be made by either party in respect thereof. B. Payment Instructions (i) All payments due to us hereunder shall be remitted by telegraphic transfer in same day funds to our Account Number 001-1-948262, with The Chase Manhattan Bank N.A., 1 Chase Manhattan Plaza, New York, NY 10081. (ii) All payments due to you hereunder will be remitted by telegraphic transfer in same day funds in accordance with your written instructions. C. Non-Business Day Any amount due for payment hereunder which falls due on a day which is not a Business Day shall be payable on the next succeeding Business Day and the amount due will be adjusted accordingly by an appropriate rate of interest to be agreed between us. D. Settlement Limit Notwithstanding the foregoing provisions of paragraph 12, the maximum sum or value of Metal that we shall be obliged to pay or deliver to you or to your order, as the case may be, without our first having received confirmation that the Metal or funds (as the case may be) due to be delivered or paid to us by you, respectively, have actually been received by us at our nominated correspondent, shall not exceed US$25,000,000.00 (Twenty-Five Million United States Dollars). E. Gross-Up If you are required at any time to make any deduction or withholding for or on account of tax in respect of any payment due from you hereunder or under any transaction, then you shall increase the amount of such payment to the extent necessary to ensure that the amount we receive is not less than the amount we would have received had no such deduction or withholding been required. 13. Confirmations, Statements and Notices A. Confirmations Upon entering into any Option, Spot or Forward transaction with you under the terms of this letter we will promptly send you by telex or facsimile a confirmation setting out the principal terms of the transaction. B. Statements We will also send you monthly statements of your accounts maintained with us. C. Notices Unless the contrary is stated, any notice or communication to be given by either party hereunder shall be sent to the facsimile or telex numbers set out below and shall be deemed received upon despatch by the relevant party, provided that such party shall have received the appropriate answer back. To: N M Rothschild & Sons Limited Fax: 071-280-5139 Telex: 888031 To: USMX OF ALASKA, INC. Fax: 303-980-1363 14. Fixing Business To the extent that you wish to execute business based on a London Market Fixing Price you will place your purchase or sale order with us no later than 10:15 a.m. London time on the day in question (in the case of the morning London Gold Market Fixing Price), no later than 2:45 p.m. London time on the day in question (in the case of the afternoon US Dollar London Gold Market Fixing Price) and no later than 11:30 a.m. (in the case of the US Dollar London Silver Market Fixing Price). 15. Expenses You agrees to indemnify us in full and on demand for all reasonable fees (including legal fees), costs and expenses incurred in connection with the protection and enforcement of our rights hereunder. 16. Law and Jurisdiction The terms of this letter will be governed by, and construed in accordance with, the laws of England. For our exclusive benefit you hereby agree to submit to the jurisdiction of the English courts to settle any disputes which may arise out of or in connection with this letter. Nothing in this paragraph limits our right to bring proceedings against you in connection with this letter in any other court of competent jurisdiction, nor shall the taking of proceedings in one or more jurisdictions preclude the taking of proceedings in any other jurisdiction whether concurrently or not, to the extent permitted by the law of such other jurisdiction. 17. General Provisions A. Assignment Your rights arising under any transaction entered into pursuant hereto shall not be capable of assignment by you. B. Severability Each of the provisions of this letter and any transaction made pursuant to it shall be severable and distinct from one another and if at any time any one or more of such provisions is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of each of the remaining provisions of this letter or any such transaction shall not in any way be affected, prejudiced or impaired thereby. C. Cumulative Rights The rights, powers and remedies provided by this letter are cumulative and are not, nor are they to be construed as, exclusive of any right of set-off or other rights, powers and remedies provided by law or by any other agreement between the parties. No failure on our part to exercise, or delay in exercising, any of the rights, powers and remedies provided by this letter, law or any other such agreement shall operate as a waiver thereof, nor shall any single or partial waiver of any such right, power or remedy preclude any further or other exercise thereof. D. Reliance Each Spot, Forward or Option shall be deemed to have been entered into by you in reliance only upon your own judgment and deliberations and we do not hold ourselves out, or any of our employees or agents having our authority, to advise you on the terms thereof or on any other matters connected with Metal transactions under this letter, and neither we nor any of our employees or agents shall have any responsibility or liability whatsoever in respect of any such advice given to you, whether or not such advice was requested by you. E. Set-Off Without prejudice to our rights under paragraph 11.C. we may without notice to you set off any matured obligation owed by you to us under this letter against any obligation (whether or not matured) owed by us to you, regardless of payment, booking branch, currency or Metal of such obligations. This paragraph is intended to give rise to rights in contract only and is not intended to constitute, create or give rise to a security interest of any kind over any of your assets. 18. Acceptance Please arrange for an authorized signatory of your Company to sign and return to us the attached copy of this letter, thereby signifying your agreement to the terms set out herein. In the event that you have not so signed and returned the attached copy of this letter by close of business on July 13, 1996 (or such later date as we may agree), the uncommitted facility offered by this letter shall lapse. 