Exhibit 10.2



CREDIT FACILITY AGREEMENT


between


ALLIED GOLD LIMITED


- and -


NORD PACIFIC LIMITED


 


U.S. $2,400,000 


and with an optional facility of up to U.S. $3,000,000


December 20, 2003


Execution Copy







TABLE OF CONTENTS

 








	 	 	 	 	Page	 
	 	 	 	 	 	 
	ARTICLE 1	 	    - INTERPRETATION	 	1	 
	      1.1	 	Definitions	 	1	 
	      1.2	 	Headings and Agreement References	11	 
	      1.3	 	Number and Gender	 	11	 
	      1.4	 	Generally Accepted Accounting Principles	11	 
	      1.5	 	Per Annum Calculations; Currency; Time; "Including"	11	 
	      1.6	 	Statute References	 	12	 
	      1.7	 	Arrangement Agreement	 	12	 
	      1.8	 	Schedules	 	12	 
	ARTICLE 2	 	     - THE CREDIT FACILITY	 	13	 
	      2.1	 	Credit Facility	 	13	 
	      2.2	 	Borrowing Options	 	13	 
	      2.3	 	Non-Revolving Facility	 	13	 
	      2.4	 	Notice Periods for Drawdowns	 	13	 
	      2.5	 	Irrevocability	 	14	 
	      2.6	 	Purpose	 	14	 
	      2.7	 	Convertible Notes	 	14	 
	      2.8	 	Facility Fee	 	15	 
	ARTICLE 3	 	     - CONDITIONS PRECEDENT TO ADVANCES	15	 
	      3.1	 	Conditions for Initial Advance	 	15	 
	      3.2	 	Subsequent Advances	 	17	 
	      3.3	 	Waiver	 	19	 
	      3.4	 	Condition Subsequent to Credit Agreement	19	 
	ARTICLE 4	 	     - INTEREST	 	19	 
	      4.1	 	Interest on LIBOR Loans	 	19	 
	      4.2	 	Interest on Overdue and Accelerated Amounts	19	 
	      4.3	 	Determination Conclusive	 	20	 
	      4.4	 	Interest After Maturity	 	20	 
	ARTICLE 5	 	     - EXTENSION OF TERM; MATURITY DATE	20	 
	      5.1	 	Extension of Availability Period	 	20	 
	      5.2	 	Extension of Maturity Date	 	20	 
	      5.3	 	Increase of Optional Financing Amount	20	 
	ARTICLE 6	 	     - REPAYMENT	 	21	 
	      6.1	 	Mandatory Repayment of Principal	21	 
	      6.2	 	Prepayment	 	21	 
	ARTICLE 7	 	     - PAYMENTS; SET-OFF; TAXES	21	 
	      7.1	 	Place of Payment	 	21	 
	      7.2	 	Application of Payments	 	21	 
	      7.3	 	Set-Off	 	21	 
	      7.4	 	LIBOR Loan Repayment Net of Withholding Imposts	22	 
	      7.5	 	Stamp Taxes	 	23	 
	      7.6	 	Drawings by Lender for Payment of Certain Amounts	23	 






i










TABLE OF
CONTENTS

(continued)




 








	 	 	 	 
	 	 	Page	 
	ARTICLE 8	
        - REPRESENTATIONS
   AND WARRANTIES
	
   24
	 
	   8.1	Representations and Warranties	24	 
	   8.2	Disclosure	28	 
	   8.3	Deemed Repetition	29	 
	   8.4	General	29	 
	ARTICLE 9	     - COVENANTS	29	 
	   9.1	General	29	 
	   9.2	General Covenants	29	 
	   9.3	Financial Reporting	33	 
	   9.4	Covenants Regarding Property	35	 
	   9.5	Restrictions on Investments	35	 
	   9.6	Debt Restrictions	35	 
	   9.7	Notice Requirements	35	 
	   9.8	Lender May Perform Covenants	36	 
	ARTICLE 10	     - EVENTS OF DEFAULT AND ACCELERATION	36	 
	   10.1	Events of Default	36	 
	   10.2	Acceleration	41	 
	   10.3	Lender's Obligations to Advance	41	 
	   10.4	Remedies Cumulative and Waivers	41	 
	   10.5	Waiver of Accruing Default or Event of Default	42	 
	ARTICLE 11	     - CHANGE OF CIRCUMSTANCES	42	 
	   11.1	Illegality in Respect of LIBOR Loans	42	 
	ARTICLE 12	     - COSTS, EXPENSES AND INDEMNIFICATION	42	 
	   12.1	Costs and Expenses	42	 
	   12.2	Indemnification by the Borrower	42	 
	   12.3	Environmental Indemnity	43	 
	   12.4	No Merger	44	 
	ARTICLE 13	     - GENERAL	44	 
	   13.1	Notice	44	 
	   13.2	Governing Law; Attornment; Service Agent	45	 
	   13.3	Judgment Currency	46	 
	   13.4	Obligations of Borrower Absolute	46	 
	   13.5	Prohibited Rate	47	 
	   13.6	Benefit of the Agreement	47	 
	   13.7	Assignment	47	 
	   13.8	Severability	48	 
	   13.9	Whole Agreement	48	 
	   13.10	Amendments, Waivers and Consents	48	 
	   13.11	Further Assurances	48	 
	   13.12	Time of the Essence	49	 
	   13.13	Counterparts	49	 
	   13.14	Waiver of Immunity	49	 
	   13.15	Consent to Arrangement Transactions	49	 








ii










CREDIT AGREEMENT


THIS AGREEMENT
is made as of December 20, 2003


BETWEEN:


NORD PACIFIC LIMITED, a corporation existing under the


laws of New Brunswick (the "Borrower")


OF
THE FIRST PART


‐
and ‐


ALLIED GOLD LIMITED, a corporation incorporated and


existing under the laws of the
state of Western Australia (the "Lender")


OF THE SECOND PART


WHEREAS in
connection with the Arrangement Agreement and the transactions contemplated
thereby, the Borrower has requested the Credit Facility and the Lender has
agreed to provide it to the Borrower on the following terms;


NOW THEREFORE
the parties agree as follows:


ARTICLE 1 - INTERPRETATION


1.1       Definitions


In this
Agreement:


"Accruing Default" means
any event or circumstance which, after notice or the lapse of time or a
relevant determination being made (or any combination thereof), could
constitute an Event of Default;


"Acquisition Proposal"
means any inquiries, discussions, negotiations, offers or proposals regarding
any merger, amalgamation, take-over bid, sale of substantial assets, sale of
treasury shares, material financing or similar transaction involving the
Borrower, or any Subsidiaries of the Borrower;


"Adjusted Rate" has the
meaning ascribed thereto in Section 13.5;


"Advance" means an
advance of funds (or deemed advance of funds under Section 7.6 or 9.8) or
other extension of credit by way of a LIBOR Loan made pursuant to this
Agreement; 


"Affiliate" shall have
the meaning ascribed thereto in the Arrangement Agreement;








2


"Amended Transaction"
has the meaning ascribed thereto in Section 4.3 of the Arrangement Agreement;


"Applicable Laws" means,
in relation to any Person, transaction, event or circumstance:


(a)         all applicable provisions of laws, statutes, rules
and regulations of any Governmental Authority from time to time in effect, and


(b)        all judgments, orders, awards, decrees, official
directives, writs and injunctions of any Governmental Authority from time to
time in effect in an action, proceeding or matter in which such Person is a
party, or by which it or its property is bound, or having application to the
transaction or event;


"Arrangement Agreement"
means the Arrangement Agreement dated December 20, 2003 between the
Borrower and the Lender, providing for the acquisition of the Borrower and its
Subsidiaries by the Lender pursuant to an arrangement under Section 128 of
the Business Corporations Act (New Brunswick);


"Australex" means Nord
Australex Nominees (PNG) Limited, a corporation organized under the laws of
Papua New Guinea, and which is a wholly-owned Subsidiary of the Borrower;


"Availability Period"
means the period during which Advances are available under the Credit Facility,
commencing on the date on which the conditions precedent in Section 3.1
are satisfied (or waived as provided in Section 3.3) and ending at
4:00 p.m. (Perth, Australia time) on June 30, 2004, as may be
accelerated or extended in accordance with the terms hereof;


"Banking Day" means a
day on which banks generally are open for business in Perth, Australia and
Dayton, Ohio, but in any event does not include a Saturday or a Sunday;


"Bankruptcy Act" means
the Bankruptcy and Insolvency Act (Canada);


"Board of Directors"
means the duly appointed body of a Person having the power to direct, or cause
the direction of, the management and policies of such Person, and any successor
body thereof;


"Borrower's Account"
means U.S. Dollar Account #767807213 maintained by the Borrower at
National City Bank, Dayton, Ohio ABA no. 041000124, wire instructions for the
deposit of certain Advances hereunder to be as advised by the Borrower;


"Borrower's Counsel"
means the firm of Clark Drummie or such other legal counsel acceptable to the
Lender, acting reasonably, as the Borrower may from time to time designate;


"Cash Call" means the
Borrower's portion of a requirement issued by the Joint Venture in writing
pursuant to the Joint Venture Agreements to each member of the Joint Venture to
pay funds as specified therein on account of the exploration or development
costs related to the Joint Venture;


 








3


"Cash Call Forecast"
means a forecast of Cash Calls expected by the Simberi Joint Venture to be
issued over the two (2) month period (or such longer period as may be covered
by such forecast) from the date of the forecast;


"Certificate of the Borrower"
means a written certificate addressed to the Lender and signed in the name of
the Borrower by the President of the Borrower; 


"CMNP" means Compañía
Minera Nord Pacific De Mexico, S.A. de C.V. a corporation organized under the
laws of Mexico and which is a wholly-owned Subsidiary of the Borrower;


"Commitment Amount"
means, to the extent not cancelled, reduced or terminated hereunder,
U.S. $2,400,000;


"Credit Facility" means
the credit facilities established by the Lender in favour of the Borrower
pursuant to this Agreement;


"Current Expense Forecast"
means a forecast of Current Expenses incurred or expected to be incurred over
the two (2) month period (or such longer period as may be covered by such
forecast) from the date of the forecast;


"Current Expenses" means
expenses of the Borrower, other than any Cash Calls, incurred and payable
within twelve (12) months of the date of any Current Expense Forecast relating
thereto;


"Debt" of any Person means:


(a)                obligations for borrowed money (and any notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money), including purchase money
obligations, which under GAAP would be shown on the balance sheet or the notes
thereto as a liability of such Person,


(b)                capitalized lease obligations and obligations
under sale-leasebacks,


(c)               
obligations which are secured by any Security
Interest on property owned by such Person, whether or not such obligations
shall have been assumed by such Person,


(d)              
obligations for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or arising
under any conditional sale or other title retention agreement with respect to
any such property),


(e)               
obligations under Guarantees, 


(f)                
any other indebtedness whatsoever, and


(g)               
Debt Equivalents.








4


Debt of any Person shall include all
obligations of such Person of the character described in clauses (a) through (f)
to the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be extinguished under
GAAP.  For certainty, obligations of the Borrower under the Joint Venture
Agreements shall not constitute Debt;


"Debt
Equivalents" means the following obligations of any Person:


(a)               
obligations under a contract providing for the
making of loans, advances or capital contributions to any other Person, or for
the purchase of any property from any other Person, in each case in order to
enable such other Person to maintain working capital, net worth or any other
balance sheet condition or to pay debts, dividends or expenses,


(b)              
obligations to purchase Debt of another or
property securing Debt of another, or to advance or supply funds for such
purchase or for a payment thereof,


(c)               
obligations under a contract for the purchase of
assets or receipt of services where full payment for the same is not required
to be made by the Person until after six (6) months from the date incurred,


(d)                obligations under a contract for the purchase of
property or receipt of services if such contract (or any related document)
requires that payment for such property or services shall be made by the Person
regardless of whether or not delivery of such property or services is ever made
or tendered,


(e)               
obligations under a contract for the sale of
property or delivery of services by such Person if such contract (or any
related document) subordinates payment due to such Person for such property or
services in favour of any indebtedness of the purchaser or user owed to any
other Person,


(f)                
obligations under a contract to rent or lease
(as lessee) any property if such contract (or any related document)
(i) provides that the obligation to make payments thereunder is absolute
and unconditional under conditions not customarily found in commercial
operating leases then in general use, or (ii) requires that the Person
purchase or otherwise acquire securities or obligations of the lessor,


(g)               
obligations in respect of redeemable shares of
such Person,


(h)               
interest rate, currency, equity, commodity or
other derivative or swap obligations of such Person, and obligations or
prepayments in respect of any production payment transactions, and 


(i)                 obligations of such Person in respect of letters
of credit or instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not representing
obligations for borrowed money);


 








5


"Designated Directors"
means Lucile Lansing and John Roberts, each of whom are validly appointed and
existing members of the Board of Directors as of the date hereof, or any
successor(s) to each such director (except for any successor selected by Allied
in accordance with Sections 9.2(t) and (u) hereof;


"Documents" means this
Agreement and the agreements, certificates, instruments, Drawdown Notices,
Directions to Pay, and all other documents delivered or to be delivered to or
for the benefit of the Lender pursuant hereto or thereto and, when used
specifically in relation to any Person, the term "Documents" shall
mean and refer to the Documents that have been executed and delivered by such
Person;


"Drawdown
Date" means the date specified by the Borrower in the Drawdown Notice
as the date for an Advance hereunder, and which shall be a Banking Day;


"Drawdown Notice" means
a Certificate of the Borrower substantially in the form required by Section
2.4, duly completed and accompanied by all information and attachments referred
to therein, to be given by the Borrower to the Lender pursuant to this
Agreement;


"Environmental Law" shall
have the meaning ascribed thereto in the Arrangement Agreement;


