AMENDED AND RESTATED CREDIT AGREEMENT Effective as of July 17, 2008 among

---

“Additional Project Agreement” means each contract, agreement or other arrangement entered into by, or on behalf of, either of the Borrowers after the date hereof, involving aggregate consideration payable to or by such Borrower of U.S.$250,000 or more in any year or otherwise material to the operation or maintenance of the Mine but excluding any Secured Hedge Agreement.

 

“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

“Affiliate Contracts” has the meaning specified in Section 5.01(n).

 

“Agreement” has the meaning specified in the introductory paragraph hereto.

 

“Agreement Approvals” has the meaning specified in Section 5.01(e)(i).

 

“Applicable GAAP” means, with respect to (a) any Person (other than the Borrowers, the Guarantor and any Person incorporated, formed or organized in the United States), GAAP as in effect from time to time in the jurisdiction in which such Person is incorporated, consistently applied, (b) the Borrowers, Mexican GAAP and (c) any Person incorporated, formed or organized in the United States, U.S. GAAP.

 

“Applicable Laws” means, with respect to any Person or the Project, collectively, all international, foreign, federal, state and local laws, statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law, applicable to such Person or the Project.

 

“Applicable Margin” means (a) for Term Loans, two and one-half percent (2.50%) per annum and (b) for Revolving Loans, two percent (2.00%) per annum.

 

“Approved Bank” means (a) any commercial bank of recognized standing having capital and surplus in excess of U.S.$200,000,000, (b) any bank whose short-term commercial paper rating from Standard & Poor’s is at least A-1 or the equivalent thereof or from ▇▇▇▇▇’▇ is at least P-1 or the equivalent thereof or (c) any other bank approved in writing by the Lender.

 

“Approved Project Costs” means as of any date of determination, any Project Cost to the extent the total expenditures on Project Costs as of such date of determination are no greater than 105% of the aggregate total budgeted amount of Project Costs set forth in the Construction Budget for such date of determination.

 

2

---

“Availability Period” means the period from and including the Closing Date to the Revolving Commitment Termination Date.

 

“Average Currency Equivalent” means with respect to any amount denominated in Pesos, as of any date of determination, the equivalent in Dollars of such amount of Pesos determined at the average of the exchange rates published by the Banco de México in the Diario Oficial de la Federación (Official Gazette of the Federation) for the spot purchase in the Mexican foreign exchange market for Dollars with such amount of Pesos on each of the thirty (30) days preceding such date of determination.

 

“Borrower” and “Borrowers” have the meanings specified in the introductory paragraph hereto.

 

“Borrowing” means a borrowing consisting of Loans having the same Interest Period made by the Lender pursuant to Section 2.02.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ or Mexico City, Mexico and, if such day relates to any Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

 

“Business Interruption Insurance” means any and all insurance policies obtained by either Borrower insuring against loss of income occurring as a result of partial or complete interruption of the operation of the Mine due to damage to the Mine.

 

“Business Interruption Insurance Proceeds” means any and all proceeds of any Business Interruption Insurance.

 

“Calculation Date” means the last Business Day of each March, June, September and December, commencing with the first such day after the First Principal Repayment Date.

 

“Capital Expenditures” means, with respect to any Person for any period, any expenditure in respect of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations).

 

“Capitalized Leases” means all leases that have been or should be, in accordance with Applicable GAAP, recorded as capitalized leases.

3

---

“Cash Equivalents” means (i) marketable securities (A) issued or directly and unconditionally guaranteed by the United States of America or (B) issued by any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States, in each case having maturities of not more than twelve (12) months from the date of acquisition, (ii) Dollar denominated time deposits, certificates of deposit, Eurodollar time deposits and Eurodollar certificates of deposit of an Approved Bank, in each case with maturities of not more than three hundred sixty-four (364) days from the date of acquisition, (iii) commercial paper rated A-1 (or the equivalent thereof) or better by Standard & Poor’s or P-1 (or the equivalent thereof) or better by Moody’s and maturing within six (6) months of the date of acquisition, (iv) marketable direct obligations of any state of the United States or any political subdivision thereof in each case maturing within one (1) year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s for which the payment of the principal, interest and redemption price shall have been arranged by irrevocably deposited government obligations maturing as to principal and interest at times and in amounts sufficient to provide such payment, (v) auction preferred stock rated in the highest short-term credit rating category by Standard & Poor’s or Moody’s and (vi) shares of money market mutual funds or similar funds that invest exclusively in assets satisfying the requirements of clauses (i) through (v) of this definition and that have net assets of not less than U.S.$500,000,000 and the highest rating obtainable from either S&P or Moody’s.

 

“Cash Flow Available for Debt Service” means, for any period, the amount of Project Revenues actually received or projected to be received for such period by the Borrowers minus the sum of the amount of Operating Costs and Taxes imposed on or measured by income or receipts actually paid or projected to be paid, or accrued with respect to the Subordinated Royalty Payments, by the Borrowers during such period, with any projections to be calculated using the Financial Model.

 

“Casualty Event” means an event that causes any portion of the Mine or any other property of the Borrowers intended to be incorporated therein to be damaged, destroyed or rendered unfit for normal use for any reason whatsoever.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

 

“Closing Date” has the meaning specified in the introductory paragraph hereto.

 

“Collateral” means all of the property (whether tangible or intangible) and assets of the Loan Parties that are or are intended under the terms of the Collateral Documents to be subject to Liens in favor of the Lender.

 

5

---

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

 

“Debt Service” means, for any period, the sum of any payments due in respect of the Secured Obligations payable by the Borrowers during such period.

 

“Debt Service Coverage Ratio” means, on any Calculation Date, the ratio of (a) Cash Flow Available for Debt Service actually received by the Borrowers during the Quarterly Period ending immediately prior to such Calculation Date to (b) Debt Service actually paid by the Borrowers during such Quarterly Period.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, the Bankruptcy and Insolvency Law of Canada, the Ley de Concursos Mercantiles of Mexico and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States, Canada, Mexico, or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“Default Rate” means an interest rate equal to two percent (2.0%) per annum plus the LIBO Rate plus the Applicable Margin.

 

“Depositary” means Lender or any other financial institution approved by Lender

 

“Discount Rate” means, as of any date of determination, five percent (5%) per annum or such other percentage agreed to by the Lender.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

 

“Distribution Availability Date” has the meaning specified in Section 8.01(v).

 

“Dollar” or “U.S.$” means lawful currency of the United States.

 

6

---

“Eligible Assignee” means (i) a commercial bank organized under the laws of the United States, or any State thereof, having total assets in excess of U.S.$500,000,000 or any commercial finance or asset based lending affiliate of any such commercial bank; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, having a net worth of at least U.S.$250,000,000 calculated in accordance with GAAP; and (iii) any Affiliate of the Lender.

 

“Environmental Laws” means any federal, state, local or foreign statutes, laws, ordinances, rules, regulations, codes, orders, writs, judgments, injunctions, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those relating to hazardous substances or wastes, air emissions and discharges to waste or public systems.

 

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“Environmental Management Plan” means the Environmental Management Plan for the Project dated March 2006 prepared for the Borrowers by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, as amended, modified and changed from time to time, which has been reviewed and approved by the Lender.

 

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

 

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

“Equity Pledge Agreements” means that certain Partnership Interest Pledge Agreement, dated August 24, 2006 between Pledgor and Lender and that certain Partnership Interest Pledge Agreement, dated August 24, 2006 between Guarantor and Lender, each as amended on the Closing Date.

7

---

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with either of the Borrowers within the meaning of Section 414(b) or (c) of the Internal Revenue Code of 1986 (and Sections 414(m) and (o) of the Internal Revenue Code of 1986 for purposes of provisions relating to Section 412 of the Internal Revenue Code of 1986).

 

“ERISA Plan” means any “Employee Benefit Plan” as such term is defined in Section 3(3) of ERISA or any “multiemployer plan” as such term is defined in Section 4001(a)(3) of ERISA that is, or within the preceding five (5) years has been, established or maintained, or to which contributions are, or within the preceding five (5) years have been, made or required to be made, by either of the Borrowers or with respect to which either of the Borrowers may have any liability.

 

“Event of Default” has the meaning specified in Section 11.01.

 

“Event of Force Majeure” means (a) any event, whether similar to the following or not, which is not within the reasonable control of the Borrowers, is not the result of any act or omission of the Borrowers, cannot be cured, remedied, avoided, offset or otherwise overcome by the prompt exercise of commercially reasonable efforts by the Borrowers or any Person under their control and which makes continued construction, development or production commercially impracticable or has a material adverse effect on the ability of the Borrowers to construct, develop or operate the Project in all material respects in accordance with the Life of Mine Plan, and shall include, subject to the foregoing, an act of God, labor dispute and industrial action of any kind (including a strike, interruption, slowdown and other similar action on the part of employees or organized labor), a lockout, act of the public enemy, war (declared or undeclared), civil war, sabotage, blockade, revolution, riot, insurrection, civil disturbance, terrorism, epidemic, cyclone, hurricane, tidal wave, landslide, lightning, earthquake, flood, fire, or other unusually severe adverse weather conditions, expropriation, nationalization, act of eminent domain, laws, rules, regulations or order of any Governmental Authority, actions of non-governmental or similar organizations or of native or aboriginal groups, explosion, breakage or accident to machinery or equipment or power transmission lines or railroad tracks or ports or other facility, embargo, inability to obtain or delay in obtaining permits, licenses, approvals, resolutions or similar governmental actions or extensions thereto or renewals thereof, or equipment, materials, supplies or transport and (b) in the case of any Material Project Agreement or any Material Project Party, an event of force majeure or uncontrollable force or other similar term as such term is defined or used in such agreement or herein.

 

8

---

9

---

“Gold Hedge Agreements” means those certain Hedge Agreements entered into by and between Guarantor and the Lender prior to the date hereof, including any novation thereof to MSR.

 

“Governmental Authority” means the government of Mexico, the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantor” has the meaning specified in the first paragraph of this Agreement.

 

“Guarantor Warrants” has the meaning specified in Section 2.08.

 

“Guaranty” means that certain Guaranty made by the Guarantor in favor of the Lender dated August 15, 2006, as amended and restated as of the Effective Date, substantially in the form of Exhibit B.

 

10

---

“Hedge Agreement” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

 

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with Applicable GAAP:

 

(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

 

(b) the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

 

(c) net obligations of such Person under any Hedge Agreement;

 

(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and not past due for more than sixty (60) days after the date on which each such trade payable or account payable was created or those subject to Contest, as long as the failure of such Contest could not reasonably be expected to result in a Material Adverse Effect);

 

(e) 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;

 

(f) all obligations of such Person under Capitalized Leases or synthetic leases;

 

11

---

(h) all Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitee” has the meaning specified in Section 12.04(b).