19. Definitions "Business Day" means a day on which Banks in London, New York, Denver and Johannesburg are open for a full day's business. "Dollars" and "$" means the lawful currency of the United States of America. "gold" means 995+ gold which would constitute good delivery on the London Bullion Market. "Metal" means gold and/or silver. "Settlement" means: (a) in respect of a sale of Metal to you, settlement by your remitting to us on the Settlement Date or Maturity Date (as appropriate) the Transaction Value or Spot Price or Forward Price (as appropriate) against which we will credit your relevant London Gold Holding Account or, as the case may be, London Silver Holding Account in our books; or (b) in respect of a purchase of Metal from you, settlement by your arranging physical delivery of loco London good delivery gold to us or by your arranging for another acceptable London Bullion Market Association member to credit our relevant London Gold Exchange Account or, as the case may be, London Silver Exchange Account with such member on the Settlement Date or Maturity Date (as appropriate) against which we will remit the Transaction Value or Spot Price or Forward Price (as appropriate) to you in accordance with your instructions; and "Settle" and "Settled" shall be construed accordingly. "silver" means 999 silver which would constitute good delivery on the London Bullion Market. Unless otherwise stated, any reference herein to a numbered "paragraph" shall be a reference to such paragraph contained in this letter. Headings used in this letter shall not affect the meaning hereof. Yours very truly, PER PRO N M ROTHSCHILD & SONS LIMITED ______________________________ ______________________________ Countersigned by way of acceptance the terms and conditions set out above. For and on behalf of USMX OF ALASKA, INC. __________________________________ Authorized Signatory Name:_____________________________ Title:____________________________ SCHEDULE Condition Precedent Documents 1. A copy, certified a true copy by a duly authorized officer of USMX OF ALASKA, INC. ("USMX") Board Resolutions of USMX approving the execution, delivery and performance of this letter and the terms and conditions hereof and authorizing a named person or persons to sign this letter and any documents to be delivered by USMX pursuant hereto. 2. A certificate of a duly authorized officer of USMX setting out the names and signatures of the persons authorized to sign, on behalf of USMX, this letter and any documents to be delivered by USMX pursuant hereto. EX-10.E 6 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of July 11, 1996 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 ("NMR"). RECITALS A. USMX and NMR are parties to a Credit Agreement dated as of July 11, 1996 (the "Credit Agreement"), pursuant to which the loans provided for therein may, at the election either of USMX or NMR, may be converted into shares of the common stock of USMX (the "Shares"). In order to induce NMR to consummate the transactions provided for in the Credit Agreement, USMX has agreed to enter into this Agreement to provide certain registration rights with respect to any Shares issued to NMR pursuant to the Credit Agreement. B. Certain capitalized terms used herein and not otherwise defined are defined in Section 7 hereof. AGREEMENT The parties hereto agree as follows: 1. Shelf Registration. (a) USMX shall: (i) as promptly as possible after Conversion file a Shelf Registration Statement providing for resales of Registrable Securities by NMR (the "Shelf Registration"); (ii) use its best efforts to cause such Shelf Registration Statement to be declared effective as promptly as is possible after filing; and (iii) use its best efforts to keep the Shelf Registration Statement continuously effective under the Securities Act with respect to the Registrable Securities until the third anniversary of the date hereof, or, if sooner, until the Shares no longer constitute Registrable Securities. USMX shall supplement or amend the Shelf Registration Statement as necessary to comply with the Securities Act and the rules and regulations thereunder, the rules, regulations or instructions applicable to the registration form used by USMX, or any other law, rule or regulation applicable thereto. USMX shall pay all Registration Expenses (as defined in Section 4) incurred in connection with the Shelf Registration. (b) In the event that USMX becomes ineligible to file a Shelf Registration Statement on behalf of NMR, or the Shelf Registration filed by USMX on NMR's behalf becomes ineffective as a means of registering the Registrable Securities, at any time after Conversion and at NMR's request, USMX shall use its best efforts to register the sale of all or part of the Registrable Securities. USMX shall be required to file only one registration statement to effect the foregoing. 2. Piggyback Registrations. (a) Right to Piggyback. Whenever on or prior to the third anniversary of the date hereof USMX proposes to register any of its securities under the Securities Act to be issued in an underwritten public offering by USMX (other than pursuant to the Shelf Registration) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), USMX will give prompt written notice to NMR of its intention to effect such a registration and will include in such registration all Registrable Securities requested for inclusion therein by NMR. (b) Piggyback Expenses. The Registration Expenses related to the Registrable Securities in any Piggyback Registration will be paid by USMX. (c) Priority on Registrations. If the managing underwriters of a Piggyback Registration advise USMX in writing that in their sole discretion the number of securities requested to be included in such offering exceeds the number which can be sold in such offering such that the offering will be materially adversely affected, the number of securities to