"Equivalent Amount"
means, on any date, the equivalent amount in one currency at the 12:00 p.m.
(New York time) spot rate of exchange announced by the Federal Reserve Bank of
New York on that day for conversion of another currency to such currency, or if
such rate is for any reason unavailable, at the spot rate quoted for wholesale
transactions of currency exchanges from the other currency to such currency by
Federal Reserve Bank of New York in Toronto at approximately 12:00 p.m.
(New York time) on such date in accordance with its normal practice (provided
that if such spot rate is not quoted on the date in question, the equivalent
spot rate quoted by Federal Reserve Bank of New York on the immediately
preceding Banking Day) as normally found at the internet site of such bank at:
www.ny.frb.org/markets/fxrates/noon.cfm, or at such other rate as may be
reasonably determined by the Lender and which shall be conclusive absent
manifest error;


"Event of Default" means
any of the events or circumstances described in Section 10.1;


"GAAP" has the meaning
ascribed thereto in Section 1.4;


"Governmental
Authority" means:


(a)               
any government, parliament or legislature, any
regulatory or administrative authority, agency, commission or board and any
other statute, rule or regulation making entity having or purporting to have
jurisdiction in the relevant circumstances,


(b)              
any Person acting or purporting to act under the
authority of any of the foregoing or under a statute, rule or regulation
thereof, and


(c)               
any judicial, administrative or arbitral court,
authority, tribunal or commission having or purporting to have jurisdiction in
the relevant circumstances, 


 








6


including any such person or entity
located in Papua New Guinea;


"Guarantee" means, with
respect to any Person, any direct or indirect liability, contingent or
otherwise, of such Person with respect to any indebtedness, lease, dividend or
other obligation of another, including any such obligation directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or sold with recourse by such
Person including:


(a)               
any such obligation in effect guaranteed by such
Person through any agreement (contingent or otherwise) to purchase, repurchase
or otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form of
loans, advances, share purchases, capital contributions, letters of credit or
otherwise),


(b)                any obligation to maintain the solvency or any
balance sheet or other financial condition of the obligor of such obligation,
and


(c)               
any obligation to make payment for any products,
materials or supplies or for any transportation or services regardless of the
non-delivery or non-furnishing thereof,


in any such
case if the purpose or intent of such agreement is to provide assurance that
such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected against loss in respect thereof;


"Hazardous
Materials" shall have the meaning ascribed thereto in the Arrangement
Agreement;


"Hicor" means Hicor
Corporation a corporation organized under the laws of Delaware and which is a
wholly-owned Subsidiary of the Borrower; 


"Investment" means, with
respect to any Person, (i) any direct or indirect purchase or other
acquisition of Debt, shares, equity or ownership interests or securities of any
other Person, (ii) any direct or indirect loan or advance to any other
Person, (iii) any Guarantee in connection with the obligations, shares or
securities of any other Person, (iv) any capital contribution to any other
Person, including all Debt and accounts receivable from such other Person which
are not current assets or did not arise from sales to such other Person in the
ordinary course of business, and (v) any direct or indirect purchase or
other acquisition of any assets other than assets used in the ordinary course
of business;


"Joint Venture" means
the Simberi Mining Joint Venture and the Tabar Exploration Joint Venture;


"Joint Venture Agreements"
and terms related thereto shall have the meanings ascribed thereto in the
Arrangement Agreement;


"Lender" means the
Lender identified in the preamble to this Agreement and any assignee thereof;


"Lender's Counsel" means
such legal counsel as the Lender may from time to time designate;


 








7


"LIBOR" for an Advance
means, on the day that is two Business Days prior to the date of the Advance,
the rate per annum quoted as the London Interbank Offer Rate for "this
week" as evidenced on the website: www.bankrate.com/brm/ratehm.asp
for term deposits of United States dollars having a term that is most closely
similar to the term of maturity of the Advance in question, as determined by
the Lender in its sole discretion (or if such rate is unavailable, the rate
quoted to the Lender by its principal bankers at such time and notified to the
Borrower), provided however, that once selected in accordance herewith, the
LIBOR rate applicable to the corresponding LIBOR Loan made pursuant to Section
2.2 shall remain fixed until the repayment of all amounts owing under such
LIBOR Loan, notwithstanding any changes in such applicable LIBOR rate on the
aforementioned website or elsewhere; 


"LIBOR Loan" means an
Advance in U.S. Dollars with respect to which interest is to be calculated
by reference to LIBOR;


"Material
Adverse Effect" means a Material Adverse Effect on (i) the business,
financial condition, operations, Property or prospects of the Borrower or any
of its Subsidiaries, (ii) the rights of the Lender under any Document, or (iii)
the ability of the Borrower or any of its Subsidiaries to perform any of its
obligations under any Document, in each case as determined by the Lender acting
reasonably and in good faith;


"Maturity Date" means
December 31, 2005, as may be extended pursuant to Section 5.2 hereof;


"NANPL" means Nord
Australex Nominees Pty. Ltd., a corporation organized under the laws of New
South Wales, Australia and which is a wholly-owned Subsidiary of the Borrower;


"Note" means a Series A
Note, Series B Note, Series C Note, Series D Note or Series E Note in the form
required by Section 2.7 of this Agreement, each of which is convertible into
Shares of the Borrower as provided in the terms of such Notes;


"NRPPL" means
Nord Resources (Pacific) Pty. Ltd., a corporation organized under the laws of
New South Wales, Australia and which is a wholly-owned Subsidiary of the
Borrower;


"Obligations" means all
of the indebtedness, liabilities and obligations, present and future, absolute
and contingent, matured or not, of the Borrower under the Documents, including
for principal, interest, fees, indemnities, costs and expenses, and further
including non‐monetary obligations;


"Optional Financing Amount"
means, at the option of the Lender, to the extent not cancelled, reduced or
terminated hereunder, U.S. $3,000,000 in excess of the Commitment Amount;


"Organizational Documents"
means the documents (including bylaws, if applicable) pursuant to which a
Person (other than an individual) is organized;


"Other Currency" has the
meaning set ascribed thereto in Section 13.3;








8


"Outstandings"
means, as at any time of determination, the aggregate of the amount in U.S.
Dollars of the principal amount of all outstanding LIBOR Loans;


"Participating
Interest" has the meaning provided therefor in the Joint Venture
Agreements;


"Permitted
Debt" means:


(a)               
Debt owed by the Borrower to the Lender under
the Documents,


(b)              
unsecured Debt owed by the Borrower to any other
Person not to exceed U.S. $500,000 in the aggregate at any time
outstanding; and


(c)               
Debt secured by Permitted Encumbrances;


"Permitted Dispositions"
means the sale of any Property of the Borrower or any of its Subsidiaries in
the aggregate in any 12-month period not to exceed U.S. $10,000;


"Permitted
Encumbrances" means:


(a)               
Security Interests in any judicial proceedings
filed against the Borrower or any of  its Subsidiaries in respect of which
final judgement has not been rendered and which the Borrower or any of  its
Subsidiaries shall be contesting in good faith if and for so long as (i) a
stay of enforcement of such Security Interest (if enforceable by seizure, sale
or other remedy against any Property), as the case may be, shall be in effect
and (ii) in respect of all such Security Interests which are in excess of
U.S. $50,000 in the aggregate, an amount in cash (or cash equivalent security)
sufficient to obtain a discharge thereof shall have been deposited with a court
of competent jurisdiction,


(b)              
Security Interests incurred or created in the
ordinary course of business of the Borrower or any of its Subsidiaries and in
accordance with sound industry practice and incidental to construction or
operations which have not at such time been filed pursuant to law or which
relate to obligations not due or delinquent,


(c)               
Security Interests incurred or created in the
ordinary course of business and in accordance with sound industry practice in
respect of any of the assets of the Borrower or any of  its Subsidiaries as
security in favour of any other Person who is conducting the exploration,
development or operation of the property to which such Security Interests
relate for the Borrower's or any of  its Subsidiaries portion of the costs and
expenses of such exploration, development or operation which have not at such
time been filed pursuant to law or which relate to obligations not due or
delinquent,


(d)              
Security Interests given to a public utility or
any municipality or governmental or other authority when required by such
public utility or municipality or other authority in connection with the
operations of the Borrower or any of  its Subsidiaries, and which relate to
obligations not due or delinquent,








9


(e)               
Security Interests securing assessments under
workers' compensation laws, unemployment insurance or similar social security
legislation which are not due or delinquent,


(f)                Security Interests for penalties arising under
ordinary course non-participation provisions of operating agreements in respect
of the Borrower or any of  its Subsidiaries mining properties (and related
tangibles) which do not, individually or in the aggregate, materially detract
from the use or value of the property subject thereto,


(g)               
undetermined or inchoate Security Interests
incidental to operations in the ordinary course of business which have not been
filed pursuant to law against title to such properties or assets and which
relate to obligations not due or delinquent,


(h)               
any interest or title of a lessor under any
lease of any property (whether real or personal) by the Borrower as lessee
that, in conformity with GAAP, is accounted for, or should be accounted for, as
a capital lease on the balance sheet of the Borrower, provided that such
Security Interests do not extend to any property or assets which are not leased
property subject to such lease, and


(i)                 the security granted under the terms of any of
the Joint Venture Agreements by the Borrower, SGC or Australex to PGM or to
lenders to the Joint Venture.


"Permitted
Investments" means:


(a)               
Investments in the Joint Venture pursuant to the
Joint Venture Agreements,


(b)                bank term deposits and similar short term
Investments in respect of monies of the Borrower, as at the date of the first
Advance being term deposits at National City Bank, Dayton, Ohio in the name of
the Borrower;


"Person" means an
individual, corporation, partnership, joint venture, association, trust,
unincorporated organization, union, government or any agency, department or
instrumentality thereof, the executors or legal representatives of an
individual, or any other entity;


"Prohibited Rate" has
the meaning ascribed thereto in Section 13.5;


"Proper Currency" has
the meaning ascribed thereto in Section 13.3;


"Proposed Agreement" has
the meaning ascribed thereto in Section 4.3 of the Arrangement Agreement;


"Property"
means the property, assets and undertakings (and any part thereof), of the
Borrower and any of its Subsidiaries, both real and personal, tangible and
intangible, and shall, for certainty, include the Joint Venture Agreements,
each of the Borrower's and its Subsidiaries' Participating Interests in the
Simberi Joint Venture, and all related rights, assets and properties thereto;








10


"Sarbanes Oxley Act" has
the meaning ascribed thereto in Section 8.1(w) hereof;


"SEC" means the
Securities and Exchange Commission of the United States of America, or any
successor body thereto;


"SEC Reports" has the
meaning ascribed thereto in Section 3.2(h) hereof;


"Security
Interest" means a mortgage, pledge, deposit by way of security,
charge, hypothec, assignment by way of security, security interest (whether
statutory, equitable or at common law), title retention agreement, possessory
Security Interest, lease with option or requirement to purchase, a contractual
right of set-off (if created for the purpose of directly or indirectly securing
the repayment of Debt), the rights of a lender or purchaser under a prepaid
obligation, the agreement to give any of the foregoing, and any other interest
in property or assets, howsoever created or arising, that secures payment or
performance of an obligation (including a lease without option to purchase if
the economic effect thereof is to secure an obligation other than reasonable
rent for the current use of the leased property, and a trust, a statutory
deemed trust and statutory Security Interest or charge);


"Senior Obligations"
means Debt of the Borrower and its Subsidiaries (including the Obligations)
other than Subordinated Debt;


"SGC" means Simberi Gold
Company Limited, a corporation organized under the laws of Papua New Guinea and
which is a wholly-owned Subsidiary of the Borrower;


"Share" means a fully
paid and non-assessable outstanding common share of the Borrower or any of its
Subsidiaries, as the case may be;


"Simberi Mining Joint Venture"
shall have the meaning ascribed thereto in the Arrangement Agreement;


"Subordinated Debt"
means Debt that is subordinated to the repayment in full of the Obligations
hereunder, pursuant to a subordination agreement in the form attached hereto as
Schedule 9.2(n);


"Subsidiaries" in
relation to the Borrower means Australex, SGC, NANPL, NRPPL, CMNP and Hicor and
any other Subsidiary of the Borrower now or hereafter existing;


"Superior Transaction"
shall have the meaning ascribed thereto in Section 4.3(a) of the
Arrangement Agreement; 


"Tabar Exploration Joint Venture"
shall have the meaning ascribed thereto in the Arrangement Agreement; and


"U.S. Dollars" and
"U.S. $" means lawful currency of the United States of
America.


Derivations of any of the foregoing
defined terms shall have a corresponding meaning.


 








11


 


1.2         Headings and Agreement References


(a)               
The division of this Agreement into Articles and
Sections, the inclusion of a table of contents and the insertion of headings is
for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.


(b)              
The terms "this Agreement",
"hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof
and include any amendments hereto (including amendments effected by way of a
restatement of this Agreement).  Unless otherwise stated, references herein to
Articles, Sections and Schedules are to Articles, Sections and Schedules of
this Agreement.


1.3       Number and Gender


Words importing
the singular number shall include the plural and vice versa, and words
importing gender shall include the masculine, feminine and neuter genders.


1.4       Generally Accepted Accounting Principles


Wherever in a
Document reference is made, in relation to financial information of the
Borrower or any of its Subsidiaries, to GAAP or generally accepted accounting
principles, such reference shall be deemed to be to the generally accepted
accounting principles in the United States, applicable as at the date on which
the relevant determination or calculation is made or required to be made
("GAAP").  Where the character or amount of any asset or
liability or item of revenue or expense is required to be determined, or any
consolidation or other accounting computation is required to be made for the
purpose of any Document, such determination or calculation shall (unless the
context otherwise requires), be made in accordance with GAAP applied on a
consistent basis.


1.5       Per Annum Calculations; Currency; Time;
"Including"


(a)               
Unless otherwise stated, interest specified as a
rate "per annum" shall be computed on the basis of a calendar year of
365 days.


(b)              
For the purposes only of any required disclosure
under the Interest Act (Canada), whenever any interest is made payable
on the basis of a year of 365 days, the yearly rate of interest to which
the rate determined pursuant to such calculation is equivalent is the rate so
determined multiplied by the actual number of days in the calendar year in
which such calculation is made and divided by 365.


(c)               
The theory of "deemed reinvestment"
shall not apply to the computation of interest hereunder and no allowance,
reduction or deduction shall be made for the deemed reinvestment of interest in
respect of any payments hereunder.  Calculation of interest hereunder shall be
made using the nominal rate method, and not the effective rate method, of
calculation.