 

“Independent Engineer” means SRK Consulting or any other engineering consultant firm selected by the Lender and approved by Borrower (such approval not to be unreasonably withheld or delayed and such approval not to be required during the Continuance of a Prospective Event of Default of an Event of Default).

 

“Information” has the meaning specified in Section 12.07.

 

“Insolvency Proceeding,” with respect to any Person, means (a) entry by any competent Governmental Authority of any jurisdiction or a court having jurisdiction in the premises of (i) a decree or order for relief in respect of such Person in an involuntary case or proceeding under any applicable Debtor Relief Law or (ii) an involuntary or contested decree or order adjudging such Person as bankrupt or insolvent, or approving as properly filed a petition seeking suspension of payment, reorganization, concurso mercantil, arrangement, adjustment or composition of or in respect of such Person under any applicable Debtor Relief Law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator, síndico, visitador, conciliador, or other similar official of such Person or of any substantial part of the property of such Person, or ordering the dissolution, winding up or liquidation of the affairs of such Person and the continuance of any such decree or order unstayed and in effect for a period of ninety (90) consecutive days; or (b) commencement by such Person of a voluntary case or proceeding under any applicable Debtor Relief Law or of any other case or proceeding to be adjudicated as bankrupt or insolvent, or the consent by such Person to the entry of a decree or order for relief in respect of such Person in an involuntary case or proceeding under any applicable Debtor Relief Law or to the commencement of any bankruptcy, concurso mercantil or insolvency case or proceeding against such Person, or the filing by such Person of a petition or answer or consent seeking reorganization or relief under any applicable Debtor Relief Law; or consent by such Person to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator, síndico, visitador, conciliador, or other similar official of such Person or of any substantial part of the property of such Person, or the making by such Person of an assignment for the benefit of creditors, or the admission by such Person in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by such Person in furtherance of any such action.

 

12

---

“Insurance Proceeds” means any and all proceeds of any insurance, indemnity, warranty or guaranty payable from time to time with respect to any Casualty Event other than Business Interruption Insurance Proceeds.

 

“Insurance Proceeds Account ” has the meaning specified in Section 6.01(b).

 

“Interest Payment Date” means the last day of each Interest Period applicable to any Loan.

 

“Interest Period” means for each Loan comprising part of the same Borrowing, the period from the date on which such Loan (or portion thereof) was most recently continued or, if not previously continued, on which such Loan was made, to (and including) a date selected by Borrowers in accordance with this definition and Article II hereof. The duration of each Interest Period for any Loan shall be one (1), two (2), three (3) or six (6) months (or such other period acceptable to Borrowers and Lender), in each case as Borrowers may select in accordance with the terms of Section 2.02; provided that (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period may commence before and end after any Principal Repayment Date unless, after giving effect thereto, the aggregate outstanding principal amount of Loans which end after such Principal Repayment Date shall be less than or equal to the aggregate principal amount of Loans scheduled to be outstanding after giving effect to the payments required to be made on such Principal Repayment Date.

 

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor incurs debt of the type referred to in clause (h) of the definition of “Indebtedness” set forth in this Section 1.01 in respect of such Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit or all or a substantial part of the business of, such Person.

 

“Investment Company Act” means the United States Investment Company Act of 1940.

 

“Judgment Currency” has the meaning specified in Section 12.14(a).

 

“Judgment Currency Conversion Date” has the meaning specified in Section 12.14(a).

 

13

---

“LIBO Rate” means, for any Interest Period:

 

(a) the rate per annum (rounded upwards to the nearest four decimal places) which is the offered rate at or about 11:00 a.m. London time on the relevant Rate Fixing Day for dollar deposits for a period equal to the relevant period which appears on the display designated as the British Bankers’ Association Interest Settlement Rate as quoted on the Reuters’ Screen page no. LIBOR01 (or such other page for the purpose of so displaying the British Bankers’ Association Interest Settlement Rate for London interbank offered rates) and, in the absence of any such replacement page, such other page or any other quoting service as the Lender and the Borrowers may agree; or

 

(b) if no such interest rate (or such replacement) is available, the arithmetic mean (rounded upwards to the nearest whole multiple of 1/16%) of the rates per annum (as quoted to the Lender at its request) at which the principal London office of the Lender, or such other bank as may be agreed by the Borrowers and the Lender from time to time, was offering Dollar deposits in an amount comparable to the amount of the Loan being made or overdue amount, as the case may be, to leading banks in the London interbank market for a period equal to the relevant period at or about 11:00 a.m. on the applicable Rate Fixing Day (for the purposes of this definition, “relevant period” means the period in respect of which the LIBO Rate fails to be determined on that day in relation to the Loan or overdue amount).

 

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, preference, priority, fideicomiso or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

 

“Life of Mine Plan” means the plan for the development and operation of the Project, as described in (i) the El Chanate Gold Mine Feasibility Study dated October 14, 2005, which was prepared by M3 Engineering & Technology Corp. and (ii) the Technical Report, El Chanate Project dated November 2005, which was prepared by SRK Consulting in compliance with Canadian Securities Administration National Instrument 43-101; together with the then-current Operating Budget, as the foregoing documents, and such Life of Mine Plan for the Project, may be amended, modified and revised from time to time in accordance with this Agreement.

 

“Liquidity” means the sum of the Guarantor’s cash and Cash Equivalents (in each case, which are not subject to a Lien, other than a Permitted Lien).

 

“Loan” means the Term Loan and the Revolving Loan, individually or collectively, as applicable.

 

14

---

“Loan Life Coverage Ratio” means, as of any date of determination, the ratio of (a) Net Present Value of Future Cash Flow for the period commencing with such date of determination and ending on the Term Loan Maturity Date to (b) the Outstanding Amount on such date of determination.

 

“Loan Notice” means a notice of a Borrowing, pursuant to Section 2.02(a), substantially in the form of Exhibit C.

 

“Loan Parties” means, collectively, the Borrowers and the Guarantor.

 

“Master Agreement” has the meaning set forth in the definition of “Hedge Agreement”.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of any of the Loan Parties; (b) a material impairment of the rights and remedies of the Lender under any Loan Document, or of the ability of any Loan Party or Material Project Party to perform its obligations under any Transaction Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party or Material Project Party of any Transaction Document to which it is a party.

 

“Material Project Agreement” means each Project Agreement and each Additional Project Agreement.

 

“Material Project Party” means each Person (other than the Borrowers) party to a Material Project Agreement from time to time.

 

“Maturity Date” means the Term Loan Maturity Date or the Revolving Commitment Termination Date, as applicable.

 

“Mexican Collateral Documents” means the Account Pledge Agreement, the Equity Pledge Agreements, the Mortgage, and the Movable Assets Pledge Agreement, as amended, restated or otherwise modified from time to time in accordance with its terms.

 

“Mexican GAAP” means GAAP as in effect in Mexico.

 

“Mexican Income Tax Law” means the Ley del Impuesto Sobre la Renta of Mexico.

 

“Mexico” means the United Mexican States.

 

15

---

“Minimum Reserve Tail” means, on any date of determination, the ratio of (a) Mining Reserves projected to exist on the Term Loan Maturity Date as defined in the most recent approved Life of Mine Plan to (b) the total Mining Reserves in effect on the Closing Date.

 

“Mining Concession” means each of the títulos de concesión listed on Schedule 1.01(a).

 

“Mining Contract” means that Mining Contract between MSR and the Mining Contractor dated November 24, 2005.

 

“Mining Contractor” means Sinergia Obras Civiles y Mineras S.A. de C.V., and its successors.

 

“Mining Services Contract” means that certain Mining Contract, dated as of April 1, 2005, between MSR and Caborca Industrial, S.A. de C.V.

 

“Mining Reserves” means for any date, the proven and probable number of Ounces of Gold which remain to be recovered from, and produced at, the Mine as of such date.

 

“Mortgage” means that certain Mortgage Agreement, dated August 24, 2006, between Oro de Altar and Lender, as amended on the Closing Date.

 

“Movable Assets Pledge Agreement” means that certain Non-Possessory Pledge Agreement, dated August 24, 2006 between MSR and Lender, as amended on the Closing Date.

 

“MSR” has the meaning specified in the preliminary statements to this Agreement.

 

“Net Present Value of Future Cash Flow” means, on any date of determination and for any period, the net present value of all Cash Flow Available for Debt Service projected to be available to the Borrowers for such period calculated as of such date of determination using the Financial Model as then in effect and the then-applicable Discount Rate.

 

16

---

“Offshore Account Holder” means HSBC Bank USA, National Association.

 

“Offshore Operating Account” has the meaning specified in Section 6.01(a).

 

“Onshore Operating Accounts” has the meaning specified in Section 6.01(c).

 

“Operating Budget” means the annual operating budget of the Borrowers for the Project with respect to Project site management, administration and operation of the Project in accordance with the Life of Mine Plan, as updated and revised from time to time.

 

“Operating Costs” means, for any period, the sum without duplication of all (a) reasonable and necessary expenses of monitoring, administering, managing and operating the Mine, and all payments and expenses under Contractual Obligations associated therewith, (b) all expenditures for reclamation, remediation, mitigation and clean-up with respect to the Project, (c) all expenditures for maintenance of any equipment and facilities comprising the Mine in accordance with the Operating Budget, Prudent Industry Practices or vendor and supplier requirements with respect to such equipment and facilities, (d) all costs and expenses required to maintain the Real Property Interests at the Mine, (e) costs and expenses associated with the sale and transportation of Gold doré from the Mine and for refining Gold doré from the Mine, (f) property, sales, franchise and value added taxes payable by any Loan Party (other than taxes imposed on or measured by income or receipts) to which the mine may be subject (or payment in lieu of such taxes), (g) reasonable and necessary costs, fees and expenses incurred in connection with obtaining and maintaining the Project Approvals, the Agreement Approvals and insurance for the Borrowers and the Mine, including the Required Insurance, (h) reasonable and arm’s length legal, accounting, consulting, engineering, metallurgical and other professional fees attendant to any of the foregoing items during such period, (i) the reasonable cost of administration and enforcement of the Transaction Documents, (j) any other expenses approved in writing by the Lender to be Operating Costs (it being understood that the reasonableness and necessity of all such expenses shall be determined by the Lender after consultation with the Lender’s advisors or counsel, as appropriate), (k) all other costs and expenses included in the Operating Budget or the Life of Mine Plan then in effect, and (l) all payments and costs pursuant to the Subordinated Royalty Payments. In no event shall “Operating Costs” include any Taxes imposed on or measured by income or receipts or Capital Expenditures (other than as described in clauses (c) or (k) above).