be offered will be reduced as recommended in writing by the managing underwriters. USMX will include securities in such registration according to the following priority: (i) the securities USMX proposes to sell, and (ii) the Registrable Securities requested to be included in such registration and other securities requested to be included in such registration by holders of Parity Registration Rights, allocated among the holders of Registrable Securities and such other holders in proportion, as nearly as practicable, to the respective number of shares of Common Stock proposed to be sold in such offering by them. (d) Selection of Underwriters. USMX may select the investment banker(s) and manager(s) for any offering pursuant to a Piggyback Registration. (e) Other Registrations. If USMX has previously filed a registration statement with respect to Registrable Securities pursuant to this Section 2, and if such previous registration has not been withdrawn or abandoned, USMX will not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-4, Form S-8 or any successor form), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least three months has elapsed from the effective date of such previous registration, unless a shorter period of time is approved by the holders of a majority of the Registrable Securities included in such previous registration. 3. Registration Procedures. In connection with any registration pursuant to Section 1 hereof, whenever NMR has requested that any Registrable Securities be registered pursuant to this Agreement, USMX will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof and pursuant thereto USMX will as expeditiously as possible: (a) furnish to each Seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by it; (b) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as NMR reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable each Seller of Registrable Securities to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Seller, provided that USMX will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subsection, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction except to the extent required by applicable law; (c) notify each Seller of Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any material fact necessary to make the statements therein not misleading, and, at the request of any such Seller, USMX will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (d) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by USMX are then listed; (e) provide a transfer agent and registrar for all such Registrable Securities; (f) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as NMR reasonably requests in order to expedite or facilitate the disposition of such Registrable Securities; (g) make available for inspection by any Seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such Seller or underwriter, all financial and other records, pertinent corporate documents and properties of USMX, and cause USMX's officers, directors, employees and independent accountants to supply all information reasonably requested by any such Seller, underwriter, attorney, accountant or agent in connection with such registration statement; and (h) obtain a cold comfort letter from USMX's independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters (provided that such Registrable Securities constitute at least 10% of the securities covered by such registration statement). NMR agrees that, upon receipt of any notice from USMX of the happening of any event of the kind described in Section 3(c) hereof, NMR will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until NMR's receipt of written notice that sales may continue with the existing prospectus or the supplemented or amended prospectus contemplated by Section 3(c) hereof. In the event NMR is not able to commence sales of Shares pursuant to an effective registration statement not later than 60 days after the date of a notice pursuant to Section 3(c) (the "Notice Date"), USMX shall pay to NMR an amount per share equal to the difference (but only if the price in (ii) is less than the price in (i)), if any, between (i) the actual sales price subsequently received from any sales by NMR during a number of days following the date on which such sales become permissible which is equal to the number of days over 60 during which such sales were not allowed and (ii) the average of (A) the closing sales prices on any national securities exchange or the NASDAQ National Market System on which the Common Stock is listed or included, or (B) the average of the bid and asked prices on NASDAQ if not so listed or included for the days in excess of 60 from the Notice Date (such average closing sales prices or average bid and asked price, as the case may be, being referred to as the "Deemed Sales Price"), plus interest calculated on the Deemed Sales Price from the 61st day after the Notice Date to the date of any actual sale at the rate of 12% per annum. 4. Registration Expenses. (a) All expenses incident to USMX's performance of or compliance with this Agreement, including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for USMX and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by USMX (all such expenses being herein called "Registration Expenses"), will be borne as provided in this Agreement, except that USMX will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by USMX are then listed. (b) In connection with each registration of Registrable Securities, USMX will reimburse NMR for the reasonable fees and disbursements of one counsel chosen by NMR to the extent such fees and disbursements exceed $2,500 up to a maximum of $15,000. 