 








12


(d)              
Unless otherwise stated, references to dollar
amounts or "$" in the Documents shall be deemed to be references to
U.S. Dollars.


(e)               
Unless otherwise stated, references to time in
the Documents shall mean local time in Perth, Australia.


(f)                
The word "including" in the Documents
shall not be construed to limit or restrict the generality of the matter that
precedes it.


1.6       Statute References


References
herein to a statute include, unless otherwise stated, regulations passed or in
force pursuant thereto and any amendments to such statute or to such
regulations from time to time in effect, and any legislation or regulations
substantially replacing the same or substantially replacing any specific
provision to which such reference is made.


1.7       Arrangement Agreement


References
herein to the Arrangement Agreement or compliance therewith shall continue to
refer and apply thereto regardless of whether or not such agreement has
terminated, and for that purpose the provisions so referred to shall be deemed
to be incorporated herein by reference.


1.8       Schedules


The following Schedules are annexed hereto:




Schedule 2.4               
Form of Drawdown Notice

Schedule 2.7(a)           
Form of Series A Note

Schedule 2.7(b)           
Form of Series B Note

Schedule 2.7(c)           
Form of Series C Note

Schedule 2.7(d)           
Form of Series D Note

Schedule 2.7(e)           
Form of Series E Note

Schedule 3.1(c)           
Form of Opinion of Borrower's Counsel- Closing

Schedule 3.1(l)            
Forms of Directions to Pay 

Schedule 3.1(q)           
Forms of Conditional Resignation

Schedule 8.1(f)            
Existing Litigation

Schedule 8.1(g)           
Location and Jurisdiction

Schedule 8.1(l)            
Title to Assets

Schedule 8.1(n)           
Insurance Policies 

Schedule 8.1(p)           
Cash

Schedule 8.1(z)           
SEC Compliance

Schedule 9.2(n)           
Form of Subordination Agreement





 








13


 


ARTICLE 2 ‐ THE CREDIT FACILITY


2.1       Credit Facility


Subject to the
terms and conditions hereof, the Lender shall, during the Availability Period,
make available to the Borrower a credit facility in an aggregate amount not to
exceed the Commitment Amount.  The Lender shall have no obligation to make any
Advance if, after giving effect thereto, the Outstandings would exceed the
Commitment Amount.  In addition, if the Commitment Amount has been fully drawn
and advanced to the Borrower, the Lender (in its sole discretion) may make
additional Advances not to exceed the Optional Financing Amount.


2.2       Borrowing Options


During the
Availability Period, the Borrower may obtain Advances under the Credit Facility
in U.S. Dollars by way of LIBOR Loans as follows: 


(a)               
up to a maximum of U.S. $ 600,000 of
Advances shall be made, at the Lender's option, (i) by wire transfer into
the Borrower's Account, (ii) by cheque or bank draft, (iii) by
payment of expenses by the Lender of costs and expenses of the Borrower
contained in the Current Expense Forecast (whether incurred after or prior to
the date hereof), or (iv) pursuant to the Direction to Pay referred to in
Section 3.1(l), in each case in exchange for the issuance by the Borrower of
Series A Notes;


(b)              
Advances in excess of U.S. $600,000 up to a
maximum of the Commitment Amount, or the Optional Financing Amount, as the case
may be, at the Lender's option, (i) by wire transfer into the Borrower's
Account, (ii) by cheque or bank draft, (iii) by payment of expenses
by the Lender of costs and expenses of the Borrower contained in the Current
Expense Forecast (whether incurred after or prior to the date hereof), or
(iv) pursuant to the Direction to Pay referred to in Section 3.1(l),
in each case in exchange for the issuance by the Borrower of Series B
Notes, Series C Notes, Series D Notes and Series E Notes in
accordance with this Agreement;


2.3      
Non-Revolving Facility


The Credit
Facility is a non-revolving facility.  The Borrower may, during the Availability
Period, but not after, increase LIBOR Loans under the Credit Facility by
obtaining Advances as provided for herein, but (subject to Section 6.1 and 6.2
and Article 10) may not make any repayments or prepayments until the
Maturity Date and may not obtain Advances for any amounts repaid or prepaid
pursuant to Sections 6.1 and 6.2 and Article 10.


2.4       Notice Periods for Drawdowns


The Borrower may
only obtain an Advance by delivering to the Lender a Drawdown Notice
substantially in the form of Schedule 2.4 attached hereto, complete with all
attachments as required therein, no later than 10:00 a.m. (Perth,
Australia time) four (4) Banking Days (or, in respect of the first Drawdown
Date, such shorter period as the Lender acting reasonably may agree to in writing)
prior to the proposed Drawdown Date.


 








14


2.5       Irrevocability


Subject to the
terms and conditions of this Agreement, a Drawdown Notice given by the Borrower
hereunder shall be irrevocable and shall obligate the Borrower to take the
action contemplated therein on the date specified therein.


2.6       Purpose


All proceeds of this Credit Facility shall be used by the Borrower:


(a)               
to pay the costs and expenses of the Borrower
provided in the Current Expense Forecast, or for general working capital
purposes, all as approved in writing by the Lender pursuant to a Drawdown
Notice, and


(b)              
to fully satisfy the Cash Calls approved in
writing by the Lender pursuant to a Drawdown Notice being received by the
Lender, which approval shall not unreasonably be withheld.


The Borrower shall deliver evidence of
such use of proceeds satisfactory to Lender, forthwith upon request therefor by
the Lender from time to time.


2.7       Convertible Notes


Each Advance
shall be evidenced by the Borrower executing and delivering a Note in the
principal amount of such Advance, dated the date of such Advance and
convertible into the Shares of the Borrower as provided in such Note, which
shall be as follows:


(a)               
for the first of Advances up to
U.S. $600,000 in the aggregate the Borrower shall execute and deliver one
or more Series A Notes in the form attached hereto as
Schedule 2.7(a), convertible to Shares of the Borrower at U.S. $0.05
per Share;


(b)              
for Advances in excess of U.S. $600,000 in
the aggregate up to U.S. $2,400,000 in the aggregate the Borrower shall
execute and deliver one or more Series B Notes in the form attached hereto
as Schedule 2.7(b) convertible to Shares of the Borrower at
U.S. $0.10 per Share;


(c)               
for Advances in excess of U.S. $2,400,000
in the aggregate up to U.S. $3,400,000 in the aggregate (of the Optional
Financing Amount, if applicable) the Borrower shall execute and deliver one or
more Series C Notes in the form attached hereto as Schedule 2.7(c)
convertible to Shares of the Borrower at U.S. $0.15 per Share;


(d)              
for Advances in excess of U.S. $3,400,000
in the aggregate up to U.S. $4,400,000 in the aggregate (of the Optional
Financing Amount, if applicable)the Borrower shall execute and deliver one or
more Series D Notes in the form attached hereto as Schedule 2.7(d)
convertible to Shares of the Borrower at U.S. $0.20 per Share; and


 








15


(e)               
for Advances in excess of U.S. $4,400,000
in the aggregate up to U.S. $5,400,000 in the aggregate (of the Optional
Financing Amount, if applicable)the Borrower shall execute and deliver one or
more Series E Notes in the form attached hereto as Schedule 2.7(e)
convertible to Shares of the Borrower at U.S. $0.25 per Share.


2.8       Facility Fee


If the Lender
makes any Advances requested by the Borrower, the Borrower shall pay to the
Lender a facility fee of U.S. $50,000 on the Maturity Date or upon the
acceleration of the LIBOR Loans hereunder or termination of the Commitment
Amount and/or Optional Financing Amount, as the case may be.


ARTICLE 3 ‐ CONDITIONS PRECEDENT TO ADVANCES


3.1      
Conditions for Initial Advance


The obligation
of the Lender to make the initial Advance hereunder is subject to satisfaction
of all of the following conditions precedent:


(a)               
Drawdown Notice and Note(s):  the Lender shall have received the Drawdown Notice for the
Advance as provided in Section 2.4, and the Borrower shall have executed
and delivered to the Lender a Note(s) to evidence each such Advance as
contemplated by Section 2.7;


(b)              
opinion of Lender's counsel:  the Lender shall have received a favourable legal opinion of 
Lender's Counsel dated on or shortly before the Drawdown Date of the initial
Advance as to such matters as the Lender, acting reasonably, shall desire to
receive, if any;


(c)               
opinion of Borrower's counsel:  the Lender shall have received a favourable legal opinion of
counsel to the Borrower, dated on or shortly before the Drawdown Date of the
initial Advance, with respect to the Borrower, its Subsidiaries, the
Arrangement Agreement, this Agreement and the Documents, in the form of
Schedule 3.1(c) attached hereto with such changes as may be acceptable to
the Lender; 


(d)              
no default:  no
Accruing Default or Event of Default shall have occurred and be continuing, and
no Accruing Default or Event of Default shall occur as a result of the making
of the initial Advance;


(e)               
representations true:  without limiting paragraph (d) above, the representations and
warranties in Article 8 hereof, and those contained in Section 3.1 of
the Arrangement Agreement (except for matters consented to by the Lender in
writing as part of the Arrangement Agreement transactions), shall be materially
true and correct as though made on the Drawdown Date of the initial Advance;


 








16


(f)                
compliance with covenants: the Borrower shall be in material compliance with all of its
covenants in Article 9 hereof and Articles 4 and 6 of the Arrangement
Agreement;


(g)               
certificate of corporate authority:  the Lender shall have received in respect of the Borrower and all
of its Subsidiaries:


(i)                 
a certificate of compliance/status under its
governing corporate statute,


(ii)                
a copy of all Organizational Documents, as
amended, and a certified copy of the resolutions of its board of directors or
other applicable governing body, as the case may be, authorizing the Documents
executed by it and the transactions contemplated therein, together with a
Certificate of the Borrower to the effect that all such documents are in full
force and effect in such form with no proceedings pending to amend or rescind
the same (other than as contemplated in the Arrangement Agreement), and no
shareholder's agreements or other documents are in effect which restrict the powers
of its board of directors or other applicable governing body, as the case may
be,), and


(iii)                a certificate of incumbency with specimen
signatures of the individuals executing any of the Documents;


dated as
of the Drawdown Date of the initial Advance;


(h)               
[intentionally deleted] 


(i)                 Debt:  neither
the Borrower nor any of its Subsidiaries have any Debt other than the Permitted
Debt, and the Lender shall have received true and complete copies of all of the
documents and notes evidencing such Permitted Debt; 


(j)                 Security Interests:  neither the Borrower nor any of its Subsidiaries or their
respective Properties shall be subject to any Security Interests other than the
Permitted Encumbrances, none of which are presently being asserted by other
members of the Joint Venture over the Borrower's, or any of its Subsidiaries',
interests in the Joint Venture or otherwise;


(k)              
Investments:  the
Borrower, any of its Subsidiaries, and Subsidiaries of the Borrower shall not
have any Investments other than the Permitted Investments;


(l)                 Directions to Pay:  the Borrower and any of its Subsidiaries shall have executed and
delivered to the Lender Directions to Pay substantially in the forms of
Schedule 3.1(l) attached hereto, permitting the Lender at its option to
satisfy (i) Current Expenses directly to the person supplying the goods or
services creating the expense; or (ii) Cash Calls on behalf of the
Borrower directly to the Joint Venture or any member of such joint venture, as
the case may be;


 








17


(m)             
Arrangement Agreement:  the Arrangement Agreement shall be in full force and effect; no
default on the part of the Borrower shall have occurred and is continuing
thereunder; no event or circumstance, or failure to meet a condition, shall
have occurred thereunder that would entitle the Lender to terminate the
Arrangement Agreement, or to not complete the transactions contemplated
thereby, or to excuse its non-performance thereunder;


(n)               
lawful: since the
date of this Agreement, the making, maintenance and funding of any LIBOR Loan
hereunder or the issuance by the Borrower of any Note hereunder, or the
conversion thereof, shall not, in the opinion of Lender's Counsel, be unlawful;


(o)              
Joint Venture documents:  the Lender shall have received true and complete copies of:


(i)                 
all Joint Venture Agreements, and


(ii)                
copies of all authorizations, consents,
approvals, licences, rulings, permits, certifications, exemptions, filings,
variances, claims, orders, judgments, decrees, publications or written
directions of, registrations by or with, or any other actions whatsoever, by or
on behalf of, any Governmental Authority in connection with the Joint Venture; 


(p)               
insurance:  the
Lender shall have received true and complete copies of all insurance policies
maintained by the Borrower and each of its Subsidiaries, including those
policies relating to the Joint Venture; 


(q)               conditional resignation:  the Lender shall have received signed and undated conditional
resignations from each of the Designated Directors, each in form attached
hereto as set forth in Schedule 3.1(q) and substance satisfactory to the
Lender; 


(r)                 litigation:        all existing or threatened actions, suits, claims or proceedings
(including counterclaims or third party proceedings) among the Borrower, each
of its Subsidiaries, Nord Resources Corporation, and their respective
shareholders and directors, have been resolved on terms and conditions
satisfactory to the Lender acting in its sole discretion ;and


(s)                registrations: 
all filings and registrations against the Property in any jurisdiction, other
than the Permitted Encumbrances, shall have been discharged, and the Lender
shall have received confirmation thereof satisfactory to it, acting reasonably.