 

17

---

“Ounce” means a fine ▇▇▇▇ ounce.

 

“Outstanding Amount” means, on any date of determination, the aggregate outstanding principal amount of the Loans after giving effect to any Borrowings and prepayments or repayments of the Loans occurring on such date of determination.

 

“Participant” has the meaning specified in Section 12.06(b).

 

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001), as amended.

 

“Payment Date” means each Interest Repayment Date and each Quarterly Date.

 

“Permitted Liens” means each of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, not yet due or which are subject to Contest; (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than sixty (60) days or which are subject to Contest and in either case, individually or together with all other Permitted Liens outstanding on any date of determination do not materially adversely affect the use of the property to which they relate; (c) pledges or deposits in the ordinary course of business under worker’s compensation laws or similar legislation, unemployment insurance or other types of social security or employment security other than any Lien imposed by ERISA or any similar Foreign Government Scheme or Arrangement which could be reasonably expected to have a Material Adverse Effect; (d) pledges or deposits to secure the performance of reclamation, remediation, trade contracts and leases (other than Indebtedness), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights of way, rights of use, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto; (f) Liens securing judgments for the payment of money not constituting an Event of Default under Section 11.01(g) or securing appeal or other surety bonds related to such judgments; (g) Liens of record or otherwise registered with the applicable Governmental Authorities in Mexico as set forth on Schedule 1.01(b); and (h) any Liens created in favor of the Lender under or pursuant to the Loan Documents.

 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, fideicomiso, ejido, Governmental Authority or other entity.

 

“Peso” or “P$” means the lawful currency of Mexico.

 

“Pledgor” means Leadville Mining & Milling Holding Corporation.

 

18

---

“Process Agent” means any Person appointed as agent by another Person to receive on behalf of itself and its property services of copies of summons and complaint or any other process which may be served in connection with any action or proceeding before any court arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party.

 

“Project” has the meaning specified in the preliminary statements to this Agreement.

 

“Project Agreements” means the Construction Contract, Real Estate Rights Agreements, the Mining Services Contract and the Mining Contract.

 

“Project Approvals” has the meaning specified in Section 5.01(c)(i).

 

“Project Costs” means the costs and expenses incurred by or on behalf of the Borrowers set forth in the Construction Budget plus, to the extent not included therein, (i) funding of the Debt Service Reserve Requirement and (ii) other amounts approved in writing by the Lender.

 

“Project Revenues” means, for any period, the sum, computed without duplication, of all cash revenues received by the Borrowers during such period (or, in the case of any future period, projected to be received by the Borrowers in accordance with the Financial Model (as modified from time to time) during such period) from (a) cash flow generated by the Mine in the ordinary course of business; (b) Business Interruption Insurance Proceeds and any other payments received in respect of any loss of profit or delay in startup insurance or interruption of operations; (c) refunds of deposits and Tax refunds; (d) proceeds resulting from positive financial settlements arising under any Secured Hedge Agreement; and (e) all other income, proceeds or receipts howsoever earned or received by the Borrowers; provided, however, that notwithstanding the foregoing, “Project Revenues” shall not include (i) proceeds of Loans or any other Indebtedness; (ii) Insurance Proceeds or (iii)  any equity contributions made by the Guarantor or other Affiliate of the Borrowers to the Borrowers.

 

“Prospective Event of Default” means any event or condition that, with the giving of notice or lapse of time, or both, would constitute an Event of Default.

 

“Prudent Industry Practices” means those practices, methods, techniques, specifications and standards of safety and performance, as they may be modified from time to time, that (a) are generally accepted in the mining industry as good, safe and prudent engineering practices in connection with the operation, maintenance, repair or use of mining facilities, and (b) conform in all material respects to the manufacturer’s operation and maintenance guidelines, in each case as applicable to the equipment in question, taking into account such equipment’s size, service and type. “Prudent Industry Practices” are not necessarily the optimum practice or method to the exclusion of others, but rather refer to commonly used and reasonable practices and methods.

 

19

---

“Quarterly Period” means each fiscal quarter of the Borrowers ending on a Quarterly Date commencing with the fiscal quarter ending September 30, 2006.

 

“Rate Fixing Day” in relation to any period for which an interest rate is to be determined hereunder, means the day on which quotations would ordinarily be given by prime banks in the London Interbank Market for deposits in dollars for delivery on the first day of that period.

 

“Real Estate Rights Agreement” means, collectively, any agreement, document or instrument relating to any Real Property Interest owned by or granted in favor of either of the Borrowers in connection with the Project, including, without limitation, the Mining Concessions.

 

“Real Property Interest” means any fee owned land, Mining Concession or leasehold, easement, right of way, license, concession or other real property right.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

 

“Replacement Consultant” has the meaning specified in Section 12.12(a).

 

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the thirty (30)-day notice period has been waived.

 

“Required Insurance” has the meaning specified in Section 7.01(r).

 

“Responsible Officer” means the chief executive officer, president, chief operating officer, chief financial officer, treasurer or vice president of a Loan Party with knowledge of the particular matter at hand. Any document delivered hereunder that is signed by a Responsible Officer of any Person shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Person and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Person.

 

“Restricted Payments” has the meaning specified in Section 8.01(v).

 

“Revolving Commitment” has the meaning specified in Section 2.01(b).

 

“Revolving Commitment Termination Date” means the earliest to occur of (a) the date that is one (1) year following the Closing Date and (b) the date of termination of the Commitments in full pursuant to Section 11.02(a), as such date may be extended by Lender in its sole discretion pursuant to Section 2.05(b).

 

“Revolving Loans” has the meaning specified in Section 2.01(b).

 

20

---

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

“Secured Hedge Agreement” means any Hedge Agreement that the Borrowers are permitted to enter into pursuant to Section 7.01(p).

 

“Secured Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Secured Hedge Agreement, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that notwithstanding the foregoing, “Secured Obligations” shall not include any obligations, covenants or duties of the Borrowers owed to the Guarantor or any other Affiliate of the Borrowers.

 

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

“Stock Purchase Agreement” means that Stock Purchase Option Agreement, dated effective December 15, 2000, among AngloGold (Jerritt Canyon) Corp., AngloGold North America Inc., Leadville Mining & Milling Corporation and Pledgor, as amended.

 

“Subordinated Royalty Payments” means (a) the net profits interest royalty payable pursuant to the Stock Purchase Agreement and (b) the net profits interest royalty payable pursuant to the Termination Agreement.

 

21

---

“Support Instrument” means any guarantee, letter of credit, surety, payment or performance bond or other similar agreement or instrument relating to the performance by any Person of its obligations under any Transaction Document to which it is a party.

 

“Tangible Net Worth” means, as of any date, (a) the total assets of the Guarantor and its Subsidiaries that would be reflected on the Guarantor’s consolidated balance sheet as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of the Subsidiaries, minus (b) the sum of (i) the total liabilities of the Guarantor and its Subsidiaries that would be reflected on the Guarantor’s consolidated balance sheet as of such date prepared in accordance with GAAP, (ii) the amount of any write-up in the book value of any assets resulting from a revaluation thereof or any write-up in excess of the cost of such assets acquired reflected on the consolidated balance sheet of the Guarantor as of such date prepared in accordance with GAAP, and (iii) the net book amount of all assets of the Guarantor and its Subsidiaries that would be classified as intangible assets on a consolidated balance sheet of the Guarantor as of such date prepared in accordance with GAAP.

 

“Taxes” means all present or future levies, imposts, duties, deductions, withholdings (including with respect to Mexican withholding tax applicable interest income sourced in Mexico), assessment, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Termination Agreement” means that certain Termination Agreement, dated effective March 31, 2004, between MSR and Grupo ▇▇▇▇▇▇ ▇▇ S.A. de C.V.

 

“Term Loan” has the meanings specified in Section 2.01(a).

 

“Term Loan Commitment” has the meaning specified in Section 2.01(a).

 

“Term Loan Maturity Date” means December 31, 2011.

 

“Term Note” means a promissory note issued by the Borrowers payable to the order of the Lender, in substantially the form of Exhibit E hereto, evidencing the aggregate indebtedness of the Borrowers to the Lender resulting from Term Loans made by the Lender.

 

“Terrorism Laws” means any of the following (a) Executive Order 13224 issued by the President of the United States, (b) the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of Federal Regulations), (c) the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations), (d) the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of Federal Regulations), (e) the Patriot Act, (f) all other present and future legal requirements of any Governmental Authority addressing, relating to, or attempting to eliminate, terrorist acts and acts of war and (g) any regulations promulgated pursuant thereto or pursuant to any legal requirements of any Governmental Authority governing terrorist acts or acts of war.

 

22

---

“Transaction Document” means each of the Loan Documents, the Material Project Agreements and the Real Estate Rights Agreements.

 

24

---

Section 1.05 Currency of Coverage Ratios. For purposes of the Loan Documents, the Debt Service Coverage Ratio and the Loan Life Coverage Ratio shall each be expressed in Dollars, as follows:

 

(a) Debt Service Coverage Ratio. In connection with the calculation of the Debt Service Coverage Ratio for any period any Peso denominated component of Operating Costs shall be expressed in Dollars using the Peso-to-Dollar rate of exchange actually applied upon the transfer of any amounts to the Operating Account during the relevant period.

 

(b) Loan Life Coverage Ratio. In connection with the calculation of the Loan Life Coverage Ratio for any period, any projected Peso-denominated component of Operating Costs shall be expressed in Dollars based on the Average Currency Equivalent of such projected Peso-denominated Operating Costs.

 

Section 1.06 Updates of Life of Mine Plan and Financial Model.

 

(a) If at any time the actual construction and/or operating history of the Project as reflected in the most recent reports delivered by the Borrowers pursuant to Section 10.01 for any three (3) month period or Quarterly Period, as the case may be, is inconsistent with the projections therefor set forth in the then effective Financial Model or Life of Mine Plan, and such inconsistency shall show an actual adverse variation in the Project Costs, Operating Costs or Project Revenues, in each case taken as a whole, or in Gold production, of twenty-five percent (25%) or more for such period from that set forth for such period in the then effective Life of Mine Plan or Financial Model, then the Life of Mine Plan and the Financial Model shall be amended to reflect data and assumptions reasonably determined by the Lender and the Borrowers which accurately reflect actual Project Costs, Operating Costs, Project Revenues or Gold production, as the case may be.

 

(b) In the event that the Borrowers (on the one hand) and the Lender (on the other hand) are unable to agree as to the adjustment to the Financial Model and the Life of Mine Plan in accordance with this Section 1.06, either the Borrowers or the Lender may refer such dispute to the Independent Engineer for resolution. The findings of the Independent Engineer with respect to any adjustments to the Financial Model and the Life of Mine Plan so presented to it for resolution hereunder shall be binding upon the parties.