5. Indemnification. (a) USMX agrees to indemnify NMR, its officers and directors and any person who controls NMR within the meaning of the Securities Act against all losses, claims, damages, liabilities and expenses (including legal fees and other expenses incurred in defending any such claim or action) caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that USMX shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, prospectus, amendment or supplement in reliance upon and in conformity with information furnished to USMX in writing by NMR specifically for use therein. If the indemnification provided for in this Section 5 is unavailable to or insufficient to hold harmless NMR in respect of any losses, claims, damages, or liabilities (or actions in respect thereof) referred to therein, then USMX shall contribute to the amount paid or payable to NMR as a result of such losses, claims, damages, or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of USMX and NMR in connection with the statements or omissions which resulted in such losses, claims, damages, or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by USMX or NMR and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (b) NMR agrees to indemnify and hold USMX, its officers and directors and any person who controls USMX within the meaning of the Securities Act harmless (in the same manner and to the same extent as set forth in Section 5(a)) with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, prospectus, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to USMX by NMR specifically for use therein. 6. Participation in Registrations. No Person may participate in any registration hereunder unless such Person: (a) in the case of a registration which is underwritten, agrees to sell such Person's Registrable Securities on the basis provided in any underwriting arrangements approved by USMX; (b) as expeditiously as possible, notifies USMX, at any time when a prospectus relating to such Person's Registrable Securities is required to be delivered under the Securities Act, of the happening of any event involving such Person as a result of which such prospectus contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading; (c) complies with all reasonable requests made by USMX or its counsel with respect to the registration of such Person's Registrable Securities, including, without limitation, providing access to all relevant books and records; and (d) completes, executes and delivers all questionnaires, powers of attorney, indemnities, underwriting agreements and other usual and customary documents necessary or appropriate with respect to the offering of such Person's Registrable Securities, and in the case of a registration which is underwritten, necessary or appropriate under the terms of such underwriting arrangements. 7. Definitions. (a) "Affiliate" shall have the meaning ascribed to it in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the SEC as in effect on the date hereof. (b) "Common Stock" means collectively, USMX's common stock, par value $.001 per share. (c) "Conversion" means the election of NMR or USMX, on the terms and subject to the conditions set forth in the Credit Agreement, to convert the "Principal Amount" of the "Loan" (as those terms are defined in the Credit Agreement) into shares of Common Stock. (d) "Parity Registration Rights" means the right to register securities of USMX which, by the terms of the agreement or instrument granting such rights, are on a parity with the rights of NMR under this Agreement. (e) "Person" shall mean any individual, firm, corporation, trust, partnership, or other entity and, with respect to Persons holding Registrable Securities, shall include any group comprised of any Person and any other Person with whom such Person or an Affiliate of such Person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of any Common Stock. (f) "Registrable Securities" means (i) the Shares, and (ii) any securities issued or issuable with respect to the Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Registrable Securities, such securities will cease to be Registrable Securities when they may be resold without registration pursuant to Rule 144 of the Securities Act or have been transferred pursuant to Rule 144, the Shelf Registration, the Piggyback Registration or other registration pursuant to this Agreement. For purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to acquire such Registrable Securities (by conversion or otherwise, but disregarding any legal restrictions upon the exercise of such right), whether or not such acquisition has actually been effected. (g) "Seller" means any Person who owns Registrable Securities that are included in a Shelf or Piggyback Registration. (h) "Shares" means shares of unregistered Common Stock issued to NMR by USMX upon Conversion. (i) "Shelf Registration Statement" shall mean a "shelf" registration statement of USMX pursuant to the provisions of Section 1 of this Agreement which covers any of the Registrable Securities, on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. (j) Unless otherwise stated, other capitalized terms contained herein have the meanings set forth in the Credit Agreement. 8. Miscellaneous. (a) No Inconsistent Agreements. USMX will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to NMR in this Agreement. (b) Remedies. Any Person having rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. (c) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended and USMX may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if USMX has obtained the written consent of NMR, for so long as NMR is a holder of Registrable Securities, and, at any other time, of the holders of 60% of the Registrable Securities. (d) Successors and Assigns. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of purchasers or holders of Registrable Securities are also for the benefit of, and enforceable by, any subsequent holder of Registrable Securities. (e) Incorporation of Credit Agreement Provisions. Sections 11.2 ("Notices, Etc."), 11.6 ("Governing Law"), 11.15 ("Severability"), 11.8 ("Waiver of Jury Trial"), 11.9 ("Execution in Counterparts"), and 11.17 ("Entire Agreement") of the Credit Agreement are hereby incorporated in this Agreement by reference and made a part hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. USMX, INC. By:_______________________________ Name: Title: N M ROTHSCHILD & SONS LIMITED By:_______________________________ Brian T. Dolan Attorney in Fact -----END PRIVACY-ENHANCED MESSAGE-----