3.2       Subsequent Advances


The obligation
of the Lender to make each Advance subsequent to the first Advance is subject
to the satisfaction of the following conditions precedent:


 








18


(a)               
Drawdown Notice and Note(s):  the Lender shall have received the Drawdown Notice for the
Advance as provided in Section 2.4, and the Borrower shall have executed
and delivered to the Lender a Note(s) to evidence each such Advance as
contemplated by Section 2.7;


(b)              
 no default:  no
Accruing Default or Event of Default shall have occurred and be continuing, and
no Accruing Default or Event of Default shall occur as a result of the making
of the Advance;


(c)               
representations true:  without limiting paragraph (b) above, the representations and
warranties in Article 8 hereof, and those contained in Section 3.1 of
the Arrangement Agreement (except for matters consented to by the Lender in
writing as part of the Arrangement Agreement transactions), shall be materially
true and correct as though made on the Drawdown Date of such Advance;


(d)              
compliance with covenants: the Borrower shall be in material compliance with all of its
covenants in Article 9 hereof and Articles 4 and 6 of the Arrangement
Agreement;     


(e)                no material adverse change:  since the date of this Agreement nothing has occurred (whether
external or internal to the Borrower or any of its Subsidiaries) which
individually or in the aggregate has had or may have a Material Adverse Effect;


(f)                
Arrangement Agreement:  the Arrangement Agreement shall be in full force and effect, and
no default on the part of the Borrower shall have occurred and is continuing
thereunder; no event or circumstance, or failure to meet a condition, shall
have occurred thereunder that would entitle the Lender to terminate the
Arrangement Agreement, or to not complete the transactions contemplated
thereby; or to excuse its non-performance thereunder; 


(g)               
lawful:  since
the date of this Agreement, the making, maintenance and funding of any LIBOR
Loan hereunder or the issuance by the Borrower of any Note hereunder, or the
conversion thereof, shall not, in the opinion of Lender, have been made
unlawful; 


(h)               
SEC reports:  in
the event that such Advance shall occur following the filing of the Borrower's
Annual Report on Form 10-KSB for the year ended December 31, 2003, the Borrower
shall have filed all reports required to be filed with the SEC since the filing
of the Form 10-KSB (such reports, together with the Form 10-KSB are referred to
as "SEC Reports") and the SEC Reports taken together do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading; and


(i)                 Counsel to the Borrower shall deliver a favourable legal opinion to the Lender, dated on or shortly before the Drawdown
Date of any such Advance, with respect to such matters as may reasonably be
requested by the Lender.


 








19


3.3       Waiver


The conditions
in Sections 3.1 and 3.2 are inserted for the sole benefit of the Lender
and may be waived by the Lender in whole or in part (with or without terms or
conditions) in respect of any particular Advance.


3.4       Condition Subsequent to Credit Agreement


If the
conditions in Sections 3.1 are not met or waived within thirty (30) days
of the date of this Agreement, the Lender may, by notice in writing delivered
to the Borrower within ten (10) Banking Days thereafter, reduce each of
the Commitment Amount to zero and the Optional Financing Amount to zero and
terminate this Agreement.


ARTICLE 4 ‐ INTEREST


4.1       Interest on LIBOR Loans


The Borrower
shall pay to the Lender interest in U.S. Dollars on each LIBOR Loan
outstanding at a rate per annum equal to LIBOR plus 2% per annum.  Such
interest shall be compounded monthly and be payable on demand and in any event
no later than the Maturity Date (unless otherwise provided herein or in a Note)
for the period from and including the Drawdown Date to and including the day
preceding the Maturity Date (if applicable), and shall be computed on the daily
principal amount of each of the LIBOR Loans outstanding, on the basis of the
actual number of days elapsed in a year of 365 days.


The Borrower
shall pay interest on any overdue and unpaid amounts of principal and interest
on any LIBOR Loan, on demand, at a rate per annum equal to LIBOR applicable to
such LIBOR Loan plus 6% per annum, calculated daily and compounded monthly as
aforesaid.


4.2       Interest on Overdue and Accelerated Amounts


(a)               
The Borrower shall pay to the Lender interest on
overdue and unpaid amounts (including interest) hereunder (i) in respect
of LIBOR Loans, as specifically provided in this Article 4 and (ii) in
respect of all other overdue and unpaid amounts where no specific provision is
made herein, at the rate then applicable to the LIBOR Loan with the highest
LIBOR rate, calculated daily and compounded monthly in accordance with Section
4.1 above;


(b)              
Interest on overdue and unpaid amounts under any
provision of this Agreement shall be computed daily and shall be payable by the
Borrower on demand by the Lender; and


(c)               
To the fullest extent permitted by applicable
law, Section 8 of the Interest Act (Canada) is hereby waived by the
Borrower.


 








20


4.3       Determination Conclusive


Each
determination by the Lender of LIBOR applicable from time to time shall, in the
absence of manifest error, be conclusive and binding upon the Borrower.


4.4       Interest After Maturity


All interest and
fees to be paid hereunder (including interest on overdue amounts) shall accrue
from day to day and shall be payable both before and after maturity and before
and after default and judgment.  To the fullest extent permitted by law,
Section 46(1) of the Judicature Act (New Brunswick), insofar as it
specifies a rate of interest payable on amounts outstanding hereunder after
judgment that is lower than the rate herein provided, is hereby waived.


ARTICLE 5 ‐ EXTENSION OF TERM; MATURITY DATE


5.1       Extension of Availability Period


At least fifteen
(15) days before the end of the Availability Period, from time to time,
the Lender may, if no Accruing Default or Event of Default has occurred and is
continuing, extend the Availability Period by a further period not less than
thirty (30) days nor more than sixty (60) days.  Any such extension may be
given in the sole discretion of the Lender, and the Lender shall notify the
Borrower in writing of its decision within ten (10) days thereof.  This Section
5.1 shall apply from time to time to facilitate successive extensions if the
Lender so determines in its sole discretion.


5.2       Extension of Maturity Date


At least fifteen
(15) days before the Maturity Date, the Borrower may, if no Accruing Default or
Event of Default has occurred and is continuing, request the Lender in writing
to extend the Maturity Date by not less than thirty (30) days nor more than
sixty (60) days.  Any such extension may be given or refused in the sole
discretion of the Lender, and the Lender shall notify the Borrower in writing
of its decision within ten (10) days of its receipt of the Borrower's request. 
Failure by the Lender to notify the Borrower of its decision shall be deemed to
be a decision not to extend the Maturity Date.  This Section 5.2 shall apply
from time to time to facilitate successive extensions if the Lender so agrees
in its sole discretion.


5.3       Increase of Optional Financing Amount


At least fifteen
(15) days before the end of the Availability Period, the Borrower may, if no
Accruing Default or Event of Default has occurred and is continuing, request
the Lender in writing to increase the Optional Financing Amount.  Any such
increase may be given or refused in the sole discretion of the Lender, and the
Lender shall notify the Borrower in writing of its decision within ten (10)
days of its receipt of the Borrower's request.  Failure by the Lender to notify
the Borrower of its decision shall be deemed to be a decision not to increase
the Optional Financing Amount.  This Section 5.3 shall apply from time to time
to facilitate successive increases if the Lender so agrees in its sole
discretion.


 








21


ARTICLE 6 ‐ REPAYMENT


6.1       Mandatory Repayment of Principal


The Borrower
shall (unless waived, extended, renegotiated or refinanced by written agreement
between the Lender and Borrower) repay all LIBOR Loans, pay all interest and
shall pay all other monetary Obligations on the Maturity Date except such
principal amounts thereof as have been converted to Shares of the Borrower
pursuant to the terms of the Notes.


6.2       Prepayment


The Borrower
shall not be entitled to prepay the Outstandings prior to the Maturity Date
unless a Proposed Agreement for a Superior Transaction has been announced or received
by the Borrower, and Allied has not agreed to an Amended Transaction within
five days and the Borrower wishes to terminate the Arrangement Agreement as
provided in Section 9.5 thereof.  In such event, prior to entering into a
Proposed Agreement for a Superior Transaction, the Borrower shall prepay all,
but not less than all, Outstandings and all accrued interest thereon, together
with the facility fee referred to in Section 2.8, upon five (5) Banking
Days prior written notice to the Lender, such notice to refer to this Section
6.2 and to the conversion rights held by the Lender as contained in the Notes. 
Such notice shall be irrevocable and shall obligate the Borrower to make the
subject prepayment, interest and facility fee payment on the sixth Banking Day
following delivery of such notice of any amount thereof not converted to Shares
of the Borrower pursuant to the terms of the Notes. 


ARTICLE 7 - PAYMENTS; SET-OFF; TAXES


7.1       Place of Payment


All principal,
interest, fees and other amounts payable hereunder shall be paid by the
Borrower to the Lender in the currency in which the LIBOR Loan is outstanding
for same day value at or before 10:00 a.m. (Perth, Australia time) on the
day such amount is due, and if such day is not a Banking Day, at or before 10:00 a.m.
(Perth, Australia time) on the Banking Day next following (with interest
calculated to, but not including, the date of payment).


7.2       Application of Payments


All payments
made by the Borrower hereunder after the occurrence of an Event of Default
shall be applied to the Obligations in such order as the Lender determines in
its sole discretion, and the Borrower agrees not to direct any payment to be
accepted in any order contrary to this provision.


7.3       Set-Off


(a)               
The Obligations shall be paid by the Borrower to
the Lender without any set-off or deduction whatsoever.


(b)               Following an Event of Default which remains unremedied (whether or not the LIBOR Loans have been accelerated hereunder),
the Lender may, without notice to the Borrower, set-off all or any of the
Lender's liabilities to the Borrower (matured or not, liquidated or
unliquidated) against the Obligations, and may do so notwithstanding that the
liabilities may be expressed in different currencies, and the Lender is hereby
authorized to effect any necessary currency conversions at the 12:00 p.m. noon
spot rate of exchange announced by the Bank of Canada on the Banking Day before
the day of conversion.


 








22


(c)               
Following an Accruing Default which remains
unremedied, the Lender may, in order to preserve or enhance potential rights of
set-off hereunder, suspend or freeze its payment obligations of any amount
payable to the Borrower until such Accruing Default is remedied.


(d)              
The Lender shall notify the Borrower of any such
set-off within a reasonable period of time thereafter, although the Lender
shall not be liable to the Borrower for its failure to so notify.


(e)               
In this Section, the term "Borrower"
shall be deemed to include any of its Subsidiaries.


7.4        
LIBOR Loan Repayment Net of Withholding Imposts


(a)               
In this Section, "Taxes" means
any present or future taxes, levies, assessments, imposts, deductions, duties,
charges, withholdings or other governmental changes, and all other liabilities
with respect thereto, imposed or levied either:


(i)                 
by or on behalf of the Government of Canada or
any province or political subdivision thereof or any authority or agency
therein or thereof, or


(ii)                
by or on behalf of the government of any other
jurisdiction or any authority or agency therein or thereof which would not be
imposed or levied but for the presence of property, business or operations of
the Borrower or the undertaking of transactions by the Borrower in such
jurisdiction.


(b)              
All payments by the Borrower under the
Documents, whether in respect of principal, interest, interest on overdue and
unpaid interest, fees or any other items shall be made in full without any
deduction or withholding for or in respect of or on account of Taxes unless the
Borrower is prohibited by Applicable Law from doing so, in which event the
Borrower shall:


(i)                 
ensure that the deduction or withholding does
not exceed the minimum amount legally required,


(ii)                
forthwith pay to the Lender such additional
amounts so that the net amount received by the Lender shall equal the full
amount which would have been received by it had no such deduction or withholding
been made,


 








23


 


(iii)                 pay to the relevant taxation or other authority
within the period for payment permitted by Applicable Law the full minimum
amount of the deduction or withholding (including the full amount of any
deduction or withholding from any additional amount paid pursuant to this
Section) required to be paid to it, and


(iv)               
promptly furnish to the Lender a copy of the
official receipt of the relevant taxation or other authority for all amounts
paid to it as aforesaid.


7.5      
Stamp Taxes


The Borrower
shall pay any present or future stamp or documentary taxes or any other excise
or property taxes, similar charges or similar levies which are imposed or
levied either:


(a)               
by or on behalf of the Government of Canada or
any province or political subdivision thereof or any authority or agency
therein or thereof, or


(b)              
by or on behalf of the government of any other
jurisdiction or any authority or agency therein or thereof which would not be
imposed or levied but for the presence of property, business or operations of
the Borrower or any of its Subsidiaries or the undertaking of transactions by
the Borrower or any of its Subsidiaries in such jurisdiction,


and which arise from any payment made to
the Lender under the Documents or from the execution, delivery or registration
of, or otherwise with respect to, the Documents excluding any such tax, charge
or levy which is imposed or levied by or on behalf of any jurisdiction outside
of Canada where such tax, charge or levy would not be so imposed or levied but
for the presence of property, business or operations of the Lender or the
undertaking of transactions by the Lender in such jurisdiction.


7.6       Drawings by Lender for Payment of Certain
Amounts


If the Borrower
fails to pay to the Lender when due any amounts owing under any Document, whether
for interest, fees, indemnities or any other amount (other than principal),
then, without prejudice to any remedy it may have pursuant to this Agreement
and without prior notice to, or authorization by, the Borrower and without
regard to any condition or restriction contained in this Agreement, the Lender
may draw down for the account of the Borrower any unused amounts of the Credit
Facility and pay to itself a corresponding amount on account of such amounts
owing, and the amount so drawn shall be deemed to be a LIBOR Loan owing by the
Borrower under this Agreement, and shall bear interest accordingly, and such
LIBOR Loan and accrued interest shall be payable to the Lender on demand.  The
Lender shall, within a reasonable time, advise the Borrower of any amounts that
have been drawn pursuant to this Section 7.6.