 

(c) Promptly after any amendment to the Life of Mine Plan or the Financial Model pursuant to this Section 1.07, the Borrowers shall deliver to the Lender an updated copy of the Life of Mine Plan or the Financial Model, as the case may be.

 

25

---

ARTICLE II

THE COMMITMENTS AND THE BORROWINGS

 

Section 2.01 The Loans.

 

(a) Term Loans. The Borrowers and the Lender acknowledge that, pursuant to the Original Credit Agreement, the Lender made a term loan (each such loan, a “Term Loan”) to the Borrowers, in the aggregate principal amount of Twelve Million Five Hundred Dollars (U.S.$12,500,000) (as such aggregate maximum amount may be reduced from time to time as provided in Section 2.04, the “Term Loan Commitment”). Term Loan amounts repaid or prepaid may not be reborrowed.

 

(b) Revolving Loans. During the Availability Period, subject to the terms and conditions set forth herein, the Lender agrees to make revolving loans (“Revolving Loans”) to the Borrowers from time to time in an aggregate principal amount not to exceed Five Million Dollars (U.S.$5,000,000) (as such aggregate maximum amount may be reduced from time to time as provided in Section 2.04, the “Revolving Commitment”). Revolving Loans may be repaid and reborrowed in accordance with the provisions hereof.

 

Section 2.02 Borrowings.

 

(a) Term Loan Borrowings. The Borrowers shall request a Term Loan borrowing by delivering a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrowers and delivered to the Lender; provided that the Borrowers shall not be entitled to request a Borrowing more than once in any calendar month. Each such notice shall be irrevocable and must be received by the Lender not later than 11:00 a.m. six (6) Business Days prior to the requested date of any Borrowing. Each Borrowing shall be in a principal amount of U.S.$1,000,000 or a whole multiple of U.S.$250,000 in excess thereof; provided that such limits shall not apply to the final Borrowing, which may be in aggregate amount equal to the unused Commitment at such time. Each Loan Notice shall specify (i) the requested date of the Borrowing (which shall be a Business Day), (ii) the principal amount of Loans to be Borrowed and (iii) the Interest Period for such Borrowing.

 

(b) Revolving Loan Borrowings. The Borrowers shall request a Revolving Loan borrowing by delivering a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrowers and delivered to the Lender; provided that the Borrowers shall not be entitled to request a Borrowing more than once in any calendar month. Each such notice shall be irrevocable and must be received by the Lender not later than 11:00 a.m. five (5) Business Days prior to the requested date of any Borrowing of a Revolving Loan. Each Revolving Loan shall be in a minimum aggregate amount of U.S.$250,000 and in integral multiples of U.S.$50,000 in excess thereof (or the remaining amount of the Revolving Commitment, if less). Each such Loan Notice shall specify (i) the requested date of the Borrowing (which shall be a Business Day), (ii) the principal amount of Revolving Loans to be Borrowed and (iii) the Interest Period for such Borrowing.

26

---

(c) Funding. Following receipt of a Loan Notice, and upon satisfaction of the applicable conditions set forth in Sections 4.01, and 4.02, as applicable, the Lender shall make the principal amount specified in such Loan Notice available to the Borrowers in immediately available funds by causing such Term Loan funds to be credited to, or deposited into the Onshore Operating Account and such Revolving Loan funds to be credited to, or deposited into the Offshore Operating Account, in each case, not later than 1:00 p.m. on the Business Day specified in the applicable Loan Notice.

 

Section 2.03 Prepayments.

 

(a) Optional. The Borrowers may, upon notice to the Lender, at any time (i) after the First Principal Repayment Date in the case of Term Loans or (ii) during the Availability Period in the case of Revolving Loans, voluntarily prepay Loans in whole or in part without premium or penalty; provided that (A) such notice must be received by the Lender not later than 11:00 a.m. three (3) Business Days prior to any date of prepayment; and (B) any prepayment shall be in a principal amount of at least U.S.$250,000 or a whole multiple of U.S.$50,000 in excess thereof or, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrowers, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Each such payment shall be accompanied by payment of any amounts required by Section 3.04 hereof.

 

(b) Mandatory. On each Quarterly Date, the Borrowers shall prepay an aggregate principal amount of the Loans equal to the amount of any Insurance Proceeds received by the Borrowers or the Lender that are not permitted to be applied to repair, reconstruct or replace any of the damaged property as contemplated by Section 6.03(b)(ii).

 

(c) Prepayments Generally.  

 

(i) Each prepayment of Loans pursuant to this Section 2.03 shall be applied (x) first, to the principal repayment installments of the Term Loans in inverse order of maturity and (y) second to the outstanding Revolving Loans.

 

(ii) Each prepayment under this Section 2.03 shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.04. Any amounts required to be applied to prepay the Loans pursuant to Section 2.03(b) shall be applied solely to the repayment of principal, interest and breakage costs for the account of the Borrowers.

 

Section 2.04 Termination or Reduction of Commitment.

 

(a) Mandatory.

 

(i) The Term Loan Commitment shall be automatically and permanently reduced on the date of each Borrowing of a Term Loan after giving effect to each such Borrowing by the amount of such Borrowing.

 

27

---

(b) Voluntary. The Borrowers shall have the right to terminate or permanently reduce the unused portion of the Revolving Commitment at any time or from time to time upon not less than ten (10) Business Days’ prior notice thereof to the Lender, which notice shall specify the effective date of such termination or reduction, the amount of any such reduction, which shall be in a minimum amount of U.S.$250,000 or a whole multiple of U.S.$50,000 in excess thereof and shall be irrevocable and effective upon receipt by the Lender, provided that no such reduction or termination shall be permitted if after giving effect thereto and to any prepayments of the Loans made on the effective date thereof, the sum of the outstanding Revolving Loans would exceed the Revolving Commitment.

 

(c) Revolving Commitment Reductions. All fees accrued pursuant to Section 2.07 until the effective date of any termination or reduction of the Revolving Commitment shall be paid on the effective date of such termination or reduction.

 

Section 2.05 Repayment of Loans.

 

(a) Term Loan. On each Principal Repayment Date, the Borrowers shall repay to the Lender the aggregate principal amount of all Term Loans outstanding in the respective amounts set forth opposite such dates (which amounts shall be reduced as a result of the application of prepayments or Commitment reductions in accordance with the order of priority set forth in Section 2.03(b)(i)) as follows:

Principal Repayment Date		Amount
September 30, 2008		U.S.$	1,000,000
December 31, 2008		U.S.$	1,125,000
March 31, 2009		U.S.$	1,000,000
June 30, 2009		U.S.$	1,000,000
September 30, 2009		U.S.$	750,000
December 31, 2009		U.S.$	750,000
March 31, 2010		U.S.$	750,000
June 30, 2010		U.S.$	875,000
September 30, 2010		U.S.$	875,000
December 31, 2010		U.S.$	875,000
March 31, 2011		U.S.$	875,000
June 30, 2011		U.S.$	875,000
September 30, 2011		U.S.$	875,000
December 31, 2011		U.S.$	875,000

 

provided, however, that the final principal repayment installment of the Term Loans shall be repaid on or before the Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of all Term Loans outstanding on such date.

28

---

(b) Revolving Loan. The Borrowers shall repay to the Lender the aggregate principal amount of all Revolving Loans outstanding on the Revolving Commitment Termination Date. The Borrowers shall have the right to request up to two (2) one (1) year extensions of the Revolving Commitment Termination Date by giving written notice to the Lender no later than one (1) month prior to the first (1^st) or second (2^nd) anniversary of the Closing Date. No such extension shall be effective unless and until (i) the Lender, in its sole discretion, agrees in writing to such extension, (ii) the Borrowers pay an extension fee of U.S.$30,000 to the Lender and (iii) no Prospective Event of Default or Event of Default shall have occurred and be Continuing.

 

Section 2.06 Interest.

 

(a) Interest Rate. Subject to the provisions of Section 2.06(b), each Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the LIBO Rate for such Interest Period plus the Applicable Margin.

 

(b) Default Interest.

 

(i) If any amount payable by the Borrowers under any Loan Document is not paid when due, whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by Applicable Law.

 

(ii) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand, to the extent permitted by Applicable Law.

 

(c) Interest Due Dates. Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any Insolvency Proceeding, to the extent permitted by Applicable Law.

 

(d) Interest Periods. (i) Borrowers may not at any time have outstanding more than an aggregate of eight (8) different Interest Periods relating to outstanding Loans and each such Interest Period shall be in respect of a principal amount of Loans of not less than U.S.$250,000; and (ii) Borrowers may contact Lender at any time prior to the end of an Interest Period for a quotation of the LIBO Rates in effect at such time for given Interest Periods, and Lender shall provide such quotation promptly upon request. If Borrowers fail to notify Lender of the next Interest Period for any Loan at least three (3) Business Days prior to the end of the then current Interest Period, such Loan shall automatically continue with the same Interest Period at the close of business on the last day of the then current Interest Period therefor, unless such Interest Period would extend beyond the applicable Maturity Date, in which case Lender shall choose an Interest Period that is closest in duration to the remainder of the term of the Loans. Lender shall as soon as practicable (and, in any case, within three (3) Business Days) notify Borrowers of each determination of the interest rate applicable to each Loan.

29

---

Section 2.07 Commitment Fee. The Borrowers shall pay to the Lender a commitment fee payable (x) in arrears on each Quarterly Date and on the last day of the Availability Period and (y) on the date of any cancellation or termination of the Revolving Commitment in respect of the cancelled or terminated portion of the Revolving Commitment, in each case at the rate of one and one half percent (1.50%) per annum on the average daily unused portion of the Revolving Commitment. The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met.

 

Section 2.08 Guarantor Warrants. On or prior to the Closing Date, Borrowers shall cause the Guarantor to issue and deliver to the Lender warrants to purchase 600,000 common shares in the Guarantor (the “Guarantor Warrants”), in the form of Exhibit F hereto.

 

Section 2.09 Computation of Interest and Fees. All computations of fees and interest shall be made on the basis of a three hundred sixty (360)-day year and actual days elapsed (including the first day but excluding the last day) occurring in the period for which such fees or interest are payable. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid. Each determination by the Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

Section 2.10 Evidence of Indebtedness.

 

(a) Accounts and Records. The Loans shall be evidenced by one or more accounts or records maintained by the Lender in the ordinary course of business. The accounts or records maintained by the Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lender to the Borrowers and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Secured Obligations.

 

30

---

 

Section 2.11 Payments Generally. All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made to the Lender in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. All payments received by the Lender after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.

 

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

 

Section 3.01 Taxes.

 

(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the Borrowers shall be required by Applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions and (iii) the Borrowers shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.

 

(b) Payment of Other Taxes by the Borrowers. Without limiting the provisions of clause (a) above, the Borrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.

 

(c) Indemnification by the Borrowers. The Borrowers shall indemnify the Lender, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01) paid by the Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrowers by the Lender shall be conclusive absent manifest error.

 

(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority, the Borrowers shall deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.

31

---

(e) Status of Lender. If the Lender is entitled to an exemption from or reduction of withholding tax under the laws of the jurisdiction in which the Borrowers are resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document, the Lender shall deliver to the Borrowers, at the time or times prescribed by Applicable Law or reasonably requested by the Borrowers, such properly completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, the Lender, if requested by the Borrowers, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrowers as will enable the Borrowers to determine whether or not the Lender is subject to backup withholding or information reporting requirements.

 

Section 3.02 Illegality. If any Applicable Law has made it unlawful, or any Governmental Authority has asserted that it is unlawful, for the Lender or its applicable lending office to make, maintain or fund any Loans, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on the authority of the Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by the Lender to the Borrowers, any obligation of the Lender to make or continue Loans shall be suspended until the Lender either changes its lending office or notifies the Borrowers that the circumstances giving rise to such determination no longer exist or have been otherwise mitigated. Upon receipt of notice from the Lender that Loans at the LIBO Rate cannot be maintained due to any of the foregoing actions, the Borrowers shall, upon demand from the Lender, prepay all Loans, either on the last day of the Interest Period therefor, if the Lender may lawfully continue to maintain such Loans to such day, or immediately, if the Lender may not lawfully continue to maintain such Loans. Upon any such prepayment, the Borrowers shall also pay accrued interest on the amount so prepaid. The Lender agrees to use reasonable efforts (including reasonable efforts to change its lending office) to avoid or to minimize any amounts which might otherwise be payable pursuant to this Section 3.02, at the cost and expense of the Borrowers.

 

Section 3.03 Increased Costs; Reserves on Loans.

 

(a) Increased Costs Generally. If any Change in Law shall:

 

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, the Lender;

 

(ii) subject the Lender to any tax of any kind whatsoever with respect to this Agreement, any Loan made by it, or change the basis of taxation of payments to the Lender in respect thereof (except for Taxes or Other Taxes covered by Section 3.01); or

 

(iii) impose on the Lender or the London interbank eurodollar market any other condition, cost or expense affecting this Agreement or Loans made by the Lender;

32

---

and the result of any of the foregoing shall be to increase the cost to the Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Loans), or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or any other amount) then, upon request of the Lender, the Borrowers will pay to the Lender, such additional amount or amounts as certified by the Lender as being required to compensate the Lender for such additional costs actually incurred or reduction actually suffered. The Lender agrees to use reasonable efforts (including reasonable efforts to change its lending office) to avoid or to minimize any amounts which might otherwise be payable pursuant to this Section 3.03, at the cost and expense of the Borrowers.

 

(b) Capital Requirements. If any Change in Law affecting the Lender regarding capital requirements has or would have the effect of reducing the rate of return on the Lender’s capital or on the capital of the Lender’s holding company, if any, as a consequence of this Agreement, the Commitment or the Loans made by the Lender, to a level below that which the Lender or the Lender’s holding company could have achieved but for such Change in Law (taking into consideration the Lender’s policies and the policies of the Lender’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to the Lender, as the case may be, such additional amount or amounts as certified by the Lender as being required to compensate the Lender or the Lender’s holding company for any such reduction actually suffered. The Lender agrees to use reasonable efforts (including reasonable efforts to change its lending office) to avoid or to minimize any amounts which might otherwise be payable pursuant to this Section 3.03, at the cost and expense of the Borrowers.

 

(c) Certificates for Reimbursement. A certificate of the Lender setting forth the amount or amounts necessary to compensate the Lender or its holding company, as the case may be, as specified in clause (a) or (b) of this Section 3.03 and delivered to the Borrowers shall be conclusive absent manifest error. The Borrowers shall pay the Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

(d) Delay in Requests. Failure or delay on the part of the Lender to demand compensation pursuant to the foregoing provisions of this Section 3.03 shall not constitute a waiver of the Lender’s right to demand such compensation.

 

Section 3.04 Compensation for Losses. Upon demand of the Lender from time to time, the Borrowers shall promptly compensate the Lender for and hold the Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a) any continuation, payment or prepayment of any Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or

 

(b) any failure by the Borrowers (for a reason other than the failure of the Lender to make a Loan) to prepay, borrow or continue any Loan on the date or in the amount notified by the Borrowers,

 

including, in each case, any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrowers shall also pay any customary administrative fees charged by the Lender in connection with the foregoing.

33

---

For purposes of calculating amounts payable by the Borrowers to the Lender under this Section 3.04, the Lender shall be deemed to have funded each Loan made by it at the LIBO Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Loan was in fact so funded. A certificate of the Lender setting forth the amount or amounts necessary to compensate the Lender or its holding company, as the case may be, as specified in this Section 3.04 and delivered to the Borrowers shall be conclusive absent manifest error.

 

ARTICLE IV

CONDITIONS PRECEDENT

 

Section 4.01 Conditions Precedent. The following conditions precedent shall have been satisfied or waived on or prior to the Closing Date, as determined by the Lender:

 

(a) Delivery of Certain Documents, Certificates, Etc. The Lender’s receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, with each Loan Document properly executed by a Responsible Officer of the signing Loan Party and dated the Closing Date (or in the case of certificates of governmental officials, a recent date before the Closing Date), and with each of the following in form and substance reasonably satisfactory to the Lender:

 

(i) executed counterparts of this Agreement and the Guaranty, sufficient in number for distribution to the Lender and each Loan Party;

 

(ii) a Term Note and a Revolving Note each on safety paper executed by the Borrowers in favor of the Lender;

 

(iii) an Officer’s Certificate (which Officer’s Certificate shall be accompanied by copies of all documents referred to in such Officer’s Certificate, in each case as in effect as of the Closing Date (and, if not in English with an English translation thereof), of each Loan Party in respect of (A) its Constituent Documents, (B) its address and other information that will allow the Lender to identify it in accordance with Applicable Law, and (C) the actions of its Equity Interest holders, shareholders, partners, board of managers or other similar corporate supervisory body taken to authorize the execution, delivery and performance of this Agreement and each other Transaction Document to which it is or is to be a party;

 

(iv) a certificate of each Loan Party in respect of the identity, authority, capacity, incumbency and true signature of each Person who has signed or will sign this Agreement and each other Transaction Document on behalf of such Loan Party for the purposes of signing documents in connection with this Agreement and any other Transaction Document and the transactions contemplated hereby and thereby;

34

---

(v)  to the extent (i) not previously delivered pursuant to the Original Credit Agreement or (ii) amended or supplemented since the Original Credit Agreement Closing Date, copies of each Material Project Agreement and each Affiliate Contract in effect on the Closing Date (and, if not in English, an English translation thereof), including any amendments or supplements thereto, accompanied by an Officer’s Certificate of a Borrower, certifying that (A) the copies of the Material Project Agreements and Affiliate Contracts delivered pursuant to this Section 4.01(a)(v) are true, correct and complete copies of such Material Project Agreement or Affiliate Contract, as the case may be, (B) no term or condition of any Material Project Agreement or Affiliate Contract has been amended from the form thereof delivered pursuant to this Section 4.01(a)(v) (other than in connection with any such amendments or supplements so delivered), (C) each Material Project Agreement and Affiliate Contract delivered pursuant to this Section 4.01(a)(v) is in full force and effect, enforceable against each Person party thereto in accordance with its terms, (D) neither the Borrowers nor, to the knowledge of such Borrower, any other Person party to any Material Project Agreement or Affiliate Contract delivered pursuant to this Section 4.01(a)(v) is in default thereunder, (E) each of the Real Estate Rights Agreements delivered pursuant to this Section 4.01(a)(v) has been filed for registration in the relevant public registry in which such filing is necessary or appropriate in order to render such Real Estate Rights Agreement enforceable against any third party in interest in respect of the Real Property Interests conveyed to the Borrowers under such Real Estate Rights Agreement and (F) the Borrowers and to the knowledge of the Borrowers each other Person party to each Material Project Agreement and Affiliate Contract delivered pursuant to this Section 4.01(a)(v) have complied with all conditions precedent to their obligations under such Material Project Agreement or Affiliate Contract, as the case may be, required to be performed or complied with by any such Person on or before the Closing Date;

 

(vi)  to the extent (i) not previously delivered pursuant to the Original Credit Agreement or (ii) renewed or supplemented since the since the Original Credit Agreement Closing Date, copies of each Project Approval and Agreement Approval necessary or required under the terms of the Transaction Documents or Applicable Law to be obtained as of the Closing Date (and if not in English, an English translation thereof), including any amendments and supplements thereto, accompanied by an Officer’s Certificate of a Borrower certifying that (A) the copies of each of the Project Approvals and Agreement Approvals delivered pursuant to this Section 4.01(a)(vi) are true, correct and complete copies of such Project Approval or Agreement Approval, as the case may be, (B) no term or condition of any such Project Approval or Agreement Approval has been amended from the form thereof delivered pursuant to this Section 4.01(a)(vi) (other than in connection with any such amendments or supplements so delivered), (C) each Project Approval and Agreement Approval delivered pursuant to this Section 4.01(a)(vi) is in full force and effect, is not subject to any pending appeal, intervention or similar proceeding or any unsatisfied condition that may result in modification or revocation thereof, (D) to the knowledge of such Borrower, no event has occurred that could reasonably be expected to result in the modification, cancellation or revocation of any Project Approval or Agreement Approval required to be delivered pursuant to this Section 4.01(a)(vi), and (E) such Borrower has no reason to believe that those Project Approvals and Agreement Approvals that are not necessary under the terms of the Transaction Documents or Applicable Law as of the Closing Date will not be obtained in the ordinary course as and when required;

 

35

---

 

(viii) to the extent (i) not previously delivered pursuant to the Original Credit Agreement or (ii) amended or supplemented since the Original Credit Agreement Closing Date, a copy of the Life of Mine Plan accompanied by an Officer’s Certificate of a Borrower stating that the Life of Mine Plan and all components thereof (A) were prepared in good faith by the Borrowers or at the direction of the Borrowers, (B) are based upon assumptions that are consistent with the requirements of the Transaction Documents, the Agreement Approvals, the Project Approvals and the Applicable Law and which the Borrowers consider to be reasonable in light of the conditions existing as of the Closing Date, and (C) in the Borrowers’ reasonable judgment, represent the Borrowers’ best estimate of the information set forth therein as of the Closing Date;

 