24


ARTICLE 8 ‐ REPRESENTATIONS AND WARRANTIES


8.1       Representations and Warranties


The Borrower represents and warrants as follows:


(a)                corporate existence and power: each of the Borrower and its Subsidiaries is duly incorporated and
validly existing under the laws of its jurisdiction of incorporation and is
duly registered and otherwise qualified to do business in all jurisdictions in
which the nature of any material business transacted by it or the character of
any material properties owned or leased by it requires such qualification; and
each of the Borrower and its Subsidiaries has full corporate power and
authority to:


(i)                  own its Property,


(ii)                 conduct its business as presently conducted, 


(iii)               
to borrow money, to issue the Shares of the
Borrower contemplated by the Notes and to perform all of the Obligations;


(iv)                execute, deliver and perform its obligations
under the Documents executed by it;


(b)               
authorization: 
it is duly authorized to borrow money hereunder and it and all of its Subsidiaries
are duly authorized to execute, deliver and perform the Documents to which they
are a party, and all corporate steps and proceedings necessary for the due
execution and delivery of the Documents by it and any of its Subsidiaries and
the performance of the Obligations have been taken;


(c)               
compliance with Applicable Laws and other
agreements:  the execution, delivery and
performance by the Borrower and its Subsidiaries of the Documents executed by
it and each of its' Subsidiaries, as applicable, does not and will not:


(i)                 
violate any provision of Applicable Law which
would adversely affect the obligations of the Borrower or any of its
Subsidiaries or the Lender's rights under the Documents or any provision of the
articles or by-laws of the Borrower or any of its Subsidiaries, or,


(ii)                
contravene any resolution of its directors or
officers or any committee of either,


(iii)                
result in a breach of, a default under, or the
creation of, any Security Interest (other than under the Documents) on the
Property of the Borrower or any of its Subsidiaries under any material
agreement or instrument to which the Borrower or any of its Subsidiaries is a
party or by which it or any of its Property or operations may be bound or
affected, or cause or permit any of the Joint Venture Agreements or any other
project agreement, lease, licence or permit to be terminated or declared void;


 





25


 


(iv)                constitute, with or without the notice or lapse
of time or both, an event entitling any Person to accelerate the payment of any
Debt, or


(v)                 result in any requirement on it to grant any
Security Interest (including a matching security interest) other than to the
Lender, or result in any Person becoming entitled to call for any Security
Interest (including a matching Security Interest) from it,


(d)              
validity and enforceability:  the Documents have been duly executed and delivered by it and
each of its Subsidiaries, as applicable, and constitute legal, valid and
binding obligations of it and each of its Subsidiaries, as applicable,
enforceable by the Lender in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization and other similar
laws affecting creditors' rights generally, and to the equitable and statutory
powers of the courts having jurisdiction therein;


(e)               
approvals and consents:  no consent, authorization, approval or other action by, and no
publication, notice to or filing or registration with, any Governmental
Authority is required for the due execution, delivery and performance by it and
each of its Subsidiaries of the Documents to which such entity is a party or to
ensure the validity or enforceability thereof against such entity;


(f)                
litigation: 
other than as disclosed in Schedule 8.1(f) to this Agreement, there are no
actions, suits, claims or proceedings (including counterclaims or third party
proceedings) existing or, to its knowledge threatened against it or any of its
Subsidiaries or affecting the Property before any Governmental Authority which
purports to challenge or which would reasonably be expected to affect the
validity or enforceability of any Document or would reasonably be expected to
have a Material Adverse Effect;


(g)               
location and jurisdiction:  its and each of its Subsidiaries jurisdiction of incorporation
and place of business (or chief executive office, if more than one place of
business) is as disclosed in Schedule 8.1(g), all of its Subsidiaries and
entities in which it has a direct or indirect interest are disclosed in such
schedule, and all of the outstanding equity interests in the Borrower and each
such Subsidiary have been validly issued and are fully paid and non-assessable;


(h)               adverse contracts: 
it and any of its Subsidiaries is not a party to, or otherwise subject to, any
provision contained in any agreement relating to Debt or any other document which
limits the amount of, or otherwise imposes restrictions on the incurring of,
the Obligations;


(i)                 priority:  all
payment Obligations rank in priority of payment to any Debt or other
obligations owed by the Borrower to any of its Subsidiaries, pari passu with
all Senior Obligations of the Borrower and no other Debt has priority over the
Obligations of the Borrower, except for (i) Debt secured by Permitted
Encumbrances, and (ii) indebtedness which is a prior ranking claim arising
solely by operation of bankruptcy, insolvency or other laws of general
application; 


 






26


 


(j)                no immunity:  it
and each of its Subsidiaries are subject to civil and commercial law with
respect to the Obligations; the execution, delivery and performance of the
Documents by it and each of its Subsidiaries, as applicable, constitute private
and commercial acts rather than governmental or public acts; it, any of its
Subsidiaries and the Property do not enjoy any right of immunity from suit,
set-off or attachment or execution on any judgment that may be rendered in
respect of the Obligations;


(k)              
statutory security and deemed trusts:  all assessments and levies made against it and any of its
Subsidiaries under Applicable Laws in respect of workers compensation, and all
contributions and amounts required to be paid by such entities under such laws,
have been paid; all wages, overtime pay, vacation pay, general holiday pay and
pay in place of notice of termination of employment due to its and any of its
Subsidiaries' employees or former employees, have been paid when due in
accordance with Applicable Laws; all monies received or withheld by it or any
of its Subsidiaries from their employees under an arrangement whereby such
entity pays money into a pension fund as the employee's contribution
thereunder, and all amounts required to be paid by such entity as employer
contributions to a pension fund under Applicable Laws to be withheld or
deducted by it or any of its Subsidiaries have been withheld or deducted and
remitted as required; all amounts required to be deducted by it or any of its
Subsidiaries from the remuneration of their employees on account of any
contribution required to be made by such employees pursuant to Applicable Laws
have been deducted and remitted as required; all amounts required to be deducted
by it or any of its Subsidiaries from the remuneration of their employees as or
on account of the premium required to be paid pursuant to Applicable Laws have
been deducted and remitted as required;


(l)                 title to assets: 
it and each of its Subsidiaries have good and marketable title to the Property
free and clear of any Security Interests and adverse claims, other than under
paragraph (i) of the definition of Permitted Encumbrances and the Borrower owns
100% of the issued and outstanding shares of each of its Subsidiaries free and
clear of any Security Interests, as well as a current undivided 50% interest in
and to the Simberi Mining Joint Venture and a current 99% interest in the Tabar
Exploration Joint Venture (in the future the Borrower's interest is subject to,
and may be modified by, the terms of the Joint Venture Agreements) free and
clear of any Security Interests; no Person has any agreement or right to
acquire any of the Shares of the Borrower or any of its Subsidiaries, Property
or any interest therein other than pursuant to the Joint Venture Agreements and
neither the Borrower nor any of its Subsidiaries has received any notice of a
defect in its title to any of its Shares or the Property;


 





27


 


(m)             
location of Property:  none of the material tangible Property is situated in any
jurisdiction other than Papua New Guinea, Mexico, Australia, United States and
Canada;


(n)               insurance:  as at
the date hereof it maintains and causes each of its Subsidiaries to maintain,
the insurance coverage set out in Schedule 8.1(n) attached hereto;


(o)              
expropriation and work order:  no part of the Property has been condemned, taken or expropriated
by any Governmental Authority and no alteration, repair, improvement or other
work has been ordered or directed to be done or performed in respect thereof by
any such authority, and neither it nor any of its Subsidiaries have received
any notices from any such authority with respect to any of the foregoing; 


(p)              
cash: the
Borrower and each of its Subsidiaries do not have any cash or cash equivalents
(such as short term investments) other than as set out in Schedule 8.1(p)
attached hereto;


(q)              
environmental matters: the Borrower and its Subsidiaries have obtained all permits,
licences and other authorizations which are required under all Environmental Laws;
and the Borrower and its Subsidiaries are in compliance with (i) all terms and
conditions of all such permits, licenses and authorizations, and (ii) all
conditions and requirements contained in such Environmental Laws, except where
non-compliance in any such cases would not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;


(r)                
defaults:  there
exists no Event of Default and no Accruing Default;


(s)               
total consolidated indebtedness:  the total consolidated indebtedness of the Borrower and the
Subsidiaries at November 30, 2003 is no more than U.S. $400,000 and
since such date no change has occurred which would reasonably be expected to
have a Material Adverse Effect on its business, operations or financial condition;


(t)                
taxes and insurance:  to the best knowledge of the Borrower, the Borrower and its
Subsidiaries have paid all taxes and assessments (including interest and
penalties) which are due and payable to any applicable Governmental Authority,
other than those taxes and assessments which are being contested in good faith
and for which adequate reserves have been set aside by the Borrower in
accordance with GAAP and for which any adverse judgment related thereto would
not reasonably be expected to have a Material Adverse Effect or the Borrower or
any of its Subsidiaries, and the delinquent taxes owed by CMNP (approximately
U.S. $12,000, which such amount is included in the total indebtedness of
the Borrower set forth in Section 8.1(s) above); 


(u)               
orders and consents:  all orders, consents, licences, approvals, permits,
authorizations, exemptions from, and filings and registrations with, all
Governmental Authorities, required for the execution, delivery and the
performance by the Borrower or any of its Subsidiaries, as applicable, of the
Documents have been duly obtained, authorized or made, and are in full force
and effect;





28


 


(v)               illegal payments: 
neither the Borrower nor any of its Subsidiaries nor, to the Borrower's
knowledge, any employee or agent of the Borrower or any of its Subsidiaries,
has made any payment of funds of the Borrower or any of its Subsidiaries or
received or retained any funds in violation of any law, rule or regulation;


(w)             
 certain transactions:  since July 30, 2002, the Borrower has not, directly or
indirectly, including through any of its Subsidiaries:  (A) extended credit,
arranged to extend credit or renewed any extension of credit, in the form of a
personal loan, to or for any director or executive officer of the Borrower, or
to or for any family member or affiliate of any director or executive officer
of the Borrower; or (B) made any material modification, including any renewal 
thereof, to any term of any personal loan to any director or executive officer
of the Borrower, or any family member or affiliate of any director or executive
officer, which loan was outstanding on July 30, 2002.  Neither the Borrower nor
of its Subsidiaries has any outstanding loans to or extensions of credit to, or
any guarantee or any indebtedness of, any employee, officer or director of the
Borrower or any of its Subsidiaries; 


(x)               
status of Designated Directors:  each of the Designated Directors have been validly appointed to
the Board of Directors of the Borrower in accordance with the Organizational
Documents of the Borrower and Applicable Law, and each such Designated Director
is currently a member in good standing of such Board of Directors on the date
hereof;


(y)             
SEC compliance: 
the Borrower and its Subsidiaries have delivered to the SEC all reports or
other documentation required to be filed by the SEC as of the date hereof,
except for those reports and documents listed in Schedule 8.1(z) attached
hereto.


8.2       Disclosure


(a)               
The Borrower represents and warrants to the best
of its knowledge and belief that neither the Documents nor any materials furnished
to the Lender by or on behalf of the Borrower or any of its Subsidiaries
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not
misleading.  There is no fact peculiar to it or any of its Subsidiaries which
has a Material Adverse Effect or is reasonably foreseeable in the future to
have a Material Adverse Effect on its or any of its Subsidiaries' business,
financial condition, operations, properties or prospects and which has not been
disclosed to the Lender in writing by or on its or any of its Subsidiaries'
behalf in connection with the transactions contemplated hereby; and


 





29


 


(b)              
The Borrower has undertaken reasonable
investigation, and has made due inquiries of all of its officers and senior
employees, as necessary, having responsibility in all applicable areas, to
ensure the factual accuracy of the representations and warranties in this
Article 8.


8.3       Deemed Repetition


Each of the
foregoing representations and warranties, and each of the representations and
warranties in Section 3.1 of the Arrangement Agreement (except for matters
consented to in writing by the Lender as part of the Arrangement Agreement
transactions), shall be deemed to be repeated on each date of delivery by the
Borrower of a Drawdown Notice to the Lender, and again on the date of an
Advance made by the Lender pursuant thereto, and on the delivery of any
extension request under Section 5.1 or 5.2 or request to increase the
Optional Financing Amount under Section 5.3.


8.4     
General


(a)               
The Borrower acknowledges that the Lender has
entered into this Agreement and agreed to make Advances in full reliance upon
the foregoing representations and warranties.  Such representations and
warranties shall survive until this Agreement has been terminated.  Any
investigations made at any time by or on behalf of the Lender shall not
diminish in any respect whatsoever its right to rely on such representations
and warranties;


(b)                All statements contained in any Certificates of
the Borrower or in any documents delivered by or on behalf of the Borrower
under or pursuant to this Agreement shall constitute representations and
warranties made by the Borrower to the Lender under this Agreement; and


(c)               
All representations and warranties, when repeated
or deemed to be repeated hereunder, shall be construed with reference to the
facts and circumstances existing at the time of repetition.


ARTICLE 9 ‐ COVENANTS


9.1       General


The Borrower
covenants and agrees with the Lender as set forth in this Article 9, each such
covenant to remain in force and effect until this Agreement has been
terminated, provided that in the case of covenants relating to
environmental matters, the same shall survive termination of this Agreement.


9.2       General Covenants


The Borrower shall, and shall cause each of its Subsidiaries to:


(a)               Arrangement Agreement:  strictly comply with all obligations of the Borrower and any of
its Subsidiaries contained in the Arrangement Agreement;


 





30


 


(b)              
compliance with Applicable Laws:


(i)                 
comply with all Applicable Laws (including all
Environmental Laws), regulations and orders of any Governmental Authority; and 


(ii)               
duly observe and conform in all material
respects to all valid requirements of any Governmental Authority relative to
any of its assets and all covenants, terms and conditions upon or under which
any of its assets are held;


(c)               
permit discussions:  make senior management available to the Lender upon its
reasonable request and permit any representative of the Lender or any certified
accountant or auditor or other consultant hired by the Lender to discuss with
its senior management its business, Property, financial condition and
prospects;


(d)               use of LIBOR Loans:  use the proceeds from the Credit Facility only for the purposes
set forth in Section 2.6;


(e)               
copies of documents:  as soon as practicable after the issuance thereof, provide to the
Lender a copy of:


(i)                 all authorizations, consents, approvals, licences, rulings, permits, certifications, exemptions, filings, variances,
claims, orders, judgments, decrees, publications or written directions of,
registrations by or with, or any other actions whatsoever by or on behalf of,
any Governmental Authority in connection with the Joint Venture, issued or
amended after the date hereof, and


(ii)                 any insurance policies;


(f)                payment and performance:  pay duly and punctually all sums of money due from it hereunder
and shall perform all other obligations on its part to be performed under the
terms of the Documents at the times and places and in the manner provided for
therein;


(g)               
corporate existence and conduct of business:  maintain its corporate existence in good standing, maintain its
rights (charter and statutory) and franchises, and carry on and conduct its
business in a proper, efficient and businesslike manner and in accordance with
good business practice;


(h)               
insurance: 
insure and keep insured its properties and operations with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is customarily maintained by similar entities engaged in the same or
similar business and, if reasonably requested by the Lender, shall increase
such insurance and maintain political risk insurance in an amount to be
determined by the Lender in consultation with the Borrower but determined in
the sole discretion of the Lender.  The Borrower will not modify any of the
insurance policies it currently holds without the prior written consent of the
Lender, not to be unreasonably withheld;


 





31


 


(i)                 
financial information:  promptly:


(i)                 furnish to the Lender such notices, compliance
certificates, financial and operating statements and reports and statements on
the financial condition or business affairs of the Borrower and its
Subsidiaries, and permit such inspections, as the Lender may request from time
to time, and


(ii)                 cause to be furnished to the Lender copies of
any audited or unaudited financial statements prepared by or for the Borrower
and or any of its Subsidiaries and any, Annual Information Forms, Annual Filing
Forms, Notices of Material Change and any other documents that the Borrower is
required by Applicable Law to file with any securities commission or by
agreement with any other Person, furnish to its shareholders or publicly
disclose (whether by way of advertisement or otherwise);


(j)                
defend title: 
defend its title to its Property from any Person seeking to claim the same, or
asserting interests adverse to the Borrower or any of its Subsidiaries with
respect thereto;


(k)              
 negative pledge:  not
create, assume or permit to exist any Security Interest on its Property, except
for Permitted Encumbrances or those Security Interest created under the
Documents;


(l)                 amalgamations and other corporate
transactions:  not be a party to a merger with or
into, or a consolidation or amalgamation with, or transfer, convey, lease or
otherwise dispose of (whether in one transaction or in a series of transactions
except as provided in the Joint Venture Agreements) all of any substantial part
of all its assets (whether now owned or hereafter acquired) to, or liquidate,
dissolve or wind-up into, another entity (or authorize or take any steps or
proceedings in connection therewith) without the prior written consent of the
Lender;


(m)             
 debt and equity Restrictions:  not incur or become liable for any Debt (other than Permitted
Debt), nor declare or pay any dividends, purchase, redeem, retire, defease or
otherwise acquire for value any of its equity interests now or hereafter
outstanding, return any capital to its stockholders, partners or members (or
the equivalent Persons thereof) as such, make any distribution of assets,
equity interests, obligations or securities to its stockholders, partners or
members (or the equivalent Persons thereof) as such or issue or sell any equity
interests or accept any capital contributions, without the prior written
consent of the Lender and except in accordance with the transactions
contemplated by the Documents and the Arrangement Agreement;


(n)               
ownership of its Subsidiaries:  the Borrower shall at all times own 100% of the issued and
outstanding Shares of each of its Subsidiaries;


 





32


 


(o)               
asset sales:  not
sell or dispose of any assets;


(p)               
change of business restriction:  not change its business from that presently carried on; 


(q)               
payment obligations:  ensure that all payment of Obligations will continue to rank in
priority of payment to any Debt or other obligations owed by the Borrower to
any of its Subsidiaries, pari passu with all Senior Obligations of the
Borrower and no other Debt will have priority over the Senior Obligations of
the Borrower except for (i) Debt secured by Permitted Encumbrances, and
(ii) indebtedness which is a prior ranking claim arising solely by
operation of bankruptcy, insolvency or other laws of general application;


(r)                Cash Calls: 
promptly provide a Drawdown Notice in respect of any Cash Call that the
Borrower or any Subsidiary may receive and use all the proceeds of any Advance
provided in response to such Drawdown Notice to pay such Cash Call or portion
thereof specified in the Drawdown Notice;


(s)               
Composition of Board of Directors:  ensure that the maximum number of directors permitted to serve on
the Board of Directors of the Borrower is not increased and that the number of
directors serving on such Board of Directors at any time does not exceed four
(4) directors and subject to approval of the settlement of the NRC litigation
on terms agreed in the Settlement Agreement and the declaration of the Court as
to the board of directors being composed of three (3) directors, shall not at
any time exceed three (3) directors;  


(t)                resignation of initial director:  in the event that the Lender (either directly or indirectly)
acquires Notes evidencing an aggregate principal amount of Debt that, if the
conversion option provided for in each such Note was exercised by Allied, would
result in the Lender owning at least ten percent (10%) of the outstanding
Shares of the Borrower after any such conversion, the Borrower shall, if
requested by the Lender, take all actions necessary to cause (i) the
resignation of any one Designated Director as selected by Allied in its sole
discretion, and (ii) cause the appointment of any person nominated by Allied in
its sole discretion as the replacement director to fill such vacancy;


(u)               
resignation of subsequent director:  in the event that the Lender (either directly or indirectly)
acquires Notes evidencing an aggregate principal amount of Debt that, if the
conversion option provided for in each such Note was exercised by Allied,
result in the Lender owning at least fifty percent (50%) of the outstanding
Shares of the Borrower after any such conversion in the aggregate when added to
any Shares of the Borrower held by the Lender, the Borrower shall, if requested
by the Lender, take all actions necessary to cause (i) the resignation of both
Designated Directors, (or the remaining Designated Director if one has already
been replaced) and (ii) the appointment of any such new director nominated by
Allied in its sole discretion as the replacement director to fill such vacancy


 





33


 


(v)               
transactions with Affiliates:  conduct all transactions otherwise permitted under the Documents
with any of its Affiliates on terms that are fair and reasonable and no less
favorable to the Borrower or such Subsidiary than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate; and


(w)             
further assurances:  do all such acts and things and execute and deliver or cause to be
executed and delivered to the Lender such agreements and such other deeds,
documents, instruments and assurances as may be necessary, in the reasonable
opinion of the Lender, in order to give full effect to the Documents.


9.3      
Financial Reporting


The Borrower shall:


(a)               
monthly financial statements: furnish to the Lender as soon as available and in any event within
twenty (20) days after the end of each calendar month, unaudited financial
statements of the Borrower and its Subsidiaries for each such month, prepared
on a consolidated and unconsolidated basis in accordance with GAAP, such
statements to include a balance sheet, statements of income, profit and loss,
retained earnings, shareholders' equity and of changes in financial position,
such statements to be accompanied with a Certificate of the Borrower confirming
that (i) they present fairly (subject to year-end adjustments) the financial
position and the results of operations of the Borrower for the period then
ended in accordance with GAAP, and (ii) no Accruing Default or Event of Default
has occurred and is continuing or, if an Accruing Default or Event of Default
has occurred and is continuing, a statement as to the nature thereof and;


(b)              
annual financial statements: furnish to the Lender as soon as available and in any event within
sixty (60) days after the end of its fiscal year audited financial statements
of the Borrower and its Subsidiaries for such year prepared on a consolidated
and unconsolidated basis in accordance with GAAP, such statements to include a
balance sheet, statements of income, profit and loss, retained earnings,
shareholders' equity and of changes in financial position;


(c)               
certificate of no default:  on the last Banking Day of each month, furnish to the Lender a
Certificate of the Borrower:


(i)                 
stating that to the best of such director or
officer's knowledge, information and belief, after due inquiry, no Accruing
Default or Event of Default has accrued and is continuing, except those that
have been expressly disclosed to and waived by the Lender, or if either has
occurred and is continuing, specifying the nature thereof, the period of
existence thereof and what action it proposes to take with respect thereto,


(ii)               
stating that all notices required to be given
pursuant to Section 9.7 have been given,


 





34


 


(iii)              
stating that all information received by the
Borrower or any of its Subsidiaries in connection with the Joint Venture has
been provided to the Lender forthwith upon receipt,


(iv)                stating that the representations and warranties
in Article 8 hereof and in Section 3.1 of the Arrangement Agreement
(except for matters consented to in writing by the Lender as part of the
Arrangement Agreement transactions) are true and correct as at the date of such
certificate, as if originally made on such date, and that the Borrower has
complied with all covenants in Article 9 hereof and Articles 4 and 6
of the Arrangement, except in each case as otherwise disclosed by it to the
Lender in writing, and


(v)               
stating that as at the date of such certificate
neither it nor any of its Subsidiaries has created, assumed or suffered to
exist, nor do they otherwise have outstanding, any Security Interest other than
Permitted Encumbrances;


(d)              
other reports: 
promptly furnish to the Lender any financial or operating statements or other reports
relating to its and any of its' Subsidiaries' business, Property or affairs (in
particular, the Joint Venture) as the Lender may reasonably request from time
to time in writing from the Borrower;


(e)               shareholder reports:  promptly upon transmission thereof, furnish to the Lender copies
of all financial statements, proxy statements, notices, material change reports
and other reports as it shall send to its shareholders and copies of all
registration statements and all material change reports, press releases and
similar disclosures which it or any of its Subsidiaries files with any
securities commission or similar regulatory body;


(f)                
interim audit reports:  promptly upon receipt thereof, furnish to the Lender a copy of
each report submitted to it by any accountants or auditors in connection with
any annual, interim or special audit made by such accountants or auditors of
its or any of its' Subsidiaries' books or records;


(g)               
books of account: 
keep and maintain, and cause any of its Subsidiaries to keep and maintain,
proper books of account and records accurately and completely covering all
aspects of their respective business and affairs (including full and correct
entries of all financial transactions) consistent with good industry practice,
GAAP, and as may be required by Applicable Laws; and


(h)               
inspections:
permit, and cause each of its Subsidiaries to permit, any representatives of
the Lender to inspect any of their respective books of account, records,
reports, agreements and other documents relating to their respective accounts,
financial records and transactions and to make and remove copies thereof.


 





35


 


9.4       Covenants Regarding Property


The Borrower shall, and shall cause each of its Subsidiaries to:


(a)               
inspections: 
permit the Lender and any representatives thereof to visit and inspect the
Property, and promptly furnish the Lender with any information thereon
reasonably requested by the Lender from time to time;


(b)              
maintain and repair Property:  maintain, protect and preserve the Property in accordance with
good business practice and, unless it is uneconomic to do so in accordance with
good business practice (and the Lender, acting in its sole discretion,
concurs), in the event of any damage or loss thereto from any cause whatsoever
forthwith repair such damage and replace such loss;


(c)               
prohibitions: 
not enter into any contract or agreement which restricts the ability of the
Borrower or any of its Subsidiaries to: (i) enter into amendments,
modifications, supplements or waivers of the Joint Venture Agreements,
(ii) sell, transfer or otherwise dispose of the Property,
(iii) create, incur, assume or suffer to exist any Security Interests upon
any of the Property, (iv) create, incur, assume, suffer to exist or
otherwise become liable with respect to any Debt, or (v) declare or make
any distributions of, or the setting apart of money for a sinking or other
analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any shares of any class of stock of the Borrower or any of its
Subsidiaries or of any warrants, options or other rights to acquire the same;
and


(d)              deliver information:  deliver to the Lender forthwith upon receipt all information that
it or any of its Subsidiaries receives from time to time related to the Joint
Venture.


9.5       Restrictions on Investments
 


The Borrower
shall not, and shall not permit any of its Subsidiaries or any Subsidiary of
the Borrower to, make or have outstanding any Investments except for Permitted
Investments.


9.6       Debt Restrictions


The Borrower
shall not, and shall not permit any of its Subsidiaries to, create, incur,
assume or suffer to exist any Debt other than the Permitted Debt.


9.7       Notice Requirements


The Borrower shall promptly give written notice to the Lender of:


(a)               
defaults:  any
Accruing Default or Event of Default, accompanied by a statement of the chief
executive officer of the Borrower setting forth the details thereof and the
action that the Borrower has taken and proposes to take with respect thereto;


 





36


 


 


(b)              
 damage:  any
damage to, contamination of, or destruction or partial destruction of the
Property;


(c)               
actions:  the
threat or commencement of, or any new development in, any actions, suits or
proceedings before any Governmental Authority which individually or in the
aggregate could have a Material Adverse Effect;


(d)              
Bankruptcy Act applications:  its or any of its Subsidiaries' intention to make a proposal, or
to file a notice of intent to make a proposal, under the Bankruptcy Act, or any
insolvency, moratorium or any other similar legislation in any jurisdiction or
to repudiate any lease of real property under any Applicable Laws, or to make
an assignment of its property under Applicable Laws, or to apply for a stay of
proceedings or an interim receiver under Applicable Laws;


(e)               other Debt:  any
material default (including any payment default) by it or any of its
Subsidiaries under any agreement creating or evidencing Debt, or any default or
event which could entitle the lender thereunder to accelerate the payment of
such Debt or to cancel, terminate or withdraw any funding commitment
thereunder;


(f)              
dispositions of Properties:  any disposition of, or title defect affecting, or Security
Interest (other than a Permitted Encumbrance) on, or any casualty affecting,
any Property;


(g)               
leases:  any
default of any lessee under any material lease of real Property, and any claim
made by any lessee against it or any of its Subsidiaries under any such lease;
and


(h)                material changes: 
any other condition or event, whether external or internal to it or any of its
Subsidiaries, which individually or in the aggregate has or could have a
Material Adverse Effect.


9.8       Lender May Perform Covenants


If the Borrower
fails to perform any payment covenants on its part herein contained, the Lender
may give notice to the Borrower of such failure and if, within three (3) days
of such notice (or after the expiry of such shorter time or cure period as may
be set forth in this Agreement) such payment has not been made, the Lender may,
in its discretion, but need not, make such payment and all sums so expended
shall be payable by the Borrower to the Lender on demand and shall bear
interest at LIBOR plus 6% per annum.