(ix) to the extent (i) not previously delivered pursuant to the Original Credit Agreement or (ii) amended or supplemented since the Original Credit Agreement Closing Date, a hard copy of, and an electronic copy containing, the Financial Model accompanied by an Officer’s Certificate of a Borrower stating that the Financial Model and its underlying models and assumptions (A) were prepared in good faith by the Borrowers, (B) are based on assumptions that are consistent with the requirements of the Life of Mine Plan, the Transaction Documents, the Agreement Approvals, the Project Approvals and Applicable Law and that the Borrowers consider to be reasonable in light of the conditions existing as of the Closing Date and (C) in the Borrowers’ reasonable judgment, represent their best estimate of the information set forth therein as of the Closing Date;

 

(x) to the extent (i) not previously delivered pursuant to the Original Credit Agreement or (ii) amended or supplemented since the Original Credit Agreement Closing Date, a copy of the Environmental Management Plan; 

 

(xi) copies of the most recent audited and unaudited financial statements of the Borrowers and the Guarantor on a consolidated basis, accompanied by an Officer’s Certificate of each such Person, certifying that the copies of such financial statements fairly present the financial condition of such Person and its Subsidiaries (to the extent applicable) as of the date of such financial statements and the results of operations of such Person and its Subsidiaries (to the extent applicable) for the period indicated in such financial statements, all in accordance with Applicable GAAP or U.S. GAAP, as the case may be, subject, in the case of interim statements, to year-end audit adjustments and the absence of footnotes;

 

(xii) to the extent (i) not previously delivered pursuant to the Original Credit Agreement or (ii) amended or supplemented since the Original Credit Agreement Closing Date, copies of each Hedge Agreement in effect as of the Closing Date;

 

36

---

 

(xiii) copies of all policies, endorsements and other documents required under Section 7.01(r) to be in effect as of the Closing Date, accompanied by: (A) letters from the Borrowers’ insurance brokers or insurers (commonly referred to as “undertaking letters”), dated not earlier than fifteen (15) days prior to the Closing Date, stating with respect to each insurance policy that (1) such policy is in full force and effect, (2) all premiums theretofore due and payable thereon have been paid and (3) the underwriters of such insurance have agreed that the policies, when issued, will contain the provisions required under Section 7.01(r), and (B) a report from the Insurance Consultant in form and substance reasonably satisfactory to the Lender confirming that such Required Insurance is in full force and effect in accordance with the terms of this Agreement;

 

(xiv) the Mortgage, as amended to reflect the terms of this Agreement, in substantially the form of Exhibit I hereto, duly authorized and executed by each Person party thereto before a notary public in Mexico, together with evidence of the completion of all actions, recordings and filings of or with respect to the Mortgage that the Lender may deem necessary or desirable in order to create, perfect and protect a first priority lien, mortgage and encumbrance over the real property and assets described therein, including, without limitation, the filing of the Mortgage in the relevant public registries in connection therewith;

 

(xv) the Equity Pledge Agreements, as amended to reflect the terms of this Agreement, in substantially the form of Exhibit J hereto, duly executed by the Guarantor and Pledgor, together with evidence of the completion of all other actions, recordings and filings of or with respect to such Equity Pledge Agreements that the Lender may deem necessary or desirable in order to perfect and protect the Liens created thereby;

 

(xvi) the Movable Assets Pledge Agreement, as amended to reflect the terms of this Agreement, in substantially the form attached hereto as Exhibit K hereto, duly authorized and executed by each Person party thereto before a notary public in Mexico, together with evidence of the completion of all recordings and filings of and any other actions with respect to the Movable Assets Pledge Agreement that the Lender may deem necessary or appropriate in order to create, perfect and protect a first priority pledge, lien and encumbrance over the movable assets described therein as contemplated thereunder, including, without limitation, the filing of the Movable Assets Pledge Agreement in the relevant public registries in connection therewith;

 

(xvii) the Account Pledge Agreement, as amended to reflect the terms of this Agreement, in substantially the form attached hereto as Exhibit L, duly authorized and executed by each Person party thereto before a notary public in Mexico, together with evidence of the completion of all recordings and filings of and any other actions with respect to the Account Pledge Agreement that the Lender may deem necessary or appropriate in order to create, perfect and protect a first priority pledge, lien and encumbrance over the accounts as contemplated therein, including, without limitation, the filing of the Account Pledge Agreement in the relevant public registries in connection therewith; and

 

37

---

 

(xviii) an irrevocable power of attorney, duly notarized, appointing Lender, as attorney-in-fact of the Borrowers, with the power and right, in the name or on behalf of the Borrowers, without notice to or assent by the Borrowers, in terms of the first three paragraphs of Article 2554 of the Mexican Federal Civil Code and the correlative articles of the other States of Mexico and the Federal District and Article 9 of the General Law of Negotiable Instruments and Credit Transactions to the extent permitted by Applicable Law, to take any action in connection with any lawsuits and collections, acts of administration and acts of ownership, and to execute any instruments which the Lender reasonably may deem necessary to create, preserve, continue or perfect any Lien granted or purported to be granted under or pursuant to any Mexican Collateral Document and for no other purpose, but the power of attorney provided in this clause (xix) shall be used and exercised only if the Borrowers or counsel for the Borrowers fail to timely take any of the above creation, preservation, continuation or perfection actions, and the power of attorney granted hereby shall not cause any Loan Party to pay to the appointed attorneys in fact a compensation, fee or remuneration apart and different from those expressly specified hereunder; and

 

(xix) evidence reasonably satisfactory to the Lender that the Borrowers have title consistent with the Borrowers’ representations and warranties in Section 5.01(j) hereof to all Real Property Interests necessary for the development, construction and operation of the Mine in accordance with Applicable Law, the Project Approvals and the Transaction Documents and as otherwise contemplated by the Life of Mine Plan, free and clear of any Liens, other than Permitted Liens.

 

(b) Taxes, Etc. All Taxes and Other Taxes due and payable on or prior to the Closing Date (i) in connection with the execution, delivery, filing, recording or admissibility in evidence of any Transaction Document or to ensure the legality, validity, enforceability, perfection or admissibility in evidence of the Transaction Documents, and (ii) in connection with the consummation of the transactions contemplated by, and the performance of, the Transaction Documents, shall have been duly paid in full or an appropriate exemption therefrom shall have been obtained.

 

(c) Representations and Warranties. The representations and warranties of each Loan Party, and to the Borrowers’ knowledge each Material Project Party, contained in any Transaction Document, or which are contained in any certificate furnished at any time under it pursuant to any Transaction Document shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on and as of such date (or, if any such representation or warranty specifically speaks of an earlier date, such representation or warranty shall have been true and correct in all material respects on and as of such earlier date).

 

(d) Absence of Defaults. No Prospective Event of Default or Event of Default shall have occurred and be Continuing.

 

(e) Material Adverse Effect. Since July 31, 2007, there shall not have occurred any event which has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(f) Certain Fees and Expenses. The Borrowers shall have paid all accrued reasonable expenses of the Lender (including all reasonable fees and expenses of the Consultants, advisors and counsel to the Lender) and any fees due to the Lender as of the Closing Date and shall have delivered to the Lender the Guarantor Warrants.

 

38

---

 

(g) Hedge Agreements. Each of the Hedge Agreements required to be entered into as of the Closing Date pursuant to Section 7.01(p)(i) shall be in full force and effect.

 

(h) [Reserved.]

 

(i) Compliance with Original Credit Agreement. Lender shall be satisfied that Borrowers have complied in all material respects with all reporting and notice requirements set forth in the Original Credit Agreement.

 

Section 4.02 Conditions Precedent to All Borrowings. The obligations of the Lender to make any Loan is subject to the fulfillment or waiver in writing of the following conditions precedent as determined by the Lender prior to the related Borrowing:

 

(a) Taxes, Etc. All Taxes and Other Taxes due and payable on or prior to the date of such Borrowing (i) in connection with the execution, delivery, filing, recording or admissibility in evidence of any Transaction Document or to ensure the legality, validity, enforceability, perfection or admissibility in evidence of the Transaction Documents, and (ii) in connection with the consummation of the transactions contemplated by, and the performance of, the Transaction Documents, shall have been duly paid in full or an appropriate exemption therefrom shall have been obtained.

 

(b) Representations and Warranties. The representations and warranties of each Loan Party and, to the Borrowers’ knowledge each Material Project Party contained in any Transaction Document, or which are contained in any certificate furnished at any time under or pursuant to any Transaction Document, shall be true and correct in all material respects on and as of the date of such Borrowing with the same force and effect as if made on and as of such date (or, if any such representation and warranty specifically speaks of an earlier date, such representation and warranty shall have been true and correct in all material respects on and as of such earlier date).

 

(c) Absence of Defaults. No Prospective Event of Default or Event of Default shall have occurred and be Continuing or would result from such Borrowing or from the application of proceeds therefrom.

 

(d) Material Adverse Effect. Since July 31, 2007, there shall not have occurred any event which has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(e) Loan Notice. The Lender shall have received a Loan Notice in accordance with the requirements hereof.

 

(f) Fees and Expenses. The Borrowers shall have paid all accrued reasonable expenses of the Lender (including all reasonable fees and expenses of the Consultants, advisors and counsel to the Lender) and any fees due to the Lender as of the date of such Borrowing.

 

39

---

 

(g) Other Documents. The Lender shall have received such other approvals, documents, certificates and opinions relating to the Project as it may reasonably request.

 

(h) Due Diligence. The Lender shall have completed a due diligence investigation of the Borrowers, the Guarantor and the Project in scope, and with results, satisfactory to the Lender, and nothing shall have come to the attention of the Lender during the course of such due diligence investigation to lead it to believe (i) that any information provided to the Lender in connection with the Project or any aspect of the Life of Mine Plan has become misleading, incorrect or incomplete in any material respect, (ii) that the Borrowers will not have valid title to all material Real Property Interests comprising the Mine, and (iii) that any event shall have occurred which has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

Section 5.01 Representations and Warranties of the Borrowers. Each of the Borrowers represents and warrants to the Lender that:

 

(a) Organization and Ownership.

 

(i) Each of Oro de Altar and MSR (A) is a sociedad de responsabilidad limitada de capital variable, duly organized and validly existing under the laws of Mexico, (B) has all power and authority to own or lease and operate its property and, in the case of MSR, to carry out the development, construction, completion, ownership and operation of the Mine and (C) is duly qualified and is licensed and in good standing under the laws of each other jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. The Borrowers do not own any properties or assets and have not engaged in any business or activity other than those relating to or to be used in connection with the Mine and the Project. All of the outstanding Equity Interests in each of the Borrowers have been validly issued in compliance with the Constituent Documents of such Borrower and Applicable Law, are fully paid, non-assessable and free and clear of all Liens, except for Liens for taxes not yet due or which are subject to Contest and any Liens created in favor of the Lender under or pursuant to the Loan Documents.