ARTICLE 10 ‐ EVENTS OF DEFAULT AND ACCELERATION


10.1     Events of Default


Each of the
following events or circumstances shall be an "Event of Default"
(in this Section, the term "Borrower" shall be deemed to include
any of its Subsidiaries):


 





37


 


(a)               
failure to pay: 
(i) the Borrower shall fail to pay the principal amount of any LIBOR Loan
on the date upon which the same is due and payable, or (ii) the Borrower
shall fail to pay any interest, or any other amount payable pursuant to the
Documents, on the date upon which the same is due and payable, and such failure
under this paragraph (a)(ii) shall have continued for seven (7) days after
the same becomes due and payable;


(b)              
failure to meet Cash Calls: (i) the Borrower shall fail to use the proceeds of the Credit
Facility as provided for hereunder, or (ii) the Borrower shall fail to deliver
a Drawdown Notice hereunder to make any Cash Call on a timely basis or fail to
make such Cash Call on a timely basis;


(c)               
prohibited transfers:  the Borrower or any of its Subsidiaries shall sell, lease,
assign, convey or transfer any Property in contravention of
Section 9.4(c);


(d)              
creation of prohibited security:  the Borrower or any of its Subsidiaries shall create, assume,
suffer to exist or otherwise have outstanding any Security Interest in
contravention of Section 9.2(l);


(e)               
failure to comply with obligations:  the Borrower shall commit any breach of or omit to observe any of
its obligations or undertakings under the Documents or under the Arrangement
Agreement  (other than any breach or omission specifically dealt with in
another paragraph of this Section 10.1), and (i) such breach or
omission is not capable of being remedied by the Borrower, or (ii) if such
breach or omission is capable of being remedied by the Borrower, shall continue
unremedied for more than seven (7) days after the Borrower becomes aware of the
same or could reasonably have been expected to become aware of the same;


(f)                
incorrect representations or warranties:  any representation or warranty made or deemed to be made by the
Borrower (or any of its officers) under or in connection with the Documents or
the Arrangement Agreement is, or shall prove to be, incorrect, untrue or
misleading in any material respect when made or deemed to be made;


(g)               
payment cross-default:  the Borrower or any of its Subsidiaries fails to make any payment
of principal of or interest on any Debt in excess of U.S. $10,000 when the
same becomes due and beyond any period of grace provided with respect thereto;


(h)               
event cross-default:  any event or circumstance occurs under (i) an agreement or
instrument relating to Debt of the Borrower or any of its Subsidiaries in
excess of U.S. $10,000 which could cause or permit a Person to declare
(whether immediately or with notice or the lapse of time or both) such Debt or
any part thereof to become due prior to the stipulated date for repayment
thereof, or (ii) a Guarantee relating to Debt of the Borrower or any of its
Subsidiaries in excess of U.S. $10,000 which could cause or permit the
beneficiary thereunder to declare (whether immediately or with notice or the
lapse of time or both) such Debt or any part thereof to become due and payable
by the Borrower;


 





38


 


(i)                 
insolvency (voluntary proceedings): the Borrower or any of its' Subsidiaries shall:


(i)                 
become insolvent, or generally not pay its debts
or meet its liabilities as the same become due, or admit its inability to pay
its debts generally, or declare any general moratorium on its indebtedness, or
propose a compromise or arrangement between it and any class of its creditors,


(ii)               
commit an act of bankruptcy under the Bankruptcy
Act or similar Applicable Laws in any other jurisdiction, or make an assignment
of its property for the general benefit of its creditors under any Applicable
Laws, or make a proposal (or file a notice of its intention to do so) under any
Applicable Laws,


(iii)                institute any proceeding seeking to adjudicate
it an insolvent, or seeking liquidation, dissolution, winding-up,
reorganization, compromise, arrangement, adjustment, protection, moratorium,
relief, stay of proceedings of creditors generally (or any class of creditors),
or composition of it or its debts under any other statute, rule or regulation
relating to bankruptcy, winding-up, insolvency, reorganization, plans of arrangement,
relief or protection of debtors (including the Bankruptcy Act, the Companies'
Creditors Arrangement Act (Canada) and any applicable corporate laws or
other Applicable Laws in any jurisdiction), or at common law or in equity,


(iv)             
apply for the appointment of, or the taking of
possession by, a receiver, interim receiver, receiver/manager, custodian,
administrator, trustee, liquidator or other similar official for it or its
Property, or


(v)                 threaten to do any of the foregoing, or take any
action, corporate or otherwise, to approve, consent to, or authorize any of the
actions described in this paragraph (i) or in paragraph (j) below, or
otherwise act in furtherance thereof or fail to act in defense thereof;


(j)                insolvency (involuntary proceedings):  any petition shall be filed, application made or other proceeding
instituted against or in respect of the Borrower or any of its Subsidiaries:


(i)                 
seeking to adjudicate it an insolvent,


(ii)                 seeking a receiving order against it under the
Bankruptcy Act or other similar Applicable Laws in any jurisdiction,


(iii)              
seeking liquidation, dissolution, winding-up,
reorganization, compromise, arrangement, adjustment, protection, moratorium,
relief, stay of proceedings of creditors generally (or any class of creditors),
or composition of it or its debts under any statute, rule or regulation
relating to bankruptcy, winding‐up, insolvency, reorganization, plans of
arrangement, relief or protection of debtors (including the Bankruptcy Act, the
Companies' Creditors Arrangement Act (Canada) and any applicable
corporate laws or other Applicable Laws in any jurisdiction), or at common law
or in equity, or


 





39


 


(iv)             
seeking the entry of an order for relief or the
appointment of a receiver, interim receiver, receiver/manager, custodian,
administrator, trustee, liquidator or other similar official for it or its
Property,


and such
petition, application or proceeding shall continue undismissed, or unstayed and
in effect, for a period of thirty (30) days after the institution thereof, provided
that if an order, decree or judgment has been granted (whether or not entered
or subject to appeal) against the Borrower or any of its Subsidiaries, as the
case may be thereunder in the interim, such grace period shall cease to apply;


(k)              
attachment or seizure (secured or unsecured):  the Property shall be seized (including by way of execution,
attachment, garnishment or distraint) or any Security Interest thereon shall be
enforced, or such Property shall become subject to any charging order or
equitable execution of a Governmental Authority, or any writ of execution or
distress warrant shall exist in respect of the Borrower, any of its
Subsidiaries, or the Property, or any sheriff or other Person shall become
lawfully entitled to seize or distrain upon the Property under Applicable Laws
with respect to Property which has a fair market value in excess of
U.S. $50,000;


(l)                 monetary judgments:  one or more judgments (other than any judgment relating to a
legal action disclosed in the disclosure schedule to the Arrangement Agreement)
or orders, either individually or in the aggregate, for the payment of money in
excess of U.S. $10,000, and not fully covered by insurance, shall be
rendered by a court of competent jurisdiction against the Borrower or any of
its Subsidiaries and the Borrower or any of its Subsidiaries, as the case may
be,  shall not have (i) provided for its discharge in accordance with its
terms within five (5) days from the date of entry thereof, or
(ii) procured a stay of execution thereof within five (5) days from the
date of entry thereof and within such period, or such longer period during
which execution of such judgment shall have been stayed, appealed such judgment
and caused the execution thereof to be stayed during such appeal; provided
that if enforcement and/or realization proceedings are lawfully commenced in
respect thereof in the interim, such grace period shall cease to apply;


(m)             
non-monetary judgments:  any non-monetary judgment or order shall be rendered against the
Borrower or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect, and there shall by any period of ten (10) consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect;


 





40


 


(n)               
unenforceability of Documents:  any Document or any material provision thereof shall at any time
for any reason cease to be in full force and effect, be declared to be void or
voidable or shall be repudiated, or the validity or enforceability thereof
shall at any time be contested by the Borrower or any of its Subsidiaries, as
the case may be, or the Borrower or any of its Subsidiaries, as the case may
be, shall deny that it has any or any further liability or obligation
thereunder or any action or proceeding shall be commenced to enjoin or restrain
the performance or observance by the Borrower or any of its Subsidiaries, as
the case may be, of the terms thereof or to question the validity or
enforceability thereof, or at any time it shall be unlawful or impossible for the
Borrower to perform any of the Obligations;


(o)              
 cessation of business:  the Borrower or any of its Subsidiaries shall cease or threaten
to cease to carry on all or any material part of its business as now conducted,
or shall make a bulk sale or a sale of all or substantially all of its assets,
or the Borrower shall cease to own all of the issued and outstanding shares of
any of its Subsidiaries;


(p)              
 material adverse change:  an event or situation shall occur (whether internal or external
to the Borrower or any of its Subsidiaries), or an Applicable Law shall be
passed or become operative, which individually or in the aggregate has had or
could have, a Material Adverse Effect on the Borrower or any of its
Subsidiaries, the Simberi Joint Venture or the Borrower's Participating
Interest therein; 


(q)              
 Arrangement Agreement:  the Arrangement Agreement shall terminate, or the Lender shall
become entitled to terminate the Arrangement Agreement, or any determination,
event or circumstance occurs, or a condition is not met, whereby the
transactions contemplated thereby may not be consummated or the Lender's
obligation to perform thereunder would be excused as a result thereof; or the
Borrower breaches the covenant in Section 4.2 of the Arrangement Agreement
(Non-Solicitation); or an "Allied Termination Event" (as
defined in Section 9.4 of the Arrangement Agreement) shall occur; or a
Proposed Agreement for a Superior Transaction has been announced or received by
the Borrower and Allied has not agreed to an Amended transaction within five
(5) days unless the Board of Directors of the Borrower shall have
publicly announced within such time period their determination not to enter
into approve or recommend such Proposed Agreement and shall have issued a press
statement reiterating their recommendation of the transactions contemplated by
the Arrangement Agreement; and


(r)                
other:  events
relating to political events, stoppage or abandonment of any project in which
the Borrower or any of its Subsidiaries have an interest, expropriation or
nationalization of any Property of the Borrower or any of its Subsidiaries by
any Governmental Authority, invalidity of any Security Interest securing
performance of the Obligations, or change of law in Papua New Guinea, currency
restrictions or inconvertibility, sanctions, the invalidity, termination or
unenforceability of any of the Joint Venture Agreements relating to the Joint
Venture that would increase the cost to the Lender to provide the Advances
hereunder or would reasonably be expected to have a Material Adverse Effect.


 





41


 


10.2      Acceleration


(a)               
If any Event of Default shall occur and be
continuing:


(i)                 
the entire principal amount of LIBOR Loans then
outstanding,


(ii)               
the facility fee referred to in
Section 2.8, and


(iii)              
all accrued interest and all other fees,
expenses and amounts due to the Lender under the Documents,


shall, at
the option of the Lender, upon notice to the Borrower, become immediately due
and payable with interest thereon calculated at the rate or rates determined as
provided in Section 4.2 up to the date of actual payment thereof, all without
any further notice, presentment, protest or demand, all of which are hereby
expressly waived by the Borrower.


(b)                Notwithstanding Section 10.2(a), if any
Event of Default referred to in Sections 10.1(), (j), (k), (l), or (m) shall
occur or the Lender requests prepayment of the Outstandings pursuant to Section
6.2, the amounts referred to in Sections 10.2(a) shall, without any
notice, presentment, protest or demand (the same being hereby expressly waived
by the Borrower), automatically become immediately due and payable with
interest thereon calculated at the rate or rates determined as provided in
Section 4.2 up to the date of actual payment thereof.


(c)               
Immediately upon any amounts becoming due and
payable under Section 10.2(a) or (b), the Commitment Amount and the
Optional Financing Amount (if applicable) shall each thereupon automatically
reduce to zero.


(d)              
The Lender may, in its sole discretion, rescind
any acceleration that occurs under this Section 10.2 and reinstate any
Commitment Amount and/or Optional Financing Amount, as the case may be.


10.3     Lender's Obligations to Advance


The occurrence
of an Accruing Default or an Event of Default shall immediately relieve the
Lender of all obligations to provide any further LIBOR Loans hereunder.


10.4     Remedies Cumulative and Waivers


The respective
rights and remedies of the Lender under any Document are cumulative and are in
addition to, and not in substitution for, any rights or remedies provided by
law, equity, or otherwise, and any single or partial exercise by the Lender of
any right or remedy, or procurement of a judgment in respect of a default or
breach of any provision contained in any Document shall not be deemed to
operate as a merger of, or be a waiver of, or to alter, affect or prejudice any
other right or remedy to which the Lender may lawfully be entitled in respect
of such default or breach.


 





42


 


10.5     Waiver of Accruing Default or Event of Default


The Lender may
waive, either absolutely or for a limited period of time, and subject to such
terms or conditions as the Lender may in its sole discretion specify, any
Accruing Default or Event of Default.  No such waiver shall be construed to
extend to the occurrence of any other Accruing Default or Event of Default,
whether or not it shall be the same as the Accruing Default or the Event of
Default which has been waived.  Any such waiver may be given prospectively or
retrospectively with respect to any Accruing Default or Event of Default.  No
failure of the Lender to exercise, or delay by the Lender in exercising, any of
its rights or remedies shall be construed as a waiver of any Accruing Default
or Event of Default.


ARTICLE 11 ‐ CHANGE OF CIRCUMSTANCES


11.1     Illegality in Respect of LIBOR Loans


If, subsequent
to the date hereof, the introduction of or any change in Applicable Law,
regulation, treaty or official directive or regulatory requirement (whether or
not having the force of law) or in the interpretation or application thereof by
any court or by any Governmental Authority charged with the administration
thereof, prohibits or makes it unlawful or impractical for the Lender to make,
to fund or to maintain the LIBOR Loans or to perform any other Obligations
under this Agreement, the Lender may, by written notice to the Borrower,
terminate any or all of its obligations under this Agreement, and if such
notice is given the Borrower shall repay all affected LIBOR Loan fees,
interest, and other amounts accruing to the Lender forthwith.


ARTICLE 12 ‐ COSTS, EXPENSES AND INDEMNIFICATION


12.1     Costs and Expenses


Except for
ordinary expenses of the Lender relating to the day-to-day administration of
this Agreement, the Borrower shall, within five (5) Banking Days of notice from
the Lender to do so, pay all costs and expenses incurred by or for the account
of the Lender in connection with the consideration or review of any waivers,
consents or amendments to any of the Documents or discharges of any Security
Interest provided to the Lender to secure the Obligations (whether or not the
same are effected), the documentation, printing, execution and delivery
thereof, the establishment of the validity and enforceability of the Documents
and any Security Interest created thereunder, and the preservation,
realization, collection or enforcement of or under the Documents, including in
each case the reasonable fees of any Lender's legal counsel retained in
connection therewith on a solicitor and his own client basis.