 

(ii) As of the date hereof, the Guarantor owns 99.99% of the authorized Equity Interests in MSR and 51% of the authorized Equity Interests in Oro de Altar and the Pledgor owns 0.01% of the authorized Equity Interests in MSR and 49% of the authorized Equity Interests in Oro de Altar.

 

40

---

 

(b) Authorization; No Contravention. The execution, delivery and performance by it of each Transaction Document to which it is or is to be a party are within its corporate or other organizational powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (i) contravene the terms of its Constituent Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (A) any Contractual Obligation to which it is a party or affecting it or its properties or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which it or its property is subject; or (c) violate any Applicable Law. It is not in breach of any Contractual Obligation, the breach of which has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(c) Consents and Approvals for Project, Etc.

 

(i) Other than those Project Approvals which are not currently necessary or required for the development or operation of the Mine as contemplated by the Life of Mine Plan or otherwise required to be in effect under the terms of Applicable Law, this Agreement or the other Transaction Documents, as of the Closing Date, no approval, consent, exemption, authorization (including any Environmental Permit) or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required as of such Closing Date in connection with the development, construction or operation of the Mine in accordance with Applicable Law and as otherwise contemplated by this Agreement, the other Transaction Documents and the Life of Mine Plan, except for the approvals, consents, exemptions, authorizations, actions, notices, filings and licenses listed on Schedule 5.01(c) hereto (the “Project Approvals”) all of which, as of the Closing Date and except as otherwise noted on Schedule 5.01(c), (A) have been duly obtained, taken, given or made, (B) are in full force and effect, (C) are not subject to appeal, intervention or similar proceeding, and (D) are free from material conditions or requirements that have not been met or complied with.

 

(ii) It does not reasonably expect that any of the Project Approvals which have not been obtained as of the date this representation or warranty is made or deemed to be made, but which will be required in the future, will not be obtained in the ordinary course as and when required under the terms of the Transaction Documents, the Life of Mine Plan and Applicable Law or that such Project Approvals will be subject to any conditions or requirements that cannot be met or complied with.

 

(iii) All applicable waiting periods in connection with any Project Approval required to be in effect as of the date this representation or warranty is made or deemed to be made for the operation of the Mine as contemplated by the Life of Mine Plan or pursuant to the terms of Applicable Law, this Agreement or the other Transaction Documents have expired without any action having been taken by any Governmental Authority restraining, preventing or imposing materially adverse conditions upon any such Project Approval and no event has occurred that could reasonably be expected to result in the revocation, termination or adverse modification of any such Project Approval.

 

(d) Binding Agreement. This Agreement has been, and each other Transaction Document to which it is or will become a party, when delivered hereunder, will have been duly executed and delivered by it. This Agreement constitutes, and each other Transaction Document when delivered hereunder will constitute its legal, valid and binding obligation enforceable against it in accordance with its terms.

 

41

---

 

(e) Consents and Approvals for Agreements.

 

(i) No approval, consent, exemption or authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary for (A) the execution, delivery and performance by, or enforcement against, it of each of the Transaction Documents to which it is a party, (B) the grant by the Loan Parties of the Liens created under the Collateral Documents, (C) the perfection and maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof), or (D) the exercise by the Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for the approvals, consents, exemptions, authorizations, actions, notices and filings listed on Schedule 5.01(e) (the “Agreement Approvals”), all of which, on or prior to the Closing Date, (1) have been duly obtained, taken, given or made, (2) are in full force and effect, (3) are not subject to appeal, intervention or similar proceeding and (4) are free from conditions or requirements that have not been met or complied with, other than those Agreement Approvals which are not currently necessary or required to be in effect under the terms of Applicable Law, this Agreement or the other Transaction Documents as indicated in Schedule 5.01(e).

 

(ii) It does not reasonably expect that any of the Agreement Approvals which have not been obtained as of the date of this representation or warranty is made or deemed to be made, but which will be required in the future, will not be obtained in due course as and when required under the terms of the Transaction Documents, the Life of Mine Plan and Applicable Law or that such Agreement Approvals will be subject to conditions or requirements that cannot be met or complied with.

 

(iii) All applicable waiting periods in connection with any Agreement Approval required to be in effect as of the date this representation or warranty is made or deemed to be made pursuant to the terms of Applicable Law, this Agreement or the other Transaction Documents have expired without any action having been taken by any Governmental Authority restraining, preventing or imposing materially adverse conditions upon any such Agreement Approval and no event has occurred that could reasonably be expected to result in the revocation, termination or adverse modification of any such Agreement Approval.

 

(f) Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to its knowledge after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority by or against it or against any of its properties, assets or revenues that (i) purport to affect or pertain to this Agreement or any other Transaction Document or the consummation of the transactions contemplated hereby or thereby, or (ii) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.

 

42

---

 

(g) Financial Statements.

 

(i) Each of its financial statements and the related consolidated statements of income or operations, shareholders’ equity and cash flows delivered to the Lender pursuant to Sections 4.01(a)(ix) and 10.01(b) (A) were prepared in accordance with Mexican GAAP or U.S. GAAP, as applicable, consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, subject, in the case of quarterly financial statements, to year-end adjustments and the absence of footnotes; (B) fairly present its financial condition as of the date thereof and its results of operations for the period covered thereby, subject in the case of any such unaudited financial statements and related statements of income or operations, shareholders’ equity and cash flows, to the absence of footnotes and to normal year-end adjustments; and (C) show all of its material Indebtedness and other material liabilities, direct or contingent, as of the date thereof, including liabilities for taxes.

 

(ii) Since the date of its most recently delivered audited annual financial statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

 

(h) Project Information.

 

(i) It has disclosed or provided to the Lender all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information prepared and furnished by it, and to its knowledge none of the reports or other information furnished on its behalf, to the Lender in connection with the Project and the negotiation of this Agreement or otherwise prepared and delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in the light of the circumstances under which they were made, not misleading. There are no facts or circumstances known to it which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect and which have not been disclosed to the Lender (other than facts and circumstances which are available to the public).

 

(ii) The forecasted balance sheets, income statements and cash flow statements as well as other projections and other forward-looking statements and forecasts with respect to it and the Project (including those contained in the Financial Model or the Life of Mine Plan) delivered to the Lender are a fair and reasonable description of what they purport to describe and were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in the light of the conditions existing at the time of delivery of such projections, statements or forecasts and represented, at the time of delivery, its best estimate of its future financial performance.

 

(i) No Immunity. Neither it nor any of its properties has any immunity from jurisdiction of any court otherwise having valid subject matter and personal jurisdiction or from set-off or any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise). The execution, delivery and performance by it of the Transaction Documents to which it is a party are private and commercial acts performed for private and commercial purposes.

 

43

---

 

(j) Title to Properties, Etc.

 

(i) It, together with the other Borrower, has valid, registered title to, or a valid leasehold interest in or other right to use, all Real Property Interests necessary for the operation of the Mine in accordance with Applicable Law, the Project Approvals and the Material Project Agreements and as otherwise contemplated by the Life of Mine Plan, free and clear of any Liens, other than Permitted Liens. To its knowledge, the Mining Concessions and any other Real Estate Rights Agreement relating to any Real Property Interest necessary for the operation of the Mine in accordance with Applicable Law, the Project Approvals and the Material Project Documents and as otherwise contemplated by the Life of Mine Plan have been validly granted to it and registered (to the extent required by Applicable Law to insure valid title) in its name or the name of the other Borrower and are in full force and effect in accordance with their terms.

 

(ii) It has good, legal and valid title to all of its personal property and assets, free and clear of any Liens, other than Permitted Liens.

 

(iii) All of the services, utilities, equipment and materials or supplies necessary at the time of this representation to develop, construct, operate and maintain the Mine in accordance with Applicable Law, the Project Approvals and the Transaction Documents and as otherwise contemplated by the Life of Mine Plan are available or will be made available to the Borrowers or the Mining Contractor, including those available from time to time at commercially reasonable rates consistent with those contemplated in the Life of Mine Plan and the Financial Model.

 

(iv) Collectively, the Borrowers possess or have the direct or indirect benefit of all other rights necessary for them to develop and operate the Mine in compliance with Applicable Law, the Project Approvals and the Transaction Documents and as otherwise contemplated by the Life of Mine Plan.

 

(v) The Mine, if built and operated in accordance with the plans and specifications contained in the Life of Mine Plan, is reasonably expected to conform to and comply in all material respects with all covenants, conditions, restrictions and reservations in Applicable Law, the Project Approvals and the Transaction Documents.

 

(vi) It has not executed or delivered any powers of attorney, including, without limitation, any general powers of attorney for acts of domain (poderes generales para actos de dominio), other than any such powers of attorney necessary for the normal operation of the Project in the ordinary course of business in a manner otherwise consistent with its obligations and undertakings under this Agreement and the other Transaction Documents.

 

(vii) No mortgage, pledge, financing statement or other instrument or recordation similar in effect covering all or any part of the Collateral purported to be covered by the Collateral Documents or listing such Borrower or any trade name of such Borrower as debtor is on file in any recording office, except such as may have been filed in favor of the Lender or in respect of any other Permitted Lien.

 

44

---

 

(k) Payment of Taxes.

 

(i) It has filed or caused to be filed all tax returns and reports required to be filed and has paid all taxes, assessments, fees and other governmental charges levied or imposed upon it or its properties, income or assets otherwise due and payable (including all income, withholding, value added, real and personal property taxes and asset taxes (impuesto al activo)), except those which are subject to Contest.

 

(ii) There is no proposed tax assessment against it, including, without limitation, any tax liability in respect of withholding taxes, in connection with the Project, which is not specifically reflected in the Financial Model. The Financial Model accurately reflects all material taxes that will be due and payable by it under current Applicable Law, assuming that it has the income and expenses reflected in the Financial Model.

 

(iii) It is not a party to any tax sharing agreement.

 

(l) Taxes, Fees and Duties.

 

(i) All applicable Other Taxes have been paid in full (except as may be required for the registration of the Collateral Documents which will be paid (or have been paid) in full on or prior to the Closing Date).

 

(ii) No Taxes are required to be paid in connection with the execution, delivery, filing, recording, perfection, priority, validity, enforceability or admissibility in evidence of the Transaction Documents except as may be required for the registration of the Collateral Documents which will be paid (or have been paid) in full on or prior to the Closing Date.

 

(iii) No Taxes whatsoever are, under Applicable Law, imposed, assessed, levied or collected by Mexico or any political subdivision or taxing authority thereof or therein on, or in respect of, principal, interest, commissions or other amounts payable to the Lender under the Loan Documents, except, as of the date hereof, in respect of interest payments as to which there is a withholding tax payable in accordance with Article 195 of the Mexican Income Tax Law (except to the extent exempt pursuant to Article 196 of the Mexican Income Tax Law) or with the Mexico-US tax treaty if applicable.

 

(m) Ranking. The Secured Obligations are its direct, unconditional, and unsubordinated senior secured obligations, and such Secured Obligations rank, in right of payment, senior in right of payment and collateral security to all of its other obligations or Indebtedness, other than those obligations or Indebtedness secured by a Permitted Lien.

 

(n) Contracts with Affiliates. Each agreement, arrangement, understanding or dealing entered into by it with any of its Affiliates (the “Affiliate Contracts”) on or prior to the Closing Date is listed in Schedule 5.01(n) or has otherwise been entered into after the Closing Date in compliance with the terms of this Agreement.

 

45

---

 

(o) Material Project Agreements, Etc.

 

(i) A copy of each Material Project Agreement, Support Instrument related thereto, Secured Hedge Agreement, Affiliate Contract, and if available, Agreement Approval and Project Approval presently in effect has been furnished or provided to the Lender, and each such copy is true, correct and complete in all material respects.

 

(ii) None of the Material Project Agreements, or Support Instruments related thereto, has been amended, modified or supplemented or has been rescinded, terminated, invalidated, suspended or otherwise impaired, other than in accordance with any restrictions on the foregoing actions contained in this Agreement.

 

(iii) Each Material Project Agreement and each Support Instrument related thereto that is required for the operation of the Mine in accordance with the Life of Mine Plan is in full force and effect.

 

(iv) No default by it or, to its knowledge, any other party, has occurred and is continuing, or would result from the consummation of the transactions contemplated under the Loan Documents, under any of the Material Project Agreements, Support Instruments related thereto, Affiliate Contracts, Agreement Approval or Project Approvals in effect as of the date on which this representation is made.

 

(p) Compliance. It is in compliance with the requirements of all Applicable Laws, Agreement Approvals, Project Approvals and all orders, writs, injunctions and decrees applicable to it or to its properties (such compliance to include, without limitation, compliance with the Foreign Corrupt Practices Act of 1977, the Patriot Act, Terrorism Laws and all other Applicable Laws relating to money laundering or terrorist activities), except in such instances in which (i) such requirement of Applicable Law, Agreement Approval, Project Approval or order, writ, injunction or decree is subject to Contest or (ii) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

(q) Environmental Compliance.

 

(i) Except as set forth on Schedule 5.01(q) hereto, its operations and properties comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past non-compliance with such Environmental Laws and Environmental Permits by the Borrowers has been, or will be, resolved as required by applicable Environmental Laws and Environmental Permits, and no circumstances exist at the Mine that could reasonably be likely to have a Material Adverse Effect.

 

(ii) It conducts in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law with respect to the Mine, and as a result thereof it has reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

46

---

 

(iii) To its knowledge, there is no asbestos or asbestos-containing material on any property currently owned or operated by it and Hazardous Materials have not been released, discharged or disposed on any property owned or operated by it other than in material compliance with Environmental Laws and Environmental Permits.

 

(iv) As of the Closing Date, it is not undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law, except as set forth in the Environmental Management Plan; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property owned or operated by it have been disposed of in a manner consistent with any applicable Environmental Laws and not reasonably expected to result in a material liability other than remediation expense or other expenses set forth in the Environmental Management Plan.

 

(r) Investment Company. Neither it nor any Person Controlling it is or is required to be registered as an “investment company” under the Investment Company Act. Neither the making of any Loan nor the application of the proceeds or repayment thereof by it, nor the consummation of the other transactions contemplated by the Transaction Documents, will violate any provision of any such Act or any rule, regulation or order of the SEC thereunder.

 

(s) Proper Legal Form. This Agreement and each other Loan Document to which it is a party are in proper legal form under the laws of Mexico for the enforcement thereof in accordance with their terms against it (including enforcement of the choice of law provisions), and, to ensure the legality, validity, enforceability and admissibility in evidence of each Loan Document in Mexico, it is not necessary that any Loan Document or any other document be filed or recorded with any court or other authority in Mexico or that any stamp or similar tax be paid on or in respect of any Loan Document, except for those Agreement Approvals which are not currently necessary as indicated in Schedule 5.01(e) and which it in good faith expects will be obtained in the ordinary course as and when required; provided, however, that a Spanish translation by a Mexican court-approved translator will be required for the recordation in Mexico of any such document not written in Spanish.

 

(t) ERISA, Etc.

 

(i) It is neither a “plan sponsor” (as defined in Section 3(16)(B) of ERISA) of an ERISA Plan nor a participating employer in an ERISA Plan and has incurred no obligation in connection with an ERISA Plan. It is not, and has not been within the preceding six (6) years, an ERISA Affiliate of any Person. Neither the execution of this Agreement or any other Transaction Document nor the consummation of the transactions contemplated hereby or thereby will involve a “prohibited transaction” within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986 which is not exempt under Section 406 of ERISA or under Section 4975 of the Internal Revenue Code of 1986.

 

47

---

 

(ii) With respect to each employee benefit scheme or arrangement mandated by a government other than the United States (a “Foreign Government Scheme or Arrangement”) and with respect to each employee benefit plan maintained or contributed to by it in accordance therewith (a “Foreign Plan”):

 

(A) Any employer and employee contributions required by law or by the terms of any Foreign Government Scheme or Arrangement or any Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices.

 

(B) The accrued contributions are sufficient pursuant to Applicable Law to procure or provide for the accrued benefit obligations, as of the date hereof, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable GAAP.

 

(C) Each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities as required by Applicable Law.

 

(u) Use of Proceeds. The proceeds of the Term Loans will be used solely to pay Approved Project Costs. The proceeds of the Revolving Loans shall be used to fund general corporate and working capital requirements of the Borrowers including the acquisition and/or lease of real estate and mineral concessions and rights in Mexico and activities incidental thereto.

 

(v) Indebtedness. Set forth on Schedule 5.01(v) is a complete and accurate list and description of all Indebtedness owed by it or the Guarantor as of the date of this Agreement.

 

(w) Investments and Subsidiaries.

 

(i) As of the date of this Agreement, it has no Investments.

 

(ii) It has no Subsidiaries and is not a general or limited partner in any general or limited partnership or party to any joint venture.

 

(iii) It has not engaged in any business other than entering into the Transaction Documents to which it is a party and participating in the transactions contemplated thereby, and such other business as may be reasonably incidental in the ordinary course to the development, construction, financing, ownership, maintenance, management and operation of the Mine and the Project in accordance with the Life of Mine Plan and the Transaction Documents.

 

48

---

 

(iv) It is not party to or bound by any Contractual Obligation other than as contemplated by the Transaction Documents to which it is a party or those Contractual Obligations not prohibited by this Agreement.

 

(x) Margin Regulations. It is not engaged and will not engage, principally or as one of its important activities in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock and no proceeds of any Borrowing will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.

 

(y) Intellectual Property. It owns, or possesses the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights currently required in connection with the development and operation of the Mine.

 

(z) Perfection, Etc. As of the Closing Date, all filings and other actions necessary or desirable to perfect and protect the security interest in the Collateral created under the Collateral Documents have been duly made or taken and are in full force and effect, and on and after the Closing Date, the Collateral Documents create in favor of the Lender a valid and, together with such filings and other actions, perfected first priority security interest in the Collateral, subject to Permitted Liens, securing the payment of the Secured Obligations. It is the legal and beneficial owner of the Collateral purported to be granted by it under the Collateral Documents free and clear of any Lien, except for the Liens and security interests created or permitted under the Loan Documents.

 

(aa) Events of Default, Etc. No Prospective Event of Default or Event of Default has occurred and is Continuing.

 

(bb) Translations. To the Borrowers’ knowledge, all English translations of Transaction Documents executed in a language other than English and delivered by or on behalf of it to the Lender pursuant to the terms of the Loan Documents are true, correct and complete translations thereof.

 

(cc) Insurance. Attached hereto as Schedule 5.01(cc) is a true and complete list of all insurance polices maintained or caused to be maintained by or for the Borrowers or their assets (including without limitation any casualty, liability, automobile, directors and officers insurance) as of the date hereof.

 

(dd) Original Credit Agreement Notice and Reporting. It has complied in all material respects with its reporting and notice obligations under the Original Credit Agreement.

 

Section 5.02 Representations of the Guarantor. The Guarantor hereby represents and warrants to the Lender that:

 

(a) Organization. It (i) is a corporation duly organized and validly existing under the laws of the State of Delaware, (ii) has all power and authority to own or lease and operate its property and (iii) is duly qualified and is licensed and in good standing under the laws of each other jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect.

 

49

---

 

(b) Authorization; No Contravention. The execution, delivery and performance by it of each Transaction Document to which it is or is to be a party are within its corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (i) contravene the terms of its Constituent Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (A) any Contractual Obligation to which it is a party or affecting it or its properties or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which it or its property is subject; or (c) violate any Applicable Law. It is not in breach of any Contractual Obligation, the breach of which has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(c) Binding Agreement. This Agreement has been, and each other Transaction Document to which it is or will become a party, when delivered hereunder, will have been duly executed and delivered by it. This Agreement constitutes, and each other Transaction Document when delivered hereunder will constitute its legal, valid and binding obligation enforceable against it in accordance with its terms.

 

(d) Consents and Approvals for Agreements. No approval, consent, exemption or authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary for the execution, delivery and performance by, or enforcement against, it of each of the Transaction Documents to which it is a party other than those that have been obtained or made in connection herewith.

 

(e) Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to its knowledge after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority by or against it or against any of its properties, assets or revenues that (i) purport to affect or pertain to this Agreement or any other Transaction Document or the consummation of the transactions contemplated hereby or thereby, or (ii) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.

 

(f) Financial Statements. Each of its financial statements and the related consolidated statements of income or operations, shareholders’ equity and cash flows delivered to the Lender pursuant to Sections 4.01(a)(ix) and 10.01(b) (i) were prepared in accordance with Applicable GAAP, consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present its financial condition as of the date thereof and its results of operations for the period covered thereby, subject in the case of any such unaudited financial statements and related statements of income or operations, shareholders’ equity and cash flows, to the absence of footnotes and to normal year-end adjustments; and (iii) show all of its material Indebtedness and other material liabilities, direct or contingent, as of the date thereof, including liabilities for taxes.

 

50

---

 

(g) Ownership of Pledgor. It owns one hundred percent (100%) of the Equity Interests in the Pledgor.

 

ARTICLE VI

ACCOUNTS

 

Section 6.01 Accounts.