12.2     Indemnification by the Borrower


In addition to,
but without duplication of, any liability of the Borrower under any other
provision hereof, the Borrower shall indemnify the Lender and hold it harmless
against all losses, costs, expenses, liabilities, actions, suits, claims or
damages of any and every kind incurred by the Lender in respect of the Credit
Facility and any of the Documents or transactions contemplated thereby,
including any cost or expense as a result of:





43


 


(a)               
the failure by the Borrower to accept an
Advance;


(b)              
the Borrower's failure to make any repayment of
any amount on the date required hereunder;


(c)               
the Borrower's failure to give any notice required
to be given by it to the Lender or any other Person hereunder;


(d)              
the Borrower filing any proposal or notice of
intention to file a proposal under bankruptcy, insolvency or moratorium
legislation of any Applicable Laws, or any application (successful or not) for
a stay under such Applicable Laws, or similar such actions taken by or for the
benefit of the Borrower or any of its Subsidiaries;


(e)               
the use to which the proceeds of any LIBOR Loan
are put by the Borrower or any of its Subsidiaries; or


(f)                
the occurrence or continuance of any other
Accruing Default or Event of Default.


12.3     Environmental Indemnity


Without limiting
the generality of Section 12.2 insofar as it pertains to environmental
matters, the Borrower shall indemnify the Lender and hold it harmless against
any and all losses, costs, expenses, liabilities, actions, suits, claims or
damages of any and every kind sustained, paid or incurred by the Lender as a
result of any environmental claims, liabilities or obligations of every nature
whatsoever affecting the Borrower or any of its Subsidiaries or the Property of
either, or the property of others where the Borrower or Subsidiary could be
considered responsible under any Environmental Laws, including:


(a)               
any environmental harm or damage to or
impairment of the Property (or any other Person's property) caused by the
presence or release of any Hazardous Materials on the Property or by the
Borrower or any of its Subsidiaries;


(b)              
any decrease or loss in value of the Property
(or any other Person's property), occasioned by non-compliance by the Borrower
or any of its Subsidiaries with Environmental Laws;


(c)               
the imposition or assertion of any Security
Interest including any expenses collectable as taxes affecting the Property
under Environmental Laws by any Governmental Authority; or


(d)              
any claim asserted or order issued by a
Governmental Authority (including an enforcement order or an environmental
protection order issued under Applicable Laws) against the Lender, an agent of
the Lender or receiver or receiver-manager of the Property appointed under
Security in respect of any matter referred to in paragraphs (a), (b), or
(c) above, or for any clean-up, restoration, well abandonment, reclamation or
other securing or remedial action in respect of the Property (or any other
Persons property).


 





44


 


Without limiting
the generality of the foregoing, the indemnities in Section 12.2 and this
Section 12.3 shall extend to:


(e)               
legal fees on a solicitor and his own client
basis, including the costs of defending and/or counterclaiming or claiming over
against third parties in respect of any action or matters, and


(f)                
any amounts payable arising out of a settlement
of any action entered into between the Lender and any Person with or without
the consent of the Borrower.


These
indemnities shall extend to the officers, directors, employees, agents, legal
counsel, shareholders and assignees of the Lender as well as the Lender itself,
and the Lender will hold the benefit of these indemnities in trust for such
indemnified parties to the extent necessary to give effect hereto.  A
certificate of the Lender as to the amount of any such loss or expense shall be
prima facie proof of the amount thereof.  The provisions of and
undertakings and indemnification set out in Section 12.2 and this
Section 12.3 shall survive the payment and satisfaction of the
Outstandings and interest thereon, and termination of this Agreement shall be
deemed to be subject to the survival of these indemnities.


12.4     No Merger


The obligations
in this Article shall not merge in any judgment given in respect of the
Documents.


ARTICLE 13 ‐ GENERAL


13.1     Notice


Any notice,
communication or demand to be made or given hereunder shall be in writing and
may be made or given by personal delivery or by facsimile or other electronic
means of communication addressed as follows:


To
the Borrower:


Nord Pacific Limited

Suite 116, 2727 San Pedro Dr. N.E.

Albuquerque, New Mexico

USA  87110


 


Attention:  President

Facsimile
No.:  +1-505-830-9332


 





45


 


 


To
the Lender:


Allied Gold Limited.


Unit 15, Level 1


51-53 Kewdale Road


Welshpool, WA  6106

Australia


 


Attention: Managing Director

Facsimile
No.:  +61-8-9353-4894


With
a copy to:


Macleod Dixon llp


Barristers and Solicitors


3700 Canterra Tower


400 - 3rd Avenue S.W.


Calgary, AB  T2P 4H2

Canada


 


Attention:  Tad Gruchalla-Wesierski

Facsimile No.: 
+1-403-264-5973


or to such other address or
facsimile number as any party may from time to time notify the other in
accordance with this Section 13.1.  Any notice, communication or demand made or
given by personal delivery during usual business hours at the place of receipt
on a Banking Day shall conclusively be deemed to have been given on the day of
actual delivery thereof.  Any notice, communication or demand made or given by
personal delivery after usual business hours or by facsimile or other electronic
means of communication shall be deemed to have been given on the first Banking
Day following the delivery or transmittal thereof.


13.2     Governing Law; Attornment; Service Agent


(a)               
The Documents shall be governed by and
interpreted in accordance with the substantive laws of the State of Western
Australia and the laws of Australia applicable therein.


(b)              
The Borrower agrees that the courts of the State
of Western Australia shall have jurisdiction to hear and determine any suit,
action or proceeding and to settle any disputes which may arise out of or in
connection with the Documents, and it irrevocably submits and shall cause each
of its Subsidiaries to submit to the non-exclusive jurisdiction of such courts,
without prejudice to the rights of the Lender to take proceedings in any other
jurisdictions, whether concurrently or not.


(c)               
The Borrower agrees that final judgment in any
such suit, action or proceeding brought in such courts shall be conclusive and
binding upon it and may be enforced against it in the courts of the State of
Western Australia (or any other courts to the jurisdiction of which it or the
Property is subject) by a suit upon such judgment.


 





46


 


(d)              
The Borrower irrevocably waives any objection
which it might now or hereafter have to the courts of the State of Western Australia
being nominated as the forum to hear and determine any suit, action or
proceeding and to settle any disputes which may arise out of or in connection
with the aforesaid documents, and agrees not to claim that any such court is
not a convenient or appropriate forum.


13.3       Judgment Currency


(a)               
If, for the purposes of obtaining judgment in
any court it becomes necessary to convert any amount due under this Agreement
in one currency (the "Proper Currency") into another currency
(the "Other Currency"), then the conversion shall be made at
the rate at which the Lender is able, in accordance with normal banking
procedures, to purchase the Proper Currency with such Other Currency on the
Banking Day immediately prior to the day on which the judgment is given.


(b)                Notwithstanding any judgment expressed in a
currency other than the Proper Currency, the obligation of the Borrower under
this Agreement in respect of any amount originally due from it in the Proper
Currency shall be discharged only to the extent that, on the Banking Day
following receipt by the Lender of any amount in any Other Currency, the Lender
is able in accordance with normal banking procedures to purchase the Proper
Currency with such Other Currency.  If the Proper Currency so purchased is less
than the amount originally due to the Lender in the Proper Currency, the
Borrower shall pay to the Lender the difference; if the Proper Currency so
purchased exceeds the amount originally due to the Lender in the Proper
Currency, the Lender agrees to credit such excess to the Borrower.


(c)               
The Borrower shall indemnify the Lender for any
premiums and costs of exchange incurred by the Lender in connection with the
conversion into, or purchase of, the Proper Currency.


(d)                The obligations in this Section 13.3 shall
constitute separate and independent obligations of the Borrower from its other
obligations under this Agreement and shall not merge in any judgment granted in
respect of this Agreement.


13.4     Obligations of Borrower Absolute


The obligations
of the Borrower under the Documents shall be absolute and unconditional
irrespective of:


(a)               
any failure to obtain any governmental approvals
necessary or appropriate in connection with the Documents; or


 





47


 


(b)              
any impossibility or impracticality of
performance, or force majeure, or any act of any government or any agency or
instrumentality thereof, or any other circumstance, event or happening
whatsoever, whether foreseen or unforeseen.


The Documents
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment or other performance hereunder is rescinded or must otherwise
be returned or unwound for any reason, all as though such payment had not been
made or such performance had not occurred.


13.5     Prohibited Rate


(a)               
Notwithstanding anything herein or elsewhere
contained, if and to the extent that under any circumstances the effective
annual rate of interest (including, to the extent applicable to such
determination, the aggregate of all charges and expenses, whether in the form
of fees, fines, penalties, commissions or similar charges or expenses paid or
payable for the advancing of credit under this Agreement) received or to be
received by the Lender would, but for this Section 13.5, be a rate that is
prohibited by Applicable Laws (the "Prohibited Rate"), then
the effective annual rate of interest shall be and be deemed to be adjusted to
the highest rate (the "Adjusted Rate") that the parties could
validly have agreed to by contract on the date hereof under Applicable Laws.


(b)              
If the Lender has received a payment or partial
payment which would, but for this Section 13.5, constitute payment at the
Prohibited Rate, then any amount or amounts so received by the Lender in excess
of the Adjusted Rate shall and shall be deemed to have comprised a credit to be
applied to subsequent payments on account of interest, fees or other amounts
properly due to the Lender from the Borrower, or if no further amounts are due,
shall be repaid to the Borrower.


(c)               
It is the intent of this Section 13.5 that under
no circumstances shall the Lender be entitled to receive nor shall it in fact
receive any payment of interest, fees or other amounts at a rate that is
prohibited under Applicable Laws.


13.6     Benefit of the Agreement


The Documents
shall enure to the benefit of and be binding upon the Borrower, the Lender and their
respective successors and permitted assigns.


13.7     Assignment


(a)               
The Lender may, at any time and from time to
time assign and transfer an interest in this Agreement or any LIBOR Loan or
Note (including a proportionate share of the benefit of any Security Interest
granted to the Lender as security therefor) to any Person.  The Lender shall
promptly notify the Borrower of the completion of such assignment and transfer
and, upon the assignee and transferee assuming directly with the Borrower the
obligations of the Lender in writing, the Lender shall have no further
obligation hereunder with respect to such interest and the assignee and
transferee shall thereupon be a "Lender" to the extent of such
assigned and transferred interest.


 





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(b)              
Any such assignment and transfer by the Lender
pursuant to Section 13.7(a) above shall not materially increase the Borrower's
obligations under Section 7.4, or, alternatively, the Lender shall release
the Borrower from any obligations under Section 7.4 in connection with
such  assignment.


(c)               
The Borrower shall not assign its rights or
obligations hereunder without the prior written consent of the Lender in the
Lender's sole discretion.


13.8     
Severability


Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall
not invalidate the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.


13.9     Whole Agreement


The Documents
and the Arrangement Agreement constitute the whole and entire agreement between
the parties and cancel and supersede any prior agreements, undertakings,
declarations, commitments and representations, written or oral, in respect
thereof.


13.10    Amendments, Waivers and Consents


This Agreement
may only be amended by an agreement in writing between the Borrower and the
Lender and any other party that may from time to time become a party to this
Agreement, and the provisions hereof may only be waived, and matters shall only
be consented to by the Lender if the Lender so agrees with the Borrower in
writing unless otherwise provided herein.  Any waiver or consent by the Lender
under this Agreement shall be exercised in the sole discretion of the Lender. 
Any waiver or consent shall be effective only in the specific instance and for
the purpose for which it was given.


13.11   
Further Assurances


(a)               
Each party shall promptly cure, and the Borrower
shall cause any of its Subsidiaries (as applicable) to cure, any defect by it
in the execution and delivery of any Document.


(b)              
The Borrower, at its expense, shall promptly
execute and deliver (or cause to be executed and delivered) to the Lender, upon
request by the Lender in writing, all such other and further documents,
agreements, legal opinions, certificates and instruments in order to give
effect to the Documents, and shall make any recording, file any notice or
obtain any consent in connection therewith, all as may be reasonably necessary
or appropriate in the circumstances.


 





49


 


13.12   Time of the Essence


Time is of the
essence of this Agreement.


13.13   Counterparts


This Agreement
may be executed and delivered in any number of counterparts and by facsimile,
each of which shall be deemed to be an original and all of which taken together
shall be deemed to constitute one and the same instrument.  It shall not be
necessary in making proof of this Agreement to produce or account for more than
one full set of counterparts.


13.14   Waiver of Immunity


The Borrower
agrees that should the Lender bring legal action or proceedings against it or
its property in relation to any matters arising out of the Documents, no
immunity from such legal action or proceedings (including service of notice,
suit, pre-judgment or other attachments, the obtaining of judgment, execution
or other enforcement) shall be claimed by or on behalf of the Borrower or with
respect to its property.  The Borrower irrevocably waives any such right of
immunity which it or its Property now has or may hereafter acquire.


13.15   Consent to Arrangement Transactions


Notwithstanding anything to the contrary contained in this Agreement
or any other agreement, the Lender hereby consents to all corporate
transactions contemplated as among the Borrower, each of its Subsidiaries and
the Lender pursuant to the Arrangement Agreement, provided that,
pursuant to the Arrangement Agreement, the Borrower, each of its Subsidiaries
and any other entities involved (as contemplated therein) shall execute and
deliver such assumptions and other documentation as the Lender considers
advisable to preserve the Obligations hereunder, prior to or contemporaneously
with any reorganization as described in the Arrangement Agreement.


[Remainder of page intentionally
left blank.]
 
 
 





50

 

           

IN WITNESS WHEREOF the parties have executed this Agreement on the date hereof.



	
  NORD PACIFIC
  LIMITED

   

   

   

  
	
  By:

  	
   

  
	

  	
  Name: Mark
  R. Welch

  
	

  	
  Title: President and Chief Executive
  Officer

  
	

   	
   
	

   	
   
	


  By:

  	

  
	

  	
  Name:

  
	

  	
  Title:

  
	

  	

  
	
   

  ALLIED GOLD LIMITED

   

   

  
	

  By:

  	

  
	

  	
  Name:

  
	

  	
  Title:

  
	

   	
   
	

   	
   
	


  By:

  	


  
	

  	
  Name:

  
	

  	
  Title:

  



 






 




[Schedules in separate document